Behind the Launch of Disney’s ESPN Direct-to-Consumer Offering

In April 2018, Walt Disney (DIS) launched its first direct-to-consumer offering, ESPN+, featuring 10,000 live sports and other events, as well as a basketball show hosted by Kobe Bryant. ESPN’s subscribers will be able to access the direct-to-consumer service through an enhanced version of ESPN’s app, which offers multisports packages as well as individual sports packages. The media company’s ESPN+ streaming service would be provided for $4.99 per month or $49.99 per year.

Disney has been losing its ESPN subscribers for several years, as is evident from the chart above. In fiscal 2017 ended September 2017, Disney reported its fourth straight year of decline in US subscribers. Disney posted 88 million US subscribers at the end of the fiscal year 2017.

The primary reason for the declining ESPN subscriber base is a decline in advertising revenues as well as higher programming costs. Consumers prefer to watch sports through online video streaming services provided by players like Netflix (NFLX), Amazon (AMZN) with Amazon Prime, and Alphabet’s (GOOGL) YouTube. So, these consumers have shifted from traditional cable channels like ESPN. So, the launch of ESPN+ direct-to-consumer services makes sense for fans who prefer to watch live sports online.

Traditional media companies like Disney and pay-TV companies like AT&T, Verizon, and Comcast have been struggling to grow its subscriber base due to cord-cutting. Disney is, therefore, trying to market its direct-to-consumer offerings. The company has recently reorganized its corporate structure, creating a new unit focused on its upcoming streaming services. Disney’s acquisition of 21st Century Fox (FOXA) seems to be a significant step toward its goal of launching its direct-to-consumer strategy.