Disney CEO Bob Iger says the company has bought a $1 billion stake in Major League Baseball's streaming platform and will use it to launch a new ESPN-branded channel that will not siphon off signature programs or major sports from the cable-based ESPN services. "We view this as a complementary service."
Disney Gearing Up To Stream ESPN Lite
Disney is acquiring a 33% stake in Major League Baseball’s BAMTech streaming platform for $1 billion and will use it to offer a new sports streaming service that would complement existing ESPN services, Chairman/CEO Bob Iger announced yesterday following release of the company’s second-quarter earnings.
The primary goal, said Iger during a call with securities analysts, is … “to launch a new direct-to-consumer ESPN-branded multi-sport streaming service…It will also provide countless opportunities to expand into this space as the marketplace evolves.”
At least initially, the channel will not duplicate programming currently carried on ESPN or ESPN 2, he said.
“We’ll include content that BAMTech has already licensed for Major League Baseball and the National Hockey League, and we will add content that ESPN has licensed like college sports, football and basketball, tennis, rugby, cricket etcetera,” Iger said.
“The goal is not to take product off ESPN’s current channels, but to use sports and product that ESPN has already licensed that is not on the channels, so we view this as a complementary service to what ESPN is already providing as part of their multichannel package, obviously as an over-the top direct to consumer fashion.”
Disney received an option to acquire a controlling stake in the service down the road, and the agreement also activated an earlier agreement which gave a minority interest in BAMTech to the NHL.
The technology behind BAMTech is what sold Iger. “You’re looking at an industry-leading platform,” he said. “We concluded that what they’ve got is really robust.”
“We feel really good about the trajectory of this company,” he said, and added: “We’ll give it the ability to grow faster than it would have on its own.”
Iger said that the partners in BAMTech have plenty of content, and that ESPN alone is well-stocked and will not need to invest in new sports right packages. He said that in the long term it will consider that, option however. That’s because Iger believes sports programming will continue to gain strength for some time, and he is angling for a bigger piece of what will be a bigger pie.
According to SVP-CFO Christine M. McCarthy, ESPN’s 5% gain in advertising revenue during the company’s fiscal third quarter was a bright spot among the generally mixed results for Disney’s Media and Entertainment group. Overall, cable’s revenue and operating income totals were up 1%.
Broadcast revenue in the quarter was up 5% but operating income took a 6% hit. McCarthy said that a decrease in ratings at ABC offset an increase in advertising rates.
Looking ahead, McCarthy said that ESPN pacings are down, due largely to the presence of the Olympics on the media platform of competitor NBCU. Additionally, Disney’s unique corporate calendar has it facing a fiscal fourth quarter that is one week shorter than 4Q 2015.
Iger announced that the upcoming Direct TV Now OTT service will include key Disney offerings on all bundles, including ESPN, ESPN 2, ABC, Free Form, Disney Channel, Disney XD and Disney Junior.
Iger has no worries about Disney’s place in the OTT universe. “The inclusion of Disney product, particularly ESPN, on these OTT services is quite meaningful,” he observed. “Sony certainly had that experience when it launched Sony Vue without ESPN and then it included it later after the launch and saw its subs go up substantially.”
He had a similar comment about Dish’s OTT offering. “That new Sling product is pretty skinny,” he said, “so skinny you can’t even see it.” He reiterated the difficulty of launching without Disney products, and suggested Sling may not have a great future.
“You can slice and dice some of these channels to create packages,” Iger concluded, “but if you don’t have some of the best ones it’s pretty hard to see significant adoption of the service that’s being offered.”