ESPN Will Require A Deep-Pocketed Partner To Successfully Transition To A Pure Streaming Service By 2025

Disney has its work cut out as it transitions ESPN to a pure streaming service by 2025. While ESPN is profitable as a linear business ($953 million of Operating Income on $3.5 billion of Revenue for the September quarter), I don’t believe that ESPN will be profitable once it fully transitions to a streaming service and is no longer part of a subsidized linear bundle.

ESPN will be a premium streaming offering by 2025 per Disney CEO Bob Iger. Street consensus is that ESPN will need to charge approximately $30/subscriber/month to reach breakeven. For comparison’s sake, average monthly revenue per ESPN+ subscriber was $5.34 during the September quarter. Will customers pay 5.6x the ESPN+ price for ESPN, or, will ESPN offer its service at a lower price and replace the subsidized revenue from the linear cable bundle with revenue from a partner company?

• ESPN customer demand: Will some combination of NFL, NBA, MLB or MLS content be enough to convince subscribers to pay $30/month for ESPN? Survey data suggests not: