ESPN’s new streaming service is a ripoff—and that’s the point
Last week, ESPN put a price tag on the standalone streaming service it’s launching in the fall, and it’s not cheap.
ESPN’s streaming service will cost $30 per month, with an option to bundle Hulu and Disney+ for $6 more. (A limited time offer at launch will throw in both services free for the first year.) By contrast, ESPN’s carriage fees—the amount it charges cable TV providers to carry its channels—are reportedly around $10 per month, amounting to a 200% markup for a la carte viewing.
If you’re having trouble figuring out who would pay for such a thing, the answer might be “hardly anyone.” ESPN’s standalone service is supposed to unappealing enough that people don’t cancel cable to get it, and the high price is a signal that you should probably get the channel some other way, be it through a pay TV package or newer kinds of streaming bundles.
You wanted a la carte TV, you got it
Let’s say you want you watch all the NFL games that are normally part of a cable TV package. That would require ESPN ($30 per month), Peacock ($8 per month), Paramount+ (also $8 per month), and Fox (whose forthcoming Fox One service will reportedly cost around $20 per month).
All that would add up to $66 per month. Opting for the ad-free versions of Paramount+ ($13 per month) and Peacock ($14 per month), which are required for local CBS and NBC feeds outside of NFL coverage, would push the price to $77 per month instead.
That’s not much less than a full-size pay TV package. YouTube TV and Hulu + Live TV each cost $83 per month. DirecTV’s new MySports bundle is a bit cheaper at $70 per month, but lacks CBS currently.
A standalone ESPN subscription might still make sense in conjunction with an antenna, supplementing what’s available for free over the air. And perhaps there’s a certain kind of ESPN superfan for whom it’s the only thing keeping them glued to a pricier pay TV package.
But for sports fans who want full coverage of what’s normally on cable, the a la carte route won’t add up. Unlike with general entertainment content, you can’t merely cycle through streaming services one at a time to save money. Outside of password sharing or piracy, bundling will be the only way to defray the costs.
Back to the bundle
That brings us to the real goal with ESPN’s streaming service, which is to serve as a starting point for new kinds of TV bundles.
Just look to Disney’s own bundling strategy as an example. Hulu and Disney+ each cost $10 per month on their own, but $11 per month when bundled together. When you add them to ESPN’s flagship service, the cost for the pair goes down to $6 per month (and, at the outset, free for the first year).
Disney’s been branching into bundles with other companies as well. It already offers a $17-per-month package with Disney+, Hulu, and Max (soon to be HBO Max again), saving $4 per month over each company’s separate ad-supported offerings. Disney hasn’t announced a tie-in with ESPN, but I’d be surprised if it didn’t happen given the bundle’s apparent popularity.
Disney had also planned to collaborate with both Warner Bros. Discovery and Fox on a joint service called Venu Sports, which combined all three companies’ sports and broadcast channels for $43 per month. That plan died in court, but they could still work together on bundling their individual services at a discount.
Wireless carriers have gotten into the streaming bundle business as well. Verizon in particular offers Disney+, Hulu, and ESPN+ (that’s the current ESPN service that excludes most cable content) for $10 per month with its newest unlimited plans. An option to include ESPN’s flagship service seems like the next logical step.
Streaming companies like these kinds of bundles because they discourage subscription hopping, where you bounce between services every month to watch the best content on each. If they set a high enough price for their standalone offerings, like Disney is doing with ESPN now, those bundles start to look even more attractive.
But none of this can happen if ESPN doesn’t actually have a standalone streaming service to offer. The new service is less about selling you a $30 per month plan for a single sports channel and more about setting the table for new kinds of streaming bundles.
What sets the new ESPN streaming service apart from the ESPN+
Whether this is better than the old pay TV system is hard to say, but it’ll probably beat the alternative of paying for every individual service a la carte. That idea was never going to happen as cord-cutters imagined it.
Sign up for Jared’s Cord Cutter weekly newsletter to get more streaming advice every Friday