ESPN and Future Revenue Models

Very interesting and informative article on ESPN and how they operate. The purpose of the article is to show how ESPN is the current commanding factor in cable rights and cable sports and how that might change or stay the same is the shifting technological future. But as good as the article is - some important considerations slip through the cracks.

Early in the article they mention Aereo but only as an excuse to get in a few quotes from Barry Diller. Later in the article they mention that 898,000 consumers have fled the pay TV market but they don't explain that even with declining TV subscribers many of the big cable operators are still raking in cash because of the bonanza that is broadband. The article mentions ESPN3 but just as a throw away sentence in how "warehousing" is being handled.

What was not mentioned is how ESPN/Disney has already been way out front of competitors when it comes to broadband channels. Currently they have ABC News Broadband, Disney Connection, ESPN3, and SOAP Net. Those 4 channels can be purchased as a package for roughly $.50 per broadband subscriber but any broadband provider who wants to carry ESPN/Disney channels going forward MUST carry ESPN3 which at about $.20 per broadband subscriber is more than what ViaCom charges for Comedy Central as a standard cable channel. Think about that for a minute.

Many people look at the HBO Go product as a model going forward. HBO has insisted that HBO Go will only be available to subscribers from a traditional cable MSO or satellite provider. But what if that changes? Suddenly HBO has a product that is as attractive as Netflix or Amazon Prime or Hulu or the "cord-cutters". It could be a market that gets too rich for HBO to ignore under loyalty to the old model.

Same might be true for ESPN/Disney. Currently their broadband channels are only available through providers carrying their channel packages but what if once the dust settles with Aereo -  ESPN / Disney allows them to build ABC News Broadband, Disney Connection, ESPN3, and SOAP Net into their basic product offering for $.50 per subscriber? Small drop in the bucket when it comes to overall revenues but money is money. What if they enhanced that package by offering ESPN, ESPN2 and ESPNU for $10 per month? Suddenly we are talking different magnitudes of revenue.

The future will allow for many changes to today's TV model. The cable company may soon be just a "dumb pipe" provider and when that happens ESPN /Disney will be prepared.

They already are.

Time Warner Cable and Fox News TV Everywhere

Time Warner Cable now has TV Everywhere apps for Fox News and Fox Business News. This announcement got me wondering if we will see a new trend where TV Everywhere becomes the first line of defense for content producers against the oncoming tide of a la carte TV.

HBO Go is tremendous but the over the top service is only available to people who are already subscribing to HBO through their cable company. One hand washes the other in this arrangement. If you think about it - HBO is also a defacto package of channels. Nobody gets just one HBO channel. Other content providers who are not premium channels may see this and wonder if a similar arrangement like this can be used to their advantage.

I am not sure about the details of the Time Warner Cable arrangement with Fox News and Fox Business News regarding their apps but I have to wonder if the language of the agreement states that the apps are only available to people who subscribe to both channels? That may not be a big deal now when Time Warner and other cable companies package the channels together but it would be good protection and a very valid selling selling point if a la carte ever came to be. Sure with a la carte TV you would be free to pick either Fox News or Fox Business News or neither but what if you lost access to the apps for both channels if you didn't also get both linear channels?

Just something that occurred to me.