In 2018, Disney’s (NYSE:DIS) ESPN, the sports media behemoth, ventured into the streaming arena with ESPN+, a monthly subscription service offering live programming, including golf events, selected Major League Baseball, and professional hockey games. However, ESPN+ doesn’t grant access to high-value programming found on ESPN’s traditional channels, like NBA and NFL telecasts.
With a current subscriber base of 25.3 million, ESPN is now spearheading project “Flagship” to transition the full channel to streaming, following the footsteps of many media companies moving away from traditional TV toward the volatile economics of streaming. Traditionally, consumers bought bundled channels under long-term cable contracts, contributing to ESPN’s $9.42 share from the average cable TV bill, compared to an average of $0.49 for other networks.
On the other hand, streaming alters this dynamic since people only pay for what they want, which implies that the number of subscribers for an ESPN streaming service might be less than its current cable audience. This would inevitably affect the service’s pricing strategy. The shift hasn’t been smooth, as others are acquiring sports media rights, increasing competition. Meanwhile, ESPN’s cable audience is dwindling due to cord-cutting, impacting Disney’s traditional television network revenues.
Turning to Wall Street, analysts have a consensus price target of $127.60 on DIS stock, implying 35.51% upside potential, as indicated by the graphic above.
