Could the value of live sports be overrated? No doubt, according to BTIG analyst Rich Greenfield who today in a blog post said the firm believes ESPN has laid out far too much cash for rights to televise major sporting events, especially as the cable bundle begins to come undone and consumers look online for their entertainment.
“Simply put, ESPN has been the largest beneficiary of the ‘BIG’ cable bundle for decades and is now dramatically overearning, with consumers the biggest losers,” he wrote in a blog post today.
Greenfield contends ESPN and ESPN2 cost pay-TV subscribers a combined $8/mo., something that he believes is unsustainable.
And, Greenfield backs up his theory with results from a Civic Science survey of U.S. consumers – 87% of whom subscriber to multichannel television – that show more than half of current subscribers (56%) would drop ESPN/ESPN2 to save $8/mo. from their cable bill. Sixty percent of women surveyed and 49% of men – regardless of age – agreed. Fifty-eight percent of Millennials, 55% of Gen X and 55% of Boomers all would drop it to save $8/mo.
When asked if they would be willing to pay $20/mo. to get ESPN as a direct-to-consumer Internet service, only 6% said they would, with another 9% saying they were unsure. Again, age seemed not to matter, with only 7% of Millennials, 7% of Gen X and 5% of Boomers saying they’d pay $20.
Using that math, Greenfield says that Disney’s contention that it could go over-the-top to consumers is moot, as ESPN would “likely have to charge dramatically more” than $20/mo.
“The math for a direct-to-consumer offering for a basic cable network does not work, especially for channel(s) with very high monthly fees embedded within the current MVPD bundle,” he wrote. “Disney cannot take ESPN direct-to-consumer and they know it, whether they admit that publicly or not. Furthermore, if the multichannel video bundle frays faster than expected and the TV ad market continues to weaken, ESPN’s future growth prospects are dim, at best.”
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