As the CEO of Walt Disney, Bob Iger, seeks to get the stock moving in the right direction again, the company is faced with several tough choices. One area that requires more attention is the long-awaited launch of a full-scale streaming service for ESPN. Currently, ESPN only broadcasts its most valuable content through pay-TV partners.
While it is clear that the launch will eventually happen, the timeline and strategy remain murky. Iger reiterated the plan for ESPN to pursue a complete direct-to-consumer model on the Disney earnings call this week. However, various factors are still uncertain.
Disney is cautious about launching the service too quickly as it could anger its pay-TV partners and jeopardize the revenue generated from offering ESPN as part of cable bundles. However, delaying the switch for several more years may result in losing ground in the rapidly evolving world of sports streaming.
There is also a danger that sports leagues, which Disney hopes would invest in ESPN, will pursue other streaming options in the meantime. For instance, this week the National Football League announced its intention to directly provide cable channels NFL Network and RedZone to consumers through its own NFL+ streaming service. This move exemplifies the NFL’s approach to diversifying its streaming services by shifting the NFL Sunday Ticket package from DirecTV to Alphabet’s YouTube TV, reportedly with a rights price of $2 billion annually.
The Growing Value of Sports Rights and the Challenges for Disney
The value of sports rights has skyrocketed in recent years, presenting both opportunities and challenges for sports leagues and streaming platforms like ESPN and Disney. As the price of securing exclusive content continues to rise, Disney faces a tougher task in ensuring it has the necessary sports programming for its streaming platform.
While there are potential ways to supplement streaming income, such as through sports betting, Disney’s recent sale of exclusive rights to the “ESPN Bet” trademark fell short of expectations for a lucrative sports-betting licensing deal. The deal with Penn Entertainment (PENN) saw Disney selling the trademark for $1.5 billion in cash and $500 million worth of stock warrants over a 10-year period.
Disney is undoubtedly determined to retain ESPN, but it faces uncertainties in mapping out a successful future for the brand. These uncertainties may have a negative impact on the company’s stock performance in the foreseeable future.