Monday, November 30, 2015

Disney And ESPN Rocked By Cord Cutting

High subscriber fees, a decline in sports interest, more entertainment choices, and other challenges have rocked the world of cable television.  The Disney company, a bellwether of the media industry, is feeling those changes firsthand.  In the last 2 years, we learn that the ESPN Network lost 7 million subscribers, ABC Family (to be rebranded to Freeform, a mistake I believe) has lost 5 million subs, and Disney Channel 4 million.  Hard to make up those revenue losses without raising advertising fees, but a smaller base doesn't help drive big increases.  It is unlikely to expect a rebound as consumers continue to cut the cord and seek more OTT programming alternatives.  And Netflix, Amazon Prime and others are driving them to switch with huge libraries of content ad the rise of original programming too.

For a must have network like ESPN, the rise in sports license costs, higher ticket prices to attend live sporting events, and other challenges have driven away the middle class family from attending games and building fan interest.  Instead, the draw has become fantasy gambling, a short term boon but ultimately long term killer of sports, in my opinion.  Television sports interest continues to draw healthy ratings, but the future generation fan may be less interested in watching.  As fantasy sites get barred from advertising and used in certain states, we may in fact be watching the tipping point in sports value.

As for networks like Disney and ESPN, their challenges are also being faced by other cable networks like Fox, Viacom, Scripps, AMC, and others.  Declining subscriber revenue cannot be made up easily.  Increased advertising minutes have led to viewers seeking OTT choices that are commercial free. It is no longer fun to watch a show or movie that has what appears to be more ads than content.   And that influx of ads, along with high cable bills, may be the two primary reasons customers are fleeing the cable universe.