3 Key Facts Behind ESPN’s Downward Spiral

Walt Disney (DIS), the parent company of sports channel ESPN, announced that the company lost 7 million subscribers between the end of fiscal 2013 and fiscal 2015, with 1.5 million subscribers lost in the first quarter of 2016.

ESPN is a leader in sports. Nielsen data points to the company having 89.5 million subscribers at the end of May. The company’s subscribers may fall to 87 – 88 million by the end of the fiscal year.

Here are 3 key facts behind the channel’s downward spiral:

1.     ESPN Generates $7.21 per Subscriber for Disney

ESPN is the most expensive operator and charges $7.21 in fees per subscriber. The figure is high, especially for homes that aren’t major sport fans and now have options on the streaming front.

2.     50% of Disney’s Revenue is from ESPN

Disney is known for Mickey Mouse and animated movies, but over 50% of the company’s cable network revenue is derived from ESPN. The company’s cable network accounted for 44% of its total revenue and 53% of the company’s operating income in 2015.

3.     ESPN Has a Ramp Fee

ESPN’s contract with TV operators includes a built-in fee ramp, which offsets the sliding subscriber numbers. The company is also offering alternative broadcasts on Sling TV to bring in subscribers.

Disney reaffirms that the largest losses are from cable “shavers” that are trying to save money, but are not cord cutters.

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Daniel Simmons