What happened?

ESPN has at long last revealed the name and initial price-point of its direct-to-consumer (DTC) streaming app. Launching this fall, the service will simply to be known as “ESPN”, and for the first year will retail for $29.99 a month. Subscribers will be able to access the full slate of the Disney sports network (including games from the NFL, NBA, MLB, NHL, College Football and more) at launch, outside of a Pay TV or vMVPD service for the first time.

How does the sport streaming landscape now look?

It’s worth analyzing the competitive landscape to truly quantify the ESPN app’s ability to impact the market. After much ado in 2024 about Venu Sports, inter-network sports streaming collaboration has been paused, with each of the major broadcasters putting forth its own horse in the DTC race. Of all the entrants, ESPN has the strongest starting position from a pure sports perspective - as the largest sports rights owner in the US by value, with roughly 26% of all rights. This puts them ahead of competitors NBC (at 21%) and FOX and CBS (at 12% each).

Following the recent announcement of the FOX One DTC sports app, all of the biggest US broadcast sports rights buyers are now effectively accounted for in the streaming space: the new ESPN app; Peacock (NBC), Fox One (Fox), Paramount+ (CBS), and HBO Max (WBD’s Turner Sports). The remainder of the market then primarily consists of the growing shares of Amazon, Netflix, Apple and YouTube – each of whom has continuously grown sports rights in the last couple of years. This array of SVoD services with various Tier 1 sports offerings serves as the primary competition for the new ESPN app.

What are the short-term impacts of this move?

Incumbent Pay TV operators (and vMVPDs like YouTube TV, Fubo, etc.) will also be in competition with these DTC services. For years , the associated sports channels have been the preserve of pay TV operators (and later vMVPDs) – but as more sports become available on standalone services, consumers could potentially shift their viewing, particularly as Ampere’s Q4 2024 consumer data shows that 43% of US sports fans consider sports the only thing keeping them from unsubscribing to cable.

This has been mitigated, to an extent, by the decision to make access to the ESPN app free for those that already have access to the network through a Pay TV or vMVPD subscription. This initially positions the ESPN app as primarily complementary to aggregators with the main threat to pay TV subscriptions coming from the potential for subscribers to downscale spend and accept a reduced array of sports for a lower price point. Should enough customers churn in favor of standalone apps, this could have the potential to lead to increased pushback from Pay TV operators looking to pay lower carriage fees. Ampere research shows that up to 39% of sports fans with a Pay TV or vMVPD subscription claim to be exclusively interested in watching sports, as opposed to TV and films, suggesting a sizable pool of potential cord-cutters once the standalone apps are live.

More generally, this approach for the new ESPN app sets the stage for ESPN to focus on several short-term targets. First, through collaboration with pay TV firms, they can maintain carriage fees from pay TV operators for the majority of current subscribers, particularly sports fans who want to watch large volumes of different sports. Secondly, ESPN can try to expand its direct subscription base – reaching down the monetization ladder to either lapsed or existing pay TV customers willing to spend at a lower price point to watch a subset of sport on ESPN. And finally, ESPN can rapidly build the audience of its app – encouraging existing pay TV subscribers to get familiar with accessing content directly via the app and potentially setting them up to be users of other streaming bundles and deals that may come in the future.

And how about in the longer-term?

In the long-term, the likelihood is that we will see direct sport streaming bundles start to appear over time – even if the initial attempt at this, through Venu, was unable to get off the ground. Taking lessons from the entertainment subscription streaming services, first we see the launch of individual products, that clamor for subscribers and grow their bases; then as subscriber growth slows and churn becomes a bigger issue, all but the very largest of services will start to consider bundled offerings, reducing content costs and mitigating subscriber churn.

In this context, ESPN has a couple of different ways it can pitch itself to different consumers long-term. First, as the (current) largest purchaser of sports rights, it can position itself to consumers as the primary sports service, for more casual fans – if you just take one service, take this one. Secondly, as part of the Disney family, it will be bundled together with Disney+ and Hulu for $35.99 per month (and potentially other external services, such as HBO Max) – which will enable Disney to target consumers with something close to a pay TV-lite package – a selection of entertainment, family and sports content, all in one place at a reduced price point. And finally, it could seek to partner with other sports services in a larger sports bundle, to target the most avid sports fans – potentially as the dominant partner, should it grow its subscriber base large enough.

Ultimately, the ESPN app will be another product, although very competitive one, in the very saturated streaming market. With each network now creating a DTC counterpart, the theme of streaming looking more and more like traditional TV is yet again reinforced. It seems likely that, at some point, the continuation of said theme could be a degree of Venu-esque consolidation of these services in some capacity.