ESPN Navigates a New World Order

Abstract

In the early 2010s, ESPN was at the height of its powers. As the crown jewel of the then unassailable cable television bundle, ESPN was receiving upwards of $7 every month from more than 100 million subscribers whether they watched ESPN or not. This was in addition to the multitude of ESPN offspring, including ESPN2, ESPNEWS, ESPN Classic, and The SEC Network, from which the company received additional fees. ESPN’s secondary revenue stream – advertising – was also booming, as sponsors paid a premium to associate themselves with the brand and live sports content across ESPN’s myriad media platforms. ESPN was known as The Walt Disney Company’s cash cow, a reputation well-earned for reliably driving the performance of Disney’s Media and Entertainment division and the company overall. (Hearst owns 20% of ESPN.) 

By 2024, the question of ESPN’s marketplace position had become legitimate and increasingly pressing for Disney/ESPN management and the sports ecosystem. In the Internet-enabled streaming era, ESPN had encountered major headwinds: declining revenue, rising costs, changing consumer behavior, and increasing competition from new marketplace entities. Most devastatingly, cable/satellite subscribers to ESPN were decreasing precipitously, from 100 million at the zenith of the model (circa 2012-13) to an estimated 70m in 2023. This downward trend showed no signs of slowing, with millions of homes churning out of cable/satellite annually. 

To compete in a rapidly changing marketplace, Disney and ESPN took steps to establish and strengthen their position. In 2018, Disney launched ESPN+, its direct-to-consumer streaming platform that would serve as an add-on/supplementary service (most of ESPN’s premium content was not available on the platform). Moreover, in a decision that had been widely speculated about for years, Disney CEO Robert Iger finally confirmed in 2023 that the “flagship” ESPN network, with all its premium content, would be available direct to consumers for the first time ever in 2025. Then, Disney, Warner Bros. Discovery, and Fox announced in February 2024 a joint venture that would bundle each of the companies’ linear sports networks and networks that show sports into one sports streaming service, Venu Sports. 

Disney was trying to strike a delicate balance with ESPN: extract as much value out of its declining linear television business in the short-term, while investing in direct-to-consumer streaming to remain a relevant sports brand and grow over the long-term, potentially in ways that could hasten the further decline of their linear television business. But with this transformation came new, difficult, and perhaps existential challenges. Could ESPN transition from a company built on a B2B business model with affiliates and advertisers to more of a B2C consumer product? Could it find opportunities for revenue growth and operate profitability, which had been a challenge across the board in streaming, while also competing for live premium rights? Could it achieve relevance with a younger generation of fans who had demonstrated a resistance to video subscription services? Was this a tipping point where the “cable operators” – a.k.a. broadband providers – get out of the video business and jeopardize ESPN’s primary revenue stream? For the self-professed Worldwide Leader in Sports, the answers to these and other questions would determine its fate. 

Learning Objectives

• Understand the growth of the sports media industry; 
• Analyze competitive marketplace dynamics in media, sports, and entertainment;
• Consider how incumbent media companies manage the impact of technological disruption on business models, operations, and consumer behavior;
• Examine the implications of digital transformation strategies.

Appropriate for the Following Course(s)

strategy; digital business; managing disruption; business of media, sports, and entertainment; sports management

NOTE: THIS CASE CAN BE ASSIGNED AND TAUGHT IN ITS ENTIRETY OR IN PARTS. 

ESPN Navigates a New World Order

ESPN Navigates a New World Order: Part 1 

(The Evolution of ESPN)

ESPN Navigates a New World Order: Part 2 

(The Competitive Landscape)

ESPN Navigates a New World Order: Part 3 

(The Future of ESPN)

THERE IS NO TEACHING NOTE FOR THIS CASE STUDY.