ESPN is navigating a storm

There are a lot of exciting things happening and in the works at ESPN. But at its core, the network remains – at least for now – a cable channel.

This obviously presents some obstacles in the current television climate as subscriber numbers continue to decline rapidly. Jimmy Pitaro admitted this in an interview with CNBC's Alex Sherman, in which the ESPN president acknowledged the global leader's need to adapt.

“We are navigating a storm,” Pitaro said. “We all know that people are raising the tone more than they have in the past. If you look at the last few years, seven or eight percent fewer households watch television. That's a great business model, it was a great business model for ESPN and the Walt Disney Company. And when that business model is in decline, you have to adapt, and that’s exactly what we’re doing right now.”

How?

The most obvious example is ESPN's upcoming direct-to-consumer streaming service — currently nicknamed “Flagship” — which is scheduled to launch sometime in fall 2025. Pitaro cited the project as one reason why it still makes sense for the broadcaster to cover rising rights fees, even though declining cable subscriptions have impacted its bottom line.

“We just finished our NBA contract. If this deal brings success for us in terms of increasing our ratings and our reach – we have the 'flagship' rights – if it brings success internationally, we should see an uptick (in financial performance),” Pitaro said. “… We are not sitting here idle. (Disney CEO Bob Iger) and I talk all the time about disrupting what we're doing. We plan to launch the streaming service this time next year. And that will disrupt this traditional ecosystem even more.”

Over the course of Pitaro's 35-minute conversation with Sherman, “flagship” proved to be a recurring theme. He pointed to the possibility of integrating ESPN Bet into the yet-to-be-launched streaming service as one of the future prospects for the sports betting app, which has been largely disappointing in its first year on the market.

The issue of the ESPN streaming service was also raised in relation to regional sports networks, which are currently in disarray due to the bankruptcy of Diamond Sports Group. To that end, Pitaro made it clear that his network wants to play a role in rebuilding RSNs, with “Flagship” obviously fitting the bill.

“We want to be part of the solution for the leagues,” Pitaro said. “Especially the leagues that have had so much success from a local and market perspective. And I can tell you without hesitation that we have made that clear to the league commissioners. Especially in a world where we have our flagship direct-to-consumer business, we want to be helpful and part of the solution.

“And we would love the opportunity to leverage our technology that allows us to geo-target and pinpoint where a sports fan is, leveraging our incredible reach… that should be the top of the funnel for the leagues.” .” And they should look at ESPN's reach and say, “Okay, this is the best opportunity we have to get our content in front of as many fans as possible.”

Considering how many times “Flagship” came up during Pitaro's conversation with Sherman, it's not hard to see where ESPN is going. While the cable industry may be in the middle of a storm, it's clear that the global leader is betting that its upcoming streaming service will be a much-needed life raft.

(CNBC)