ESPN could be on its way to bankruptcy court.
This is something that is worth watching. We could be looking at the titan in cable sports going under.
It is something that is coming to light now that the CEO of Disney admitted that it talked to both the NFL and NBA about a partnership deal. This is getting laughable.
We have a situation where the future of Mickey Mouse world is in jeopardy.
Two Dead Businesses
Disney is faced with two facts:
- its streaming service has lost $11 billion to date and the numbers keep growing each quarter.
- cord cutting is real and the number of subscribers of ESPN is declining. It went from 100 million to the present 75 million. Many are estimating that the rest of the decade will see the decline continue, perhaps putting this around 50 million.
All of this means that Disney is losing a ton of revenue. The fees it collects from cable operators are dropping. This caused the push to look for partners.
Before getting into that, we need to add one other variable.
The contracts with both organizations are coming due. That means both leagues will be looking for significantly more money for the rights. So Disney is facing a dropping in revenue in addition to higher expenses.
This is not a winning combination from an account perspective.
Middleman
Disney is nothing more than a middleman. Each of the sports leagues has its own networks and direct services. Why would they want to take an equity stake in ESPN to reach customers when they can do it on their own?
There is another issue with streaming service: people who watch sports will have to pay a great deal more.
The reality is that ESPN was subsidized for decades by non-sports watchers. Everyone who has a cable subscription has to pay. This means sports users receive lower costs than they normally would.
Hence, we could be looking at a monthly fee of $25 if it is going to garner the revenues it gets from cable.
Why do the leagues need this?
The answer is they do not. Unless either is worried about monetizing their customers, they have no need for ESPN in this era. Since cable is dying, as cord cutting continues, they might as well look into going direct.
Right now, the leagues sells their rights for their product to ESPN. That entity, in turn, increases the price it charges into the market.
In reality, ESPN is a dying right before our eyes. Disney is desperate to exit an industry that is dying. Technology changed the distribution model of all entertainment.
Decades ago, entities had to use someone else to reach the audience. Now, with the ability to go direct, this is no longer the case.
As a result, ESPN is going to find that it is no longer relevant. This is going to cause Disney to ride it right into the ground. There are no partners who should step forward and team with Disney on this.
Unless that company can find another sucker, it is stuck with it.
