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Disney CEO: ESPN viewers won't need cable in the future

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ESPN eventually won't be limited to just cable subscribers, according to Disney (DIS) CEO Bob Chapek.

All ESPN-related sports broadcasts will ultimately be available on streaming through ESPN+, he hinted during the company's most recent earnings call.

“What we're doing is sort of putting one foot on the dock, if you will, and one foot on the boat right now,” Chapek said when asked if the company had considered turning all of its sports broadcasting products over to the streaming platform. “But we know that at some point when it's going to be good for our shareholders, we'll be able to fully go into an ESPN DTC (direct-to-consumer) offering the way that you described. And we fully believe that there is a business model there for us that's going to enable us to regain growth on ESPN+ in a full DTC expression.”

DTC means viewers watch the games directly on the ESPN+ app, thus cutting out traditional linear cable broadcasts, like the NBA Finals on ABC or the Stanley Cup Playoffs on ESPN. This would be a material shift from how Disney has approached the service thus far, as current subscribers can’t watch ESPN, ESPN2, or ABC live broadcasts on the app without also entering a cable subscription.

ESPN College Gameday host Jay Bilas does a promo for the broadcast between the Auburn Tigers and the Texas A&M Aggies on Feb 12, 2022. Photo: John Reed-USA TODAY Sports
ESPN College Gameday host Jay Bilas does a promo for the broadcast between the Auburn Tigers and the Texas A&M Aggies on Feb 12, 2022. Photo: John Reed-USA TODAY Sports

'It will be the ultimate fan offering'

Launched in 2018, ESPN+ now has 22.3 million paying subscribers, up from 13.8 million in the same quarter last year. The increase in subscribers comes as ESPN and other outlets have made a stronger push to bring sports to streaming services.

Wells Fargo Securities senior analyst Steven Cahall, who asked Chapek about the ESPN spinoff on the earnings call, told Yahoo Finance this would be a positive sign for investors. He pointed to Paramount+ moving live NFL broadcasts onto streaming as a potential sign of what could become an industry trend.

We think that day is coming,” Cahall told Yahoo Finance Live. “And we think it will create value for the stock when it does.”

In the past year, ESPN has added more content on the platform, including additional PGA Tour and NBA coverage and acquired the NHL’s broadcasting rights. Amazon (AMZN) will begin streaming the NFL’s Thursday Night Football this fall. NBC’s Peacock (CMCSA) streamed premium Olympics coverage and has also started broadcasting MLB games. Apple (AAPL) is streaming select MLB games and is reportedly in talks for the NFL’s Sunday Ticket package.

Many of the other companies Disney is battling for streaming eyes don’t have strong linear cable ties, like Disney with its ABC brand.

Because of that, Disney is hesitant to move over too much content from cable to streaming given the current profit deriving from linear cable, Chapek noted on the earnings call. In the second quarter of 2022, Disney’s linear networks brought in an operating income of $2.8 billion while the company’s “Direct-to-Consumer” sector, which includes Disney+ and ESPN+, lost $887 million.

“We're not ready to share the specifics of our model in terms of how long it would take for us to reach profitability or the impact that it would have on our linear business,” Chapek said. “But I would emphasize that we're only going to do it if it's accretive to our shareholder value when it comes time to actually pull the trigger. But I can tell you that it will be the ultimate fan offering that will appeal to super fans that really love sports. And I think there's nobody but ESPN that, frankly, could actually pull that off. But we don't have a lot of specifics when it comes to structure.”

Josh is a producer for Yahoo Finance.

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