Walt Disney Co ‘s ESPN network witnessed a 3.2% decline in subscribers compared to the previous fiscal year, 10K filing from late yesterday showed. The number of viewers subscribing to ESPN fell to 92 million as of October 3, from the 95 million reported in September 27, 2014.
Walt Disney CEO Bob Iger had claimed in August that the media conglomerate was seeing “modest” declines in ESPN subscribers as viewers migrate to newer and cheaper digital platforms. But Iger seemed confident that he could stem the slide.
Walt Disney Co earlier this month recorded better than expected quarterly profit. Its cable networks that include ESPN collected more advertising revenue and raked in higher fees from pay TV distributors.
Reuters had reported in October that ESPN is reorganizing and slashing more than 300 positions. Live sports is one of the very few types of content that still manages to draw massive audiences. Advertisers also find it very valuable. While for many viewers, sports is the sole reason why they hang on to their pay TV subscriptions.
Walt Disney is Losing Millions in Subscriber Revenue
ESPN had, two years ago, reported in the same 10K filing that it had 99 million subscribers. The last time ESPN said it had 92 million subscribers was in 2006. This implies that in the past two years, ESPN has erased the prior seven years’ growth in subscribers. The latest regulatory filings are important because this is the first time Walt Disney Co is publicly acknowledging ESPN’s massive subscriber losses.
The average ESPN subscriber pays around $6 a channel per month. So the erosion of 7 million subscribers would have resulted in a loss of over $500 million in revenue per year since 2013. And that’s not even taking into account the advertising dollar lost. Moreover, the last two year’s decline in subscribers has also been hurting its sister networks. ESPN2 lost 7 million subscribers, ESPNNews and ESPN Classic 6 million, while ESPNU shed 4 million subscribers.
The Implications for Cable Industry are Dire
Fox Sports’ Clay Travis reckons that if we put together all those subscriber losses, the revenue picture looks grim. “ESPN is bringing in somewhere around $700 million less in subscriber revenue from these channels than it did in 2013,” he wrote earlier today.
He goes on to add that these revenue losses may be “partially offset by the SEC Network, which ESPN reports is in 63 million homes,” but the broad trend is still alarming for the cable industry. “ESPN is making hundreds of millions of dollars less off its core business in 2015 than it was making in 2013.”
Shares of Walt Disney Co closed Wednesday at $118.69. The stock is up 26% year to date.