ESPN’s first attempt to cut out the cable guy and bring sports programming directly to consumers launched on Thursday.
Its new streaming video product, ESPN+, comes wrapped inside a re-launched ESPN app and costs $4.99 a month.
ESPN+ isn't an attempt to get sports fans to dump their cable package, but rather a way for the sports media giant to offer an additional service to its viewers while also gaining a foothold in the business of internet-delivered subscription products that are seen as the future of TV.
The new initiative offers programming not available on its flagship cable TV channel, such as live college sports and some Major League Baseball and NHL games. The service won’t have any live NFL or NBA games.
ESPN, which is owned by Disney, is hoping the addition of other programming, such as its flagship "30 for 30” documentary series, will convince people to pay for the new service, which was heavily promoted in Apple's app store on Thursday.
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ESPN+ will also carry a daily soccer talk show and original series commissioned just for the service, including a weekly show, "Quest for the Stanley Cup," a documentary following players during the NHL playoffs. Despite the subscription, the new service will not be free of ads.
With ESPN+, Disney is trying to carve out a niche in the growing direct-to-consumer online video business while simultaneously protecting its flagship channel from subscriber declines. It is a high-stakes tightrope walk for the new president of ESPN, James Pitaro, who took over last month.
Speaking at a press event at ESPN headquarters in Bristol, Connecticut, this month, Pitaro said, “We are really doing this as a service that is complementary and additive and not competitive with the pay-TV business.”
“What you see on [cable TV] will not make its way on the subscription service. And what’s on the subscription service will not be on television,” Pitaro added.
Terry Kawaja, CEO of Luma Partners, a mergers and acquisitions advisory firm, said ESPN has to be careful not to hurt its still-lucrative cable business while also not falling too far behind the consumer shift to internet-based entertainment.
"No one wants to kill the golden goose," he said at a TV conference on Thursday in New York hosted media buying agency The Media Kitchen.
Many of the major sports leagues that sell broadcast rights to ESPN are already offering ways to watch games on the internet, such as MLB.TV and NBA League Pass.
While other companies such as HBO have been able to replicate their TV network services online for a growing audience of cord-cutters, ESPN has a much trickier problem in that many of the expensive sports rights it licenses can't be streamed online. Live sports also tend to have the complex issue of blackouts in different markets.
ESPN remains one of the biggest media success stories in cable television. The company grew from a small, Connecticut-based channel showing highlights and obscure sporting events into a national powerhouse capable of bidding billions of dollars on major professional sports packages. Crucial to its success were the outsize payments ESPN commanded from cable providers — as much as $8 per subscriber per month, according to media analysis firm SNL Kagan.
But as ESPN’s total subscribers peaked and then began to decline, the company’s future became the subject of scrutiny from Wall Street analysts who predicted that its best days were in the past.
The new ESPN+ service is available only in the U.S. for now, though in an interview with Variety, Pitaro said, "Our primary focus is on making ESPN more relevant to more people across the world."
Disney also owns BAMTech, a streaming service company started by MLB that Disney later acquired. BAMTech is helping power Disney’s streaming services, and also has a joint venture with Discovery Communications — BAMTech Europe — that could help take ESPN+ to Europe, where the ESPN brand has little presence.
In addition to being a big step for ESPN, the new streaming service is also the first paid streaming venture in the U.S. for Disney, which is aiming to take on Netflix and Amazon in streaming video entertainment. Disney has announced plans for a separate entertainment service with movies and TV shows that is scheduled to launch in 2019 with some content that was previously on Netflix.
On Disney’s fourth-quarter earnings call, its chief executive, Bob Iger, noted that direct-to-consumer streaming was the company’s “highest priority this year.”
