Disney’s Plans for Launching a Premium Service for ESPN

ESPN’s direct-to-consumer service

The Walt Disney Company (DIS) plans to launch a direct-to-consumer service for ESPN later this year. The company stated in an earlier earnings call that ESPN’s direct-to-consumer service could result in a user-friendly product that could drive ESPN viewership up.

The company also explained that it could use this viewership data from ESPN’s direct-to-consumer service to improve its advertising revenues for ESPN and customize the service to users’ preferences.

Disney’s Plans for Launching a Premium Service for ESPN

At the January 2017 Citi 2017 Internet, Media & Telecommunications Conference, Disney was asked whether it planned to launch a premium over-the-top service for ESPN. Although Disney didn’t completely rule out launching such a service considering the company’s strong content portfolio, it also clarified that for now, it was concentrating on the launch of ESPN’s direct-to-consumer service in 2017.

Disney stated that it did not believe that there was a need to separate ESPN from its assets and that ESPN’s direct-to-consumer service would not be a substitute for ESPN’s television network. It would offer sports programming that isn’t available on ESPN’s television network.

Disney’s optimism regarding ESPN

Disney’s investors have expressed concern about the falling ESPN subscriber numbers. As the chart above shows, the number of Disney’s ESPN subscribers continued to fall, dropping from 99 million subscribers in 2013 to 90 million subscribers in 2016. However, Disney is optimistic about ESPN.

Disney noted during its fiscal 1Q17 earnings call that the virtual online streaming services being launched—or that have already launched—tend to have a strong user interface, are mobile-friendly, and are priced lower than a basic bundle of channels from MVPD (multi-channel video programming distributors). As a result, Disney expects that ESPN’s presence in these services would appeal to a wider user base.

Disney (DIS) makes up ~0.8% of the SPDR S&P 500 Trust ETF (SPY). SPY has an exposure of 3.9% to the computers sector.