- Pitaro says deal is impactful for “whole industry”
- Launch date depends on pace of cord cutting
- Linear distribution still key in DTC world
ESPN chairman Jimmy Pitaro says the network’s new carriage deal with Charter Communications is “critical” as it prepares the launch of its full direct-to-consumer (DTC) platform and believes linear will continue to remain an important route to market for the US sports broadcaster moving forward.
Renewal talks between the parties had reached a stalemate, leading ESPN’s parent company Disney to temporarily pull its channels from Charter’s Spectrum TV platform for several days.
Eventually, the deadlock was broken with a new agreement that increases Disney’s carriage fees and allows Charter to offer ad-supported versions of the Disney+ and ESPN+ streaming services to its customers.
A prolonged blackout would have been damaging to both sides. ESPN is a core component of Spectrum TV’s premium packages, while Charter has 14.7 million subscribers, many of which are in major media markets like New York, representing a significant proportion of ESPN’s 72.5 million footprint.
Both parties are hailing the deal as a victory, with ESPN maintaining its reach and increasing revenues, while Charter gains access to streaming assets that could futureproof its business.
“I’d be lying if didn’t tell you this Charter deal wasn’t critical,” Pitaro told the inaugural IMG Summit in London. “It was so impactful not just for ESPN and Disney but the whole industry. I take a lot of pride in the creativity of that deal and the fact that just a few days ago, we did not know if we were going to get this deal done or part ways with Charter, but we creatively came up with a deal that is definitely a win for the customer and honestly a win for both sides.”
ESPN has confirmed it will launch a new streaming service that combines the existing ESPN+ platform with its flagship sports network. It has yet to commit a timeline, but it is thought a likely launch date could be 2025 or 2026. Many believe that live sport is the glue holding the bundle together and that once a full DTC version of ESPN hits the market, then cord cutting will accelerate significantly. ESPN’s challenge is to make sure that its streaming future has the potential to be as lucrative as cable.
Pitaro said that the launch date would depend on whether cord cutting reaches a certain threshold, but also acknowledged that it could be ESPN’s decision to go DTC that would initiate that tipping point, describing it as a “chicken and egg” scenario.
“We truly do not have a [launch] date,” said Pitaro. “We know we have to get this right in terms of timing and price point. We have a really great strategy team that’s on this. It’s their number one priority, getting it right.
“Part of that [equation] is also that ESPN+ is going so well for us … We have a ton of exclusive content that’s performing very, very well for the platform. So we don’t necessarily feel the urgency. Again, we’ll see how the next year plays out in terms of traditional [Multi Video Programming Distributor] subs and if things continue to accelerate in terms of cord cutting and the decline, then yes, we will probably pull that date to early an earlier point than we’re right now currently considering.”
However, Pitaro was adamant that linear would remain an important route to market for ESPN in the medium future. He said the combination of ABC, ESPN and digital platforms meant rights holders could be confident they are reaching the widest possible audience.
“When we acquire rights for multiple platforms, most of these deals are still led by the linear component,” said Pitaro. “If you were to talk to any commissioner, whether a professional league or a conference, they will tell you that they prioritise linear because of the exposure and the reach.
“You look at the Walt Disney Company and one of the things we bring is multi platform. [We have] broadcast in ABC, cable in all of our ESPN networks, D2C in ESPN+, we own the majority of Hulu, very active on digital our .com, app and on social. Leagues love that reach that they get, but it’s led by linear. I don’t see that changing, at least over the next several years.”