ESPN — the Disney-owned sports behemoth — is shaking things up:
- Last week, ESPN announced plans to lay off 300 people.
- Earlier this week, content from the network’s top talent (e.g., Zach Lowe, Matthew Berry) was moved behind the ESPN+ paywall.
Combined, these moves mirror the new focus of ESPN’s parent company on direct-to-consumer and subscription-based businesses.
Considering the subscription model is seemingly everywhere (*cough* Trends *cough*) what took ESPN so long?
Answer: the cable bundle
The rise of streaming has led to a steady decline in cable subscribers. Despite the downward trend, ESPN has been hesitant to leave the cable bundle, which packages hundreds of channels together for one monthly price.
Rather, the sports broadcasting giant is making up for lower volume by flexing its pricing power.
While most cable companies charge less than $1 per subscriber per month, ESPN charges $9 across its network and brought in an estimated $11B for Disney last year (translation: people can’t quit live sports).
ESPN doesn’t want to cannibalize this sweet deal but it clearly sees the writing on the wall.
The company has experience with subscriptions
In 1998, ESPN entered the direct subscription game by launching:
- ESPN The Magazine as the hip print alternative to Sports Illustrated
- ESPN Insider as a digital subscription for deeper analysis
Eventually, ESPN gave away ESPN Insider with the magazine subscription to fuel engagement on the website. Fast-forward to 2018, when ESPN merged Insider with live-sports programming and exclusive originals to launch ESPN+.
Will the paywall work?
Since launching in April 2018, ESPN+ has amassed 8.5M subscribers.
However, Rob Litterst — a Hustle contributor who writes the pricing strategy newsletter Good Better Best — found the bulk of ESPN’s growth was tied to 3 big events:
- 4m+ subs: The launch of Disney+ and the 3-way bundle of Disney+, ESPN+, and Hulu
- 500k subs: The first UFC event in January 2019
- 500k subs: Conor McGregor’s return in UFC 246
Can ESPN+ keep pulling in subs with its in-house talent and not just splashy events?
While there are certainly skeptics (like Ron Burgundy), The House of Mouse is figuring out the subscription business fast: Disney+ has already notched 74m subs since launching on November 12, 2019.
