Disney's Streaming Future Begins With Modest ESPN+ Launch

ESPN App iPad - Publicity - H 2018
Courtesy of ESPN

The $5-per-month streaming service will not offer premiere games from the NFL and NBA, but instead will focus on niche sports and underserved fan-bases.

ESPN is finally making its digital play. 

The Disney-owned sports giant on Thursday launched a redesigned app that also serves as the home for a new streaming service, ESPN+. The offering, one of two planned over-the-top products currently being developed within Disney, is ESPN's answer to the growing audience for streaming content and a declining base of subscribers to its linear television offerings. 

"We consider this the beginning of a new era of innovation at ESPN," newly named ESPN president Jimmy Pitaro told reporters at an intimate gathering held April 10 at the network's Los Angeles outpost. "This really is the next phase for us. Quite simply, it's an opportunity for us to serve sports fans in a way that no one else really can and at the same time expand our audience, expand our reach and expand our engagement." 

But ESPN delivered over the internet, this is not. Programming found on ESPN or one of the company's other seven networks will largely not be available to stream live on ESPN+ due to the costly and complex web of live television rights for big-ticket games from the premiere leagues like the NFL and NBA. Instead, ESPN+ is being marketed as a complementary offering for three distinct audience segments: hardcore sports fans, people who follow niche sports in the U.S. like cricket or rugby, and college sports fans underserved by existing linear offerings (think water polo supporters or alumni of schools in smaller athletic conferences). 

At launch, ESPN+ has the rights to offer some 10,000 live events, and ESPN dealmakers are hard at work negotiating for more competitions to add to the service as the weeks go on. Among the offerings are daily MLB and NHL games, MLS out-of-market matches, live events from 20 college conferences, hundreds of Top Rank boxing matches, 20 PGA tour events, matches from three of the four Grand Slam Tennis tournaments, international cricket matches, nearly 200 Canadian Football League games and around 200 English Football League matches. 

The service will also offer a lineup of studio-produced series including basketball analysis show Detail hosted by Kobe Bryant, originals including Draft Academy and Quest for the Stanley Cup and a library of on-demand content including the entire 30 for 30 archive. ESPN+ is also launching as the exclusive home to new 30 for 30 documentary The Last Days of Knight, about the fall of the legendary college hoops coach.

Sure, there won't be Monday Night Football in the fall or spring NBA match-ups, but at $5 a month, Pitaro contends that ESPN+ is a good deal given its lineup. The service, he said, "from our perspective presents a very strong value proposition to existing customers and new customers." 

The nearly 40-year-old ESPN has long been a cash cow for Disney, contributing significantly to the $6.9 billion in operating profit that the Disney Media Networks division reported at the end of its 2017 fiscal year. But declining ratings and an increase in cord cutting have hurt the live sports business, once thought impervious to such problems, too. ESPN has made streaming bets before, launching ESPN360 (later ESPN3) as an online offering for live streams and replays. But ESPN+ will be the first subscription product that is designed to truly complement the existing linear broadcasts. 

"This service will be complementary and additive to our existing business mode," noted Pitaro. "We will continue to invest in and drive value from that multi-channel business, which has served us quite well over the years and we expect will continue to do so. In parallel, we now have additional ways to serve the sports fan." 

Launching a brand new streaming service is no easy feat. It requires millions of dollars in investment to build a technologically-sound product with enough content to keep viewers coming back day-after-day. Disney jumped some of the hurdles when it acquired a majority ownership stake in MLB's BamTech for nearly $2.6 billion. The company, led by Michael Paull, had already been used to power HBO Now and the WWE Network. Its technology now powers the new ESPN app and ESPN+. It will also be used to launch a Disney-branded service next year. 

When it comes to building an audience for the streaming service, ESPN is focusing its marketing campaign on downloading the ESPN app, which Pitaro called "the front door of all things ESPN." The newly redesigned product offers a mix of editorial content, game highlights and scores. People with existing ESPN subscriptions can authenticate via their cable provider and watch live streams of whatever is airing on the network. Inside that experience will be heavy promotion for ESPN+ (denoted by a gold flag in the corner of videos that are exclusive to the service). Signing up for ESPN+ will take only a few clicks. 

"While complementary to the main ESPN channel, we do expect [ESPN+] to get broad resonance in the marketplace," Kevin Mayer, the chairman of Disney's newly established Direct to Consumer and International division, told reporters on Tuesday. He did not offer projections on how many subscribers Disney expects ESPN+ to amass but acknowledged that the size of the membership base is "how we will measure the success" of the service. 

Mayer also signaled Disney's commitment to growing the digital business, explaining that the company will be in investment mode on the service for an unspecified number of years. Disney has already signed American Express as the ESPN+ launch partner. 

Disney is introducing ESPN+ and the forthcoming family-friendly streaming service amid seismic shifts in the entertainment industry spurred on by the rise of streaming services like Netflix and growing competition for ad dollars from digital behemoths Facebook and Google. The services, Mayer explained, are part of "a long running strategy to get closer to the consumer and be a direct-to-consumer business." Having that relationship with audiences, he added, "puts us in a new part of the value chain."