Disney Chief Says ESPN Could Be Unbundled Eventually

Disney chief says ESPN could be offered a la carte … eventually

disney head bob iger says standalone espn still ways off — Image used with permission by copyright holder

Some old-guard networks — HBO and CBS, to name a few — perceive cable de-bundling as the next goldmine in television, offering affordable standalone apps to those who don’t subscribe to cable or satellite. Others, like Disney, aren’t so sure.

Disney CEO Bog Iger told CNBC’s Squawk Box this morning that ESPN and the company’s other properties might eventually be sold a la carte, but not likely within the next five years.

“Technology is the most disruptive force that so-called traditional media […] is facing,” Iger said. “[But] while the business model may face challenges over the next few years, long term for ESPN […] they’ll be fine.”

It could be inferred that Disney struggles to see value in fixing something most wouldn’t call broken. Income at the company’s cable networks division, which includes ESPN, declined slightly last quarter, but still hit $1.26 billion. Cable providers pay more per subscriber each month to carry ESPN than any other network (the Wall Street Journal reports $6.04, or $4.56 more than second-most expensive TNT). And current cable customers still shell out (if begrudgingly) for ESPN-loaded bundles — according to a ComScore survey, more than 50 percent said sports were important to their TV viewing habits.

One development that might shift Disney’s course, Iger suggested, is “more erosion” in the satellite and TV bundles, such as Verizon’s recent packaging of “skinny bundles.” Another could be higher sports programming costs — expensive agreements with the NFL, NBA, and others have increasingly begun to impact ESPN’s bottom line. Despite those potential developments, though, the company is committed to the traditional pay TV paradigm for the time being. Chief Financial Officer James A. Rasulo told investors in February that even without a la carte components, Disney is “confident in [its] ability to grow ESPN” and other networks “in the long term.”

The decision to prolong unbundling is one Disney makes at its peril — HBO’s new standalone app, HBO Now, continually tops iTunes’ charts, and cord-cutters are climbing the walls at the chance for live sports outside of the bounds of cable. But Iger, to be sure, isn’t ruling anything out. “We […] view technology as a friend, not a foe,” he told CNBC. In addition to ESPN, he said, “Disney [Channel] is [a] brand and product that could be sold directly to the customer.”

Iger said discussion of such a service’s cost “would be conjecture at this point.” Given the amount of administrative and contractual overhead involved in ESPN’s many pots, though, it wouldn’t be cheap. Industry analyst Michael Nathanson projects that in order for the network to maintain its current profit margin, Disney would have to charge at least $36.30 for an a la carte ESPN bundle. By comparison, HBO Now starts at $15 a month.

That pricey prediciton makes Dish’s Internet TV service, Sling TV — which carries ESPN, AMC, and a host of other cable channels for just $20/month — an increasingly attractive proposition.

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