After months of anticipation, two heavyweights of the cable bundle — Fox and ESPN — are going full force into streaming. But in doing so, they’ll be attempting the balancing act of going after so-called “cord-nevers” while avoiding the acceleration of the exodus of traditional pay TV subscribers.
Both services launched a streaming version of their traditional TV offerings on Thursday — just in time for NFL season. The standalone ESPN service is available for $29.99 per month for its full lineup of programming or $11.99 per month for a subset of content already available in its existing ESPN+ service. The Fox One streaming service, which includes its entire lineup of broadcast, news, sports and entertainment programming, from Fox News to FS1, is available for $19.99 per month.
Fox One and ESPN DTC enter streaming at a time when multiple services are competing for subscription revenue despite consumers dealing with rising everyday costs. The environment is particularly thorny for sports fans, who are inundated with different bundles and offerings and still can’t get their sports content all in one place on streaming (ESPN and Fox One have their own bundle for $39.99 launching in October).
“What we’ve learned is that a decade ago, there was this fever dream about streaming,” Crakes Media founder and former Fox Sports executive Patrick Crakes told TheWrap. “It’s going to end up, on a standalone basis, being more expensive. It’s a bunch of expensive content, but it’s a sliver of the bundle before.”
Still, the potential market is lucrative, with roughly 65 million households of so-called “cord-nevers” who don’t bother with a cable subscription at play for these services. A recent survey of nearly 1,300 consumers by Hub Entertainment Research conducted prior to launch found 60% of avid sports fans were either likely or very likely to subscribe to ESPN Unlimited, while just 28% of casual fans felt the same.
“Since 1979, we’ve really redefined what’s possible in sports media,” ESPN chairman Jimmy Pitaro told reporters during a Tuesday media briefing. “We are on the verge of another industry-shaping moment.”
Fox’s direct-to-consumer CEO Pete Distad has said he expects Fox One’s growth to be “modest,” with a subscriber base in the “mid-single digit millions” over the next few years. Meanwhile, ESPN’s Pitaro has kept expectations for the new streamer closer to the vest, instead arguing that success would be measured by its total audience across its platforms, including pay TV, the company’s bundles and driving engagement on its app.
“The goal is to serve the entire ESPN audience even better. We are not going to judge ourselves based on opening weekend,” he said.
Winning over cord-cutters and cord-nevers
Fox and ESPN aren’t starting from scratch when it comes to digital, with both establishing a strong presence in recent years.
While the growth of ESPN+ since its launch in 2018 has been muted, with the service only reaching 24.1 million subscribers and offering a subset of the network’s content, the sports network reaches nearly 200 million people per month on digital and social media channels, including 30 million monthly active users who engage with its app.
Meanwhile, Fox Nation has between 2 and 2.5 million subscribers, while Fox News alone has generated over 1.5 billion video views on YouTube and 3.7 billion social video views in its latest quarter. And the company’s free, ad-supported streamer Tubi has surpassed 100 million monthly active users.
In order to appeal to younger audiences, both Fox One and ESPN are launching vertical feeds of short-form video clips with the most important news headlines and sports highlights. Fox One will also give users up to nine months of storage to record live events and will use the company’s recent acquisition of Red Seat Ventures to make select podcasts available to the service’s subscribers, while ESPN has created a personalized SportsCenter based on a user’s preferences.
The services will also integrate several interactive features into their streaming platforms to keep viewers engaged while watching their favorite team, such as betting odds and live stats for players and teams. ESPN users will be able to place bets by linking their ESPN BET accounts, with plans to integrate sports betting directly into the streamer in the future, as well as shop for merchandise and gear directly in the app without missing any of the action.
The integration of sports gambling is key. A consumer survey of nearly 2,800 people conducted by Ampere Analysis found that roughly 60% of U.S. sports fans bet, with over a third doing so weekly. Meanwhile, Hub’s survey found that 43% of avid sports fans said integrated betting features made them more interested in ESPN Unlimited, compared to 19% of casual sports fans.
“That represents a benefit, and a differentiator from other services, that goes beyond the TV content itself,” Hub’s founder Jon Giegengack told TheWrap. “With so many streaming services to choose from, differentiation is often half the battle [or more] in attracting attention from potential customers.”
Keeping the cable bundle intact
One of the major challenges Fox One and the ESPN streamer will face is mitigating the existing trend of cord-cutting. Ampere’s survey found that up to 39% of sports fans with a pay TV or vMVPD subscription were exclusively interested in watching sports, while about 43% surveyed said sports is the only thing keeping them from canceling cable.
As of September 2024, ESPN reported a total of 264 million linear subscribers across ESPN, ESPN2, ESPNU, ESPNEWS, SEC Network and ACC Network, per Nielsen and S&P Global’s Kagan Research. Meanwhile, Fox reported a total of 304 million linear subscribers across Fox News, Fox Business, FS1, FS2, the Big Ten Network and Fox Deportes as of June 2024, citing Nielsen figures.
“Should enough customers churn in favor of standalone apps, this will have the potential to lead to increased pushback from Pay TV operators looking to pay lower carriage fees,” Ampere Analysis senior analyst Sam Nursall warned TheWrap. “Just how much of this group actually cuts the cord will certainly influence carriage negotiations down the line.”
In order to keep customers inside the cable bundle, Fox One and ESPN’s pricing are in line with what pay TV operators are already charging for their content. The services are also available to existing Fox and ESPN linear subscribers at no extra cost. Fox One will also be available in bundles with Fox Nation and B1G+, while ESPN will be available with Disney+ and Hulu and NFL+ Premium.
“We’ve got a bunch of hypotheses on what the overlap will be with all the bundling that’s occurring out there in the market,” Fox’s Distad said when asked about cannibalization with linear. “For the first time, a sports fan, if they choose to, can package together a number of different services and basically get a pretty full sports portfolio. So I’d be lying if I said we exactly know where those numbers are going to land.”
“We’re mostly focused on profitability and how do we build a business that’s sustainable profitably without feeling the need to say that we have 100 million or 75 million subscribers,” he added.
Thus far, ESPN has partnered with DirecTV, Charter Communications’ Spectrum, Hulu + Live TV and Fubo, among others, to give their subscribers access to the streaming service.
“We’ve been having very, very good conversations with distributors,” Pitaro said. “There are no distributors that are surprised by this. These are multi-year conversations that we’ve been having with them. They’re very supportive.”
Both Distad and Pitaro noted that conversations with other distributors and prospective bundling partners remain ongoing.
“I don’t think anybody yet has solved the customer experience problem for a sports fan that doesn’t sit in the pay TV ecosystem. That’s a great experience for a sports fan,” Distad said. “Over time, we’re giving consumers access to all of the programming. So I think we’re taking a pretty distributor fair and friendly approach to how we’re in the market.”
The battle for sports rights
In addition to appeasing cord-cutters/nevers and pay TV distributors, ESPN and Fox’s new services provide additional leverage as they compete with deep-pocketed tech players like Amazon and Google’s YouTube and pureplay streamers like Netflix for sports rights. The costs for those rights have risen exponentially in recent years thanks to the increased competition as well as the desire for leagues like the NFL and NBA to reach a more global audience through streaming.
ESPN DTC will notably stream five out-of-market preseason NFL games as part of an expanded agreement with the league. Parent Walt Disney also struck an agreement that will give it control of the NFL Network, linear RedZone channel and NFL Fantasy in exchange for a 10% stake of ESPN for the league. Additionally, ESPN DTC will become the exclusive home for WWE’s Premium Live Events. The service will also air 80 regular season NBA games per season, as well as Christmas Day games and the NBA Finals, as part of its new 11-year deal with the league.
“A key point when we go in to talk to partners in sports rights negotiations is that even more fans will have access to your content,” Rosalyn Durant, ESPN’s executive vice president of programming and acquisitions, told TheWrap. “So it’s the combination of the opportunity to be with an innovative partner who’s looking ahead and thinking ahead and that’s focused on growing the universe and maximizing reach.”
At the same time, Durant emphasized that ESPN would be disciplined about its spending on acquiring sports rights.
“We understand that we can’t have everything, but we are proud to have the best live portfolio in the industry and it’s important to us that we protect it,” she said. “We’ll continue to do smart deals so we can best serve sports fans.”
Ultimately, how much sway these offerings have on rights negotiations will depend on how successful they are at increasing total reach.
“The leagues want new fans to access the games, so if these streaming services attract cord-nevers and turn them into sports fans, that’s a win for both sides,” S&P Global analyst Scott Robson told TheWrap. “But I don’t think the launch of these products will meaningfully impact future negotiations.”
