Walt Disney (DIS -1.62%) has announced a price increase for its ESPN+ streaming service. Starting Aug. 23, the cost of the stand-alone sports streamer will rise from $6.99 per month to $9.99, while those on an annual plan will go from paying $69.99 to $99.99 each year. Those who pay for the Disney Bundle -- which comprises Disney+, Hulu, and ESPN+ -- will not experience a price rise.
The chatter around Walt Disney's approach to live sports streaming has been a point of curiosity among sports fans and investors for a while. In 2015, former CEO Bob Iger posited a full-featured ESPN streaming service was a few years out, while current CEO Bob Chapek told investors earlier this year that such an option would be "the ultimate fan offering." Still, Walt Disney is yet to make a move -- but it's feasible the ESPN+ price could represent the first steps in that direction.
ESPN+ has always been a secondary destination
Since it launched in 2018, Walt Disney has treated ESPN+ as somewhat of a Cinderella option: It provides a service, but it's not something they hang their finest wares on. So while ESPN+ viewers can enjoy coverage of UFC bouts, college lacrosse, and the full library of 30 for 30 documentaries, it has never been the central repository for broadly popular leagues such as the NBA or the NHL. Those jewels are saved for ESPN proper, which means subscribers who want access to the most popular live sports content have to sign up for traditional cable (or a cable alternative).
Chapek has previously noted that ESPN's TV offerings drive significant revenue for Walt Disney, and the popularity of those channels is on an upward curve. As ESPN revealed earlier this year, daily viewership numbers climbed 32% in the fiscal first quarter of 2022, its best period of growth in five years. So it seems unlikely that Walt Disney will move premium content over to ESPN+ anytime soon.
Cord-cutting is gathering steam
Walt Disney is an entertainment company, and whatever the current TV-watching climate, there's no denying the home-viewing industry is leaving behind cable at a pace. Indeed, roughly 5 million people in the U.S. cut the cord in 2021. By the end of 2022, roughly 68.5 million homes are expected to still subscribe to cable services -- a figure that is projected to drop to below 60 million by the close of 2026.
For Walt Disney, the confluence of declining cable figures and a cash-cow TV brand offer both problems and opportunities. Again, Chapek has speculated that a full, live sports streaming option would be great for fans, but move too soon and the company could be leaving money on the table. However, by ratcheting up the price of stand-alone ESPN+ by 43%, Walt Disney is preparing its most ardent sports customers for what's to come -- a streaming service that's likely to be more expensive than any they've ever paid for.
ESPN could be the most premium streaming service
As things currently stand, ESPN is not offered as a solo cable product in the U.S. To get access to ESPN programming, customers must purchase a plan featuring multiple channels -- which (accounting for market variations) typically costs around $90 per month. And while Walt Disney doesn't break out how much it earns from ESPN carrier fees, the firm's linear TV networks brought in $2.8 billion in the first quarter of this year -- most of it driven by the popularity of live sports programming.
Projecting out into a future where ESPN is offered as a streaming service, it's easy to imagine it would follow the same model as ESPN+ -- packaged as part of a (more expensive) Disney bundle, as well as a pricey a la carte option. With this in mind, pushing up the price of ESPN+ so it is now more costly than both the stand-alone versions of Disney+ ($7.99 a month) and Hulu ($6.99 a month), Walt Disney is signaling that live sports are not cheap. And if people want more than ESPN+ has to offer, they will have to pay for it.
Of course, letting people subscribe to only what they want has always been the promise of the streaming era. And while it's unlikely streaming ESPN will be as expensive as basic cable, it might not be as cheap as sports fans would hope. After all, Walt Disney knows the demand is there -- it's just a question of what people will pay for it.
For those interested to see what Walt Disney's next moves might be, it's worth watching ESPN+ to see if the extra cost leads to any significantly higher-profile content. If the company rewards subscribers with a broader mix of sports, then that could be viewed by many as a reasonable trade-off. But if the offering remains mostly the same, then this amounts to Walt Disney marking out that ESPN streaming -- whenever it happens -- will be a top-dollar service.