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Summary:

New data from ESPN suggests that there are fewer cord cutters than you might think. But it’s releasing this data at the same time its distribution partners, afraid of cord cutters, are beginning to roll out cable packages without ESPN as a way to lower costs.

cable cut

ESPN released new data Monday calling into question the number of people that have canceled their cable bills. But while ESPN seeks to downplay the effect that cord cutters have, it may already feeling the hurt from the drop in pay TV subscribers — to the tune of $1.3 million per month.

ESPN’s study seeks to take into account the number of pay TV subscribers that have canceled their cable subscriptions, and compare it to the number that went from broadcast-only to joining a cable or satellite provider. The end result, according to ESPN’s data, is that just 0.11 percent of all cable households have cut the cord. Importantly, ESPN VP of Integrated Research Glenn Enoch, who we spoke with via phone, didn’t deny that cord cutting was happening, but pointed out that it represents a very small percentage of the overall population. For those interested in live sports — that is, those that would want to view ESPN — the likelihood of canceling cable was virtually non-existent.

But SNL Kagan reported that over the past two quarters, more than 330,000 households have canceled their pay TV subscriptions. For ESPN, that should equal a decline in potential subscriber revenue. The programmer pulls in about $4 per subscriber per month, depending on the distributor, so any decrease in its subscriber numbers will hit the company hard. If you take into account that 330,000 people are now going without cable or satellite subscriptions and do some back-of-the-envelope math, that means it could already be losing about $1.3 million in revenues per month.

ESPN’s research was put together using data from Nielsen’s TV ratings panel. That panel contains more than 20,000 “Nielsen Households” that allow the research firm to track their TV viewing habits. But Nielsen has been wrong in the past: It famously attempted to “debunk the myth of cord cutting” in July, just a month before research firm SNL Kagan showed the first-ever decline in pay TV subscriptions in the U.S.

The release also underlines the precarious situation that ESPN is in, as it has to justify its value not just to cable subscribers who may be thinking about canceling their subscriptions, but to the growing number of distribution partners that are rethinking the value different channels have to their lineups.

Cable providers are finally coming around to the notion that cord cutting is real, and are starting to do something about it. Time Warner Cable announced the rollout of a new, low-cost “TV Essentials” bundle last month that is priced below its existing basic cable package. But to make the pricing work, Time Warner Cable cut significant programming from its channel lineup — including ESPN. Charter Communications is looking to roll out a similar plan, but it’s not clear whether ESPN would be a part of that package or not.

It’s one thing for subscribers to jettison their cable packages; it’s a whole other thing for its distribution partners to not include ESPN in cable packages as a way to save their own butts. At the same time, this is behavior you can expect to see more of, as pay TV providers think carefully about which programming they want to make available as part of their channel lineups. IPTV provider AT&T and satellite TV firm DirecTV have both shown a willingness to let channels drop from their lineups if they are unpopular.

Clearly, ESPN has a lot more leverage than most networks, and is basically considered a must-carry channel. But at $4 a sub, distributors may begin thinking long and hard about whether or not it will be included in their more basic cable plans. We’re skeptical that TV Essentials will take off, but the trend toward smaller cable bundles must be a sobering one for ESPN. As the most expensive and most widely distributed cable network, it also has the most to lose.

Photo courtesy of (CC-BY-SA) Flickr user Akarsh Simha.

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  1. Currently, ESPN has leverage, as they carry a majority of “must-see” sporting events and shows. Interestingly enough, they have embraced new distribution methods, such as XBOX Live. Will be intriguing to see what position professional sports leagues take in the future. As noted at NewTeeVee Live, the NBA is pretty aggressive with its apps and becoming a direct publisher, still while abiding to TV contracts.

  2. I am a cord cutter and avid sports fan. I am watching NBA games through the NBA online package and watching NFL games via sports bars or online streams. ESPN has helped create the incentive to cut the cord by insisting on such high prices for their content. It can help mitigate the cord cutting trend by cutting prices and making it not worth the effort to cut the cord for sports fans, but I doubt they will do that.

    1. Ramin – What online streams of NFL games?

  3. As a cord cutter and a blogger (www.cheaper-tv.com) about cord cutting, I would say that as a sports lover you would be sacrificing a lot if you give up cable TV. The problem is, unlike movies or TV shows, you cannot easily replace live TV sports coverage. I would gladly pay $4 a month to ESPN if they made the channel available on Roku. I just don’t want to pay for all of the bundled channels that come with your run of the mill cable tv subscription. For now, if there’s a game I want to see on ESPN I have to visit a local bar.

  4. ESPN generates more than $4B in subscription revenue annually. $1.3MM is a drop in the bucket. People buy cable for content. No one can beat ESPN’s ability to buy sports rights, the most valuable content there is. Their only real threat is league-owned networks. Sooner or later everyone in sports media will be working for ESPN or for a league.

    1. Random note: Nice use of MM to denote millions vs. the single M that’s becoming more and more prevalent. Roman numerals, people. Thousand, thousand. Media geeks unite! :)

    2. Ben – that’s $4B from their top line. What’s their bottom line profit? Tough to tell as they’re all wrapped up inside Disney.

  5. The NBA is very aggressive but it still has a lot to learn. The service has waaayyy to many blackouts for the money you’re paying. Local Teams, ESPN, and TNT. Not only that they also blackout games on NBA TV. So they’re blacking out games on their own network!(I guess they had trouble negotiating with themselves.) Which they boast as having more games then any other network!

    This means that there are more blackouts then any other Online Sports League. I won’t be renewing my package next year and will stick with the games that are on ESPN3.com and locally Over the Air.

  6. I too am an avid sports-nut. I buckled down and cut the cord. So yes, I do miss Monday Night Football and college FB/Basketball. But I still get my fix via local OTA broadcasts in HD and I get my sportscenter when I’m at the gym.

    I got Roku for everything else (including Hulu+) and it’s awesome. So, yes it’s tough to lose ESPN/2/U/Classic/FSN/FoxSoccer/NFLNetwork/RedZone, etc. But the $80-100 a month I save is worth it. Time I grew up.

  7. Interesting then that ESPN offers espn3.com, which puts all of their content online for free. Well, for free if your internet provider ponies up anyway. Wonder what espn gets paid for that? And perhaps that mitigates their fear of cord-cutting?

  8. As Ben says, $1.3M is a drop in the bucket here. Just because that sounds like a big number doesn’t mean it is as a percent of revenues. Assuming $4B in annual revs and $1.3M lost per month, that works out to a loss of 0.39% of their total revenues per year.

    1. A drop in the bucket now, but the issue is one of trajectory. As its distribution partners deal with the cord cutting threat, they’re going to look for ways to lower programming fees and offer lower-cost cable packages. As the most expensive network in most cable lineups, ESPN is an easy target for deciding what to cut in those lower-cost bundles.

      1. True, but I think the real question here at this early stage is whether this early data is a result of economics or technology. Are people cutting cords because they are (possibly temporarily) cutting home expenses, or is new technology making traditional TV service less of a requirement in the home? I’m not sure we know the answer to that yet.

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