ESPN Chairman Jimmy Pitaro has doubled down on the network’s plan to launch a direct-to-consumer product in the future. Speaking from the inaugural Game Plan Summit held by CNBC and Boardroom in Los Angeles, Calif. on Tuesday, Pitaro expressed that “it’s not if, it’s when” after being asked about the network’s future plans. The network reportedly has approximately 74 million cable television subscribers in the United States, a metric that is down from year’s past. Yet its streaming service, ESPN+, has added 25 million subscribers in the five years since it has been launched.
As has been previously reported, the completion of the direct-to-consumer plan, known internally as “Project Flagship,” will not eradicate the network’s presence on television. Instead, the two will coexist in an effort to bring consumers their favorite content in a more effective way. Pitaro spoke about the perception by those in sports media that the new service will be a pronounced change instead of an addition. In reality, the company is not going anywhere on cable television, but will now be available through an alternative means.
“The [traditional] model has been very good to Disney,” Pitaro stated.
ESPN recently cut members of its on-air talent roster following layoffs mandated by The Walt Disney Company to eliminate $5.5 billion in costs. While ESPN+ gains subscribers, Disney+ continues to lose them wherefore the company’s streaming endeavor is expected to have lost a total of nearly $800 million by the end of the third quarter. Nonetheless, the company augmented the average revenue generated per user by 20%, offsetting some of the damage.
Revenue generated by the company’s linear networks, including ESPN, dropped by 7% to $6.6 billion last quarter, and now Chief Executive Officer Bob Iger is considering divesting select linear assets. ESPN, however, is now seen as its own distinct business entity and core to the interests of the company. In fact, it will report its own earnings for the first time this November, and the results are expected to be impressive.
Pitaro confirmed that the “Worldwide Leader” is in discussions with strategic partners interested in purchasing an equity stake in the company, the impetus of which was an accelerated rate of cord cutting. The key pay television companies lost 16% more subscribers in Q1 2023 than Q1 2022, equating to over 2.2 million households.
CNBC reported that the network was in talks with various professional sports leagues about the arrangement, and others have speculated that another media company could join the fold. Pitaro declined comment on naming specific partners, but he did state that there are possibilities with companies in technology, content, marketing and distribution sectors of the business.
If the network ends up cutting a deal with a league – specifically the National Basketball Association, which has an expiring national media rights contract at the end of the 2024-25 regular season – there is interest in how it would affect media rights negotiations. Pitaro expressed how the company has a strong relationship with the Association but wants to continue innovating in terms of game production.
“We believe that there are parties out there that can help us on the content side,” Pitaro said. “You can draw whatever conclusions you want from that, but my priority is when we do launch flagship channels directly to the consumer à la carte, that the content proposition is as compelling as it can be.”
