Believing in Walt Disney's (DIS +2.03%) new ESPN streaming service -- ESPN+ -- just got easier for investors. Only about five months after the new service's debut, it has garnered more than one million paid subscribers. This is an impressive achievement when considering that the service is an add-on to traditional ESPN programming.
The achievement bodes well not only for ESPN+ but also for the company's overall efforts to transition to a multiscreen, streaming-based TV era.
ESPN+. Image source: Walt Disney.
A promising start
"Reaching one million paid subscribers is an important milestone for any video subscription service," explained chairman of the company's direct-to-consumer and international (DTCI) segment Kevin Mayer, "but reaching this benchmark in such a short amount of time is an incredible testament to the teams from DTCI and ESPN who have worked tirelessly to bring this product to market and continually improve it since our April launch."
Disney launched the long-awaited direct-to-consumer ESPN streaming service in April, alongside a redesigned ESPN app. Priced at $4.99, or $49.99 per year, the service integrated into the new ESPN app and offered exclusive content. ESPN+ original programming includes documentaries, TV series, and live streaming of more live sports and games.
Beyond monetizing the app through subscription premiums, ESPN also runs ads during the advertising breaks of live sports content.
Disney CEO Bob Iger had indicated that the service was doing well during the company's most recent earnings call. Iger noted that "conversion rates from free trials to paid subscriptions are strong and subscription growth is exceeding our expectations."
ESPN and co-chair of Disney's media networks business Jimmy Pitaro is confident in the service's long-term potential, noting, "we are just getting started."
Streaming is an opportunity
The bigger story here is that Walt Disney's early efforts in streaming seem to be working. Since ESPN+ is an add-on service, investors have questioned how many people were willing to pay for incremental ESPN content. But Disney's early momentum with ESPN+ suggests streaming could be a major opportunity for Disney.
In addition to ESPN+, Disney is launching a Disney-branded streaming service sometime during the second half of 2019. Unlike its ESPN streaming service, the new Disney service will include both new, original content and the company's massive library of iconic studio films. Even more, the service will launch just as Netflix's distribution agreement for new releases from Walt Disney ends.
Disney's attempt to transition to a direct-to-consumer streaming model isn't half-baked. On the contrary, the company sees itself going all in over the long haul. And this will be good for the company, according to Disney. In an August 2017 earnings call, Iger said he believed "the profitability, the revenue-generating capability of [a self-distributed model] is substantially greater than the business models that we're currently being served by."
