Media

Can ESPN Stop the Bleeding of Subscribers?

Paul Ausick

Published: May 31, 2017 7:55 am

Last Updated: January 12, 2020 11:31 am

When Walt Disney Co. (NYSE: DIS) reported fiscal second-quarter results earlier this month, the company’s operating income from its media networks division was down 3% year over year even though revenues rose 3%. The drop in operating income was blamed on a “decrease at ESPN.” Period.

Now, ratings firm Nielsen says the bleeding continues. The New York Post reported Wednesday morning that ESPN lost 3.8% of its subscribers in the month of May as cord-cutters drop cable subscriptions in favor of over-the-top (OTT) streaming services.

What’s happening, the Mouse House said when it reported earnings, is that programming costs are rising. In the company’s fiscal first quarter, ended in December 2016, media networks operating revenues dipped 4%.

Not only that, ESPN subscriber losses offset revenue growth and higher advertising revenue — the result of higher rates — were offset by fewer impressions. For the first two quarters of its 2017 fiscal year, cable network operating income was down 6%.

The Post noted that the new Nielsen data does not include OTT subscribers, but that probably doesn’t influence the poor numbers a lot. The total subscriber base for OTT services like Dish Network’s Sling, Google’s YouTube, and Hulu is around 1.3 million. At the end of 2016, there were 94.6 million pay-TV subscribers.

To combat the drain on revenues, ESPN was the first network to join Nielsen in a new service that tracks views of ESPN programming in places other than their homes. What ESPN hopes to show is that viewer numbers are rising even though subscriber numbers are falling. That can help the network raise ad rates to offset further drops in subscriber revenue.

Disney’s stock traded up about 0.5% in Wednesday’s premarket, at $108.90 in a 52-week range of $90.32 to $116.10. Analysts at MarketWatch have an average price target on the stock of $119.14.