ESPN's OTT, ACC Network plans could provide leverage in affiliate renewal talks, analyst says

ESPN
The analyst firm spotted a few areas in which ESPN can push in order to get continued revenue growth.

Despite its struggles, ESPN has a number of levers it can pull to its advantage in upcoming affiliate renewal talks, according to MoffettNathanson.

The analyst firm spotted a few areas in which ESPN can push in order to get continued revenue growth. In particular, ESPN could launch an ACC Network and it could position itself to take advantage of its OTT plans with BAMTech.

MoffettNathanson expects ESPN’s launch of the ACC Network—due in August 2019—could have a positive impact similar to the network’s launch of the SEC Network in 2014. Citing SportsBusiness Journal reports, the firm estimates the SEC Network reached 60 million homes within a year and generated a profit of $210 million. In its first full year, EBIT for the network totaled $185 million and grew to $225 million in 2016.

FREE DAILY NEWSLETTER

Like this story? Subscribe to FierceVideo!

The Video industry is an ever-changing world where big ideas come along daily. Cable, Media and Entertainment, Telco, and Tech companies rely on FierceVideo for the latest news, trends, and analysis on video creation and distribution, OTT delivery technologies, content licensing, and advertising strategies. Sign up today to get news and updates delivered to your inbox and read on the go.

“The ACC is expecting as much revenue in its first year as the SEC generated per school in 2014. We forecast a haircut to the SEC Network’s success with an assumption that the ACC Network will only be carried in states where their schools are located, representing about 40% of the U.S. households on the Eastern coast of the U.S. This leads us to project total revenues of approximately $220 million in its first year and $80 million in EBIT,” the firm wrote.

RELATED: ESPN keeps bleeding subscribers, cuts another big name from network

The ACC could help ESPN and Disney the way the SEC did by offsetting a slowdown in Disney affiliate fee growth and profitability, the firm added.

Another upside for Disney and ESPN during the upcoming renewal cycle is Disney’s joint venture with BAMTech, which will be used to launch an ESPN direct-to-consumer service. MoffettNathanson expects the service could hit four million subscribers in the first four years—similar to CBS All Access’ growth trajectory—and that at a $10 price point, could provide an additional $480 million (or $335 million after the distributors’ cut is taken out) of subscriber revenue.

“As long as there is little to no overlap of the existing linear ESPN content on the BAMTech ESPN OTT offering, we expect essentially no cannibalization of the existing ESPN Pay TV subscriber base,” the firm wrote. “However, if content begins to spill over from existing channels, this will be an area worth monitoring closely.”

Disney and ESPN will have a number of opportunities to apply these strategies in the near future as many of the network’s affiliate agreements are coming up for renewal soon. Altice USA (the newly combined Cablevision and Suddenlink) is set to expire near the end of 2017, Verizon FiOS is set to expire next year and Time Warner Cable (now owned by Charter), AT&T U-verse and DirecTV all expire around 2019.

Suggested Articles

Streaming TV service FuboTV has expanded its deal with Discovery Inc. and in the coming weeks will add Discovery Channel, TLC and more to its base subscriber…

YouTube reportedly is considering shifting all children’s content on its platform over to its YouTube Kids app, a move that would be in response to recent…

Gracenote, which is owned by Nielsen, today launched Gracenote Video Popularity Score, a new product that compiles data to determine the most relevant…