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ESPN president Jimmy Pitaro chats with us about 2019 priorities, going direct-to-consumer and the dual issues of cord-cutting and rising sports costs.
Heading into 2019, what are your top priorities?
We had a priorities meeting a couple of weeks ago here in Bristol — with people from around the world including our international team, all of our North American areas, flying in for a day-and-a-half summit. We fleshed out that our core business priorities are for the next year and beyond and we were able to hone in on four: direct to consumer; audience expansion; quality storytelling and programming; and innovation.
Direct-to-consumer is a top priority for Disney, which formed the Direct to Consumer and International division earlier this year to oversee such efforts. How does that play out with ESPN+?
We’re responsible for content, programming, production, rights acquisition and partnerships. We work in concert with DTCI on the tech front and building the platform from the front end to the back end. It really is two units collaborating as one team.
More than a few people were surprised that ESPN+ had passed 1 million paying subscribers just five months after launch. What’s driving sign-ups? Exclusive live sports? Original content?
I’d love to tell you it’s one thing, but it’s not. Our goal is to serve the sports fan and that includes live events, but also includes original programming and studio programming. Soccer is resonating really, really well within ESPN+ because if you’re a soccer fan, you’re going to want MLS, and Italy’s Serie A and UEFA. Combat sports is also a priority. Our UFC deal is not launching until January on ESPN+, but we’ve seen top-ranked boxing move the needle. In terms of originals, we created a series called “Detail” with Kobe Bryant, which has been a very big success for us. We decided to expand it into other sports and now have Peyton Manning for the NFL. At the same time, this is just the first inning. We’re pleased with the performance of the service, but there’s a lot more to come. We’re excited about the rights we’re contemplating about bringing to the service.
All of that — live sports, original series — is costly. And yet ESPN+ is only $5 per month. Is this sustainable?
We have the best rights-acquisition team in the business. And our people have been doing this for a long time and they’ve always faced tough competition. They operate with an incredible amount of financial discipline. But we are in this for the long term, and we will continue to focus on serving the sports fans, anytime, anywhere.
ESPN lost 2 million cable subscribers in the past year and is now at 86 million. Can ESPN+ replace losses due to cord-cutting?
We are running parallel paths here. We’re making investments on the digital side, which includes ESPN+ and the ESPN app in general, which had 20.6 million unique users in October and was up 19 percent year over year — and that’s Comscore data. And that goes back to one of our other priorities, which is audience expansion. Comscore numbers for Octobers have us at 101 million unique users across platforms. We’re number one and we’re growing. And this includes the traditional MVPD model, which remains a priority for us because it’s a model that has been good to us.
But cord-cutting is still on the rise. Can anything — even YouTube TV, Hulu’s live TV and the other virtual MVPDs — replace lost traditional subscribers?
Our CFO spoke about this on the last earnings call. We have now had five consecutive quarters of improvement in the rate of net subscriber declines. Beyond that, I can only speak to where we are today. On the digital MVPD side, these products are growing faster than I think the industry anticipated. We’re believers.
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Many of these services promote skinnier bundles. Can ESPN remain a vital part of those base bundles — especially as some services are even offering non-sports bundles?
We love that we are part of these products today. I can’t predict going forward, but I will tell you that live sports remains incredibly powerful. I don’t see that changing. Just look at the Rams-Chiefs Monday Night Football game — we were up 53 percent [in viewership] versus the same game last year. Monday Night Football overall has been up about 9 percent this year. Even MLB was up 1 percent year over year.
Live sports are only getting costlier. But if the current pay-TV trends continue, does that mean at some point ESPN will have to say no to some live sports — especially if Amazon and other tech giants also start bidding up the prices for these rights?
There’s no doubt that there’s competition out there, but we like our hand. We’ve always had competition and our team has done a very good job closing deals in a smart, disciplined way despite all that. If you look at the breadth of offerings that ESPN brings to the table: not just the best production team in the business, but we bring a broadcast network with ABC, we bring in promotion from various areas of the Walt Disney Company. If you’re a league and your rights are coming up for renewal, you have to think long and hard about going anywhere other than ESPN because we’re very good partners. We’re not being naive here, we understand the competition that’s out there. But we are great at what we do and I believe the leagues see that.
Do you see Amazon, Facebook and others as legitimate competitors?
I do. Every big tech company is a legitimate competitor as we move forward in this landscape.
You’ve said ESPN has to be everything for all sports fans. Why? Why not just focus on a few key areas?
It’s who we are. When I grew up, I didn’t turn on ESPN just to get baseball highlights. It brought me up to speed on all sports. We’re not going to deviate from that. We want to be the starting point and the destination. It also goes back to our other priorities: quality storytelling and programming — not just on TV but everywhere including platforms such as Snapchat. We also want to maintain a spirit of innovation and not being afraid to try new things and fail. That’s what ESPN has been for the past 39 years and we want to make sure we continue to do that.
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