Disney's ESPN is now officially tanking as the all-sports cable giant lost 1.18 million subscribers in just the last two months

As ratings for Monday Night Football are falling for ESPN, we learn ESPN has
lost more than 1.18 million subscribers just in the last two months
As Disney stocks were somewhat rebounding, though stagnating, as virtually all Wall Street stocks were enjoying a post-Trump presidential election bounce in the new year during a record-high time for the Dow Jones Industrial Average, serious word of mouth coming out of ESPN again suggests that Disney will have a great deal of difficulty in maintaining any rising revenues or profits in 2017.

Television ratings giant A.C. Nielsen is reporting that ESPN lost another 555,000 subscribers in the month of November, following a record loss of more than 621,000 subscribers in the month of October.

That amounts to a loss of 1.18 million subscribers in just the last two months, which puts ESPN on pace to a lose at least 7.06 million total subscribers in 2017 alone—by far its worst subscriber loss projection to date.

By comparison, ESPN had lost "only" 7 million subscribers from 2011 and 2015, over a five year period, and 9 million subscribers in the last three years, according to company filings, so it appears the rate of subscriber losses is dramatically increasing this past year to the point that 2017 is going to be, far and away, the worst year for subscriber losses for the all-sports cable television media giant.


"There's an underlying theme of the bundle being the problem," said Gene Kimmelman, president of the consumer advocacy group Public Knowledge. "People don't want to pay for what they don't want to get." In other words, the pay-TV cable industry is simply not consumer friendly to most viewers in the new modern and mobile digital age, and television is where Disney makes the majority of its money as its single largest business segment, the media networks division.

Pressure is mounting for Disney CEO Bob Iger to do something this year about
ESPN's cord-cutting problems with one or more big media deals to offset or help
Disney's ailing media networks division
While it is no surprise that A.C. Nielsen has already stated that television sports viewership has been on the decline for years, the sudden acceleration in subscriber losses in the cable industry in just the last two months is particularly alarming for Disney.

It suggests that the bottom is about to fall out of the cable sports industry in a very short period of time as viewers are beginning to move away from viewing live sports as appointment television and moving towards viewing sports on-demand and on the go at their own convenience and leisure.

While Disney had previously stated that the record loss of 621,000 subscribers in the month of October was an isolated anomaly, the 550,000 subscribers lost in the following and consecutive month suggests that this is not such an unusual blip, and a very real pattern of acceleration of cord-cutting in the multi-channel cable subscriber bundle business model.


The losses don't end with just ESPN alone. Across the ESPN family, ESPN2 Lost 595,000 subscribers and ESPNU, The college sports focused channel, Lost more than 700,000 subscribers in the same time period.

ESPN tried to cut costs by gutting all its high-price talent; however, the real problem
is the much higher costs of locking in exclusive television broadcasting right to live
sporting events
Problem with this alarming subscriber loss scenario is that ESPN's enormous costs are locked over the long-term while its revenue base is unexpectedly and unpredictably shrinking over time. In 2017, ESPN will shell out $7.3 billion for the exclusive broadcasting rights to show everything from all the professional sports leagues to college football and basketball. Those costs are not renegotiable in favorable terms to Disney.

And unfortunately for Disney, these so-called fixed costs only go up over time as ESPN continually renegotiates sports television broadcasting rights with all the major professional sporting leagues as old contracts expire.

The 10th Digital Democracy survey from the consulting firm Deloitte suggest Millennials represent more than a third of the U.S. population, ages 13-66, with more than 83 million potential viewers in number.


Deloitte also found that Millennials are just as likely to consume media content on mobile devices as on traditional television screens than the traditional viewership of the past. They also spend more time streaming videos than watching live television because they value their streaming services more than pay TV, as it allows them to watch content whenever and wherever they want.

Disney needs to make another major acquisition this year; otherwise, they may
face an investor revolt as all their business segments—save for their movie
studio division—are tanking with prospects of lower revenues and profits
Unfortunately, Disney and ESPN didn't get the memo and are both firmly stuck in the mud for the traditional mode of television media content distribution of the past.

On-demand video streaming distributors such as Netflix, Apple, Amazon, Twitter, and Alphabet are growing in popularity, and they too want to stream more live sporting events, such as NFL football, National Basketball Association, and Major League Baseball games, putting great pressure on Disney as being far more adept and competent competitors in the digital market.

Disney cannot afford to go yet another year without a definitive digital business solution to its cable cord-cutting problem as they have been ignoring for the past five years. If they do, they will most certainly face a very ugly investor revolt in the coming year.


2017 will be crucial for Disney to take action because Disney CEO and chairman Bob Iger's contract only extends until 2018, and the Disney board still does not have a succession plan in place after he leaves.

Is Disney eyeing the acquisition of Netflix in 2017 as a solution to all its digital
distribution problem?
If, however, Iger cannot come up with a solution to ESPN's cord-cutting problems this year, his contract may simply not last until 2018 as company stakeholders may be calling for his head as Disney maybe vulnerable to the possibility of a break up or take over bid by the number of much larger Silicon Valley companies (e.g., Apple, Facebook, Amazon, Alphabet, etc.) looking to enter into the media content business.

Thus, we believe there is sufficient pressure on Disney's management to make another mega media acquisition deal this year, such as parting ways with ESPN and/or acquisition of an established, big-named digital distributor provider such as Netflix.

While Disney may not have the cash at hand to acquire a company as large as Netflix, they will have immense pressure to do something big this year to reinvigorate some form of confidence from its investors; otherwise, their stock prices will, not only continue to stagnate, but may precipitously fall in the coming year.


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