ESPN (s DIS) 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 (s TWC) 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 (s T) and satellite TV firm DirecTV (s DTV) 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.
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