Disney has been steadily growing its ESPN+ streaming service but it’s not likely to give up on its lucrative linear cable channel for at least another few years.
According to a new report from CNBC’s Alex Sherman, ESPN and ESPN2 currently take in approximately $10 per subscriber and with 75 million pay TV households in the U.S., it comes about to about $9 billion in revenue per year. ESPN+, which recently raised its price to $6.99 per month or $69.99 per year, ended the most recent quarter with 14.9 million subscribers but at only $4.47 of average revenue per user.
Disney is reportedly planning to just keep gradually increasing the price for ESPN+ as more key programming and content shifts over. However, the company is reportedly looking at a threshold “well under 50 million” U.S. pay TV household as the point at which introducing a full ESPN streaming product would make financial sense. Even if pay TV losses continue at the 2020 pace, when major distributors lost 6 million subscribers, according to eMarketer, it will still be another five or six years.
As to what a full ESPN streaming product might cost, CNBC spoke with former Turner chief David Levy, who said that Disney could get about 30 million subscribers to pay $30 per month for that service, which would bring in $10.8 billion every year.
That subscriber and price forecast could be overly optimistic, however, and password sharing could eat into those totals, or so Disney executives reportedly fear.
ESPN+ along with Disney+, Hotstar and Hulu have been driving growth for Disney’s direct-to-consumer business, which reported revenues up 57% to $4.3 billion during the most recent quarter while operating loss scaled down from $0.6 billion to $0.3 billion. The decrease in operating loss was due in part to Hulu’s subscription revenue growth and higher advertising revenue. Subscription revenue growth was due to an increase in subscribers and a December 2020 rate hike for the Hulu + Live TV.
“We continue to introduce exciting new experiences at our parks and resorts worldwide, along with new guest-centric services, and our direct-to-consumer business is performing very well, with a total of nearly 174 million subscriptions across Disney+, ESPN+ and Hulu at the end of the quarter, and a host of new content coming to the platforms,” said Disney CEO Bob Chapek.