Disney's Plan to Launch Sports Service Reveals Another Chink in Traditional TV Distribution Model

08.10.2016

With its $1 billion acquisition of a 33 percent stake in Major League Baseball's BAMTech streaming-media unit, Disney plans to launch a new sports-focused subscription streaming service programmed by ESPN.

The service, slated to launch at the end of 2016, will feature content from both BAMTech and ESPN but it won't offer current ESPN content. Instead, it will offer college sports, as well as cricket, rugby and tennis, said Disney CEO Bob Iger on its second-quarter earnings call with investors.

With that sort of content, the service is intended to be complementary to ESPN's live-streaming channel, WatchESPN, but not overlapping.

"As WatchESPN continues to grow and add value to the multichannel video subscription, this new service will be an outstanding complement," said ESPN President John Skipper in a statement.

It's the latest in a series of moves by content producers to build their own delivery systems as the pay-TV bundle comes under increasing economic pressure. Recently, Time Warner took a 10 percent stake in streaming video provider Hulu, joining Disney, 21st Century Fox and Comcast NBCUniversal on the portal.

Hulu is currently undergoing several changes to its business model, with plans to launch a live-streaming TV service next year, and moving its free-TV business over to Yahoo, where viewers will be able to get five episodes of TV series at a time, no sooner than eight days after they first air.

"Media companies are finally internalizing that this is the way of the world," Peter Csathy, founder of media investment and advisory firm Creatv Media, told Variety. "They either cannibalize themselves, or allow others to eat them. Of those two unsavory choices, they'd rather take door number one."

For cable operators and satellite TV providers, this distribution shift represents a challenging shift in the business. Satellite TV provider Dish Network just posted its worst-ever quarterly loss of subscribers, with 281,000 customers dropping the service. To combat that, Dish is offering the Flex Pack, including about 50 channels, for $30 per month.

Dish Network also acquired over-the-top (OTT) provider Sling TV, which offers program bundles for as little as $20 per month, with lots of options to add tiers. Other so-called skinny bundles include Verizon's Custom TV, and AT&T has plans to come on line with its own OTT service.

"The reality is that there's a whole new generation that's not going to pay TV at all, so to get a shot at reaching them, you have to go to the skinny bundle and the OTT space," said Csathy.