ESPN Has No Plans to Exit Sling TV13 Jul, 2015 By: Erik Gruenwedel
Build it and they will come. But what if the crush toward over-the-top video undermines the traditional pay-TV landscape, and more importantly, its fiscal largess?
That’s the scenario ESPN finds itself in. The perennial No. 1 sports network reportedly lost 3.2 million subscribers in the past year — much of it due to consumers scaling back or dropping (cord-cutting) their cable channel bundle. In fact, Disney-owned ESPN’s reach in domestic households is down 7.2% since 2011, to 92.9 million, according to Nielsen.
Meanwhile, ESPN (and ESPN2) in February became one of pay-TV’s first benchmark properties to test the OTT video waters when it signed onto Dish Network’s Sling TV. In May, Disney CEO Bob Iger said he welcomed new content distribution models — provided they are accretive to the bottom line.
“We thought there was value [with Sling TV] from a strategic and a financial perspective,” Iger said.
But that value is being tested. At a time when more people are watching TV programming on demand, live sports remains relatively immune from the DVR. As a result, ESPN commands one of the highest pay-TV carriage fees, reportedly at $6.61 per subscriber.
That carriage fee, however, could be in jeopardy as additional subs exit. Indeed, Disney has a clause in the Dish deal allowing it to pull ESPN from Sling TV should sub losses top 3 million, according to The Wall Street Journal.
A Sling TV representative declined to comment on contractual specifics with content holders.
“We talk with our programming partners often and they are interested in how we can grow our business together,” Sling TV said in a statement.
While it explores new distribution models, Disney remains protective of the existing pay-TV ecosystem. Earlier this year it filed litigation against Verizon’s FiOS Custom TV offer of a separate sports package featuring ESPN. It also elected not to participate in Sony’s PlayStation Vue online service for financial reasons.
ESPN representative Amy Phillips echoed a no-comment policy on the specifics of carriage contracts, adding that Sling TV enables ESPN to reach young, tech-savvy consumers.
“We have no plans to terminate our [Sling TV] contract,” Phillips said.