Disney fires Chapek, brings Iger out of retirement

Same with Steve Jobs. Unfortunately, rare as it might be, really brilliant, visionary people can often improve the world, even through capitalistic institutions. If we're gauging those folks on their people skills, I would probably argue that Iger at least has the people skills. He gives lip service to empowerment in his book, but I think that when it's merited, he empowers. To the earlier skepticism about being "Disney nice," I think he knows the difference about when to can someone and when to let them go do their thing. I can deeply relate to that. I've had to fire people, and I hate it, it's never fun. But I've also had people I could trust with autonomy to do things. I think great leadership is includes knowing the difference between the two scenarios.

hambone:

If that's true (and I don't disagree), then carriage fees are obviously going to have to come down (or stop rising as fast) at some point, which would in turn mean that athletes are going to be paid less, and/or the cost of a sports franchise will drop.

I have a feeling that the disintigration of the Pac 12 is the canary in the coal mine here. One year after the Big Ten got a huge deal across NBC, Fox, and CBS and no one but Apple was willing to pay up for the west coast time slots? That Big Ten deal might be the apex of college sports rights fees.

(The conspiracy theorists believe that the Big Four (ABC/ESPN, CBS, Fox, NBC) had a pretty good idea that the Pac 12 implosion would mean they'd all get west coast inventory at a bargain rate---and that's pretty much what happened.)

Jeff:

I'm not sure the math is that high.

This is a pretty commonly-cited number for an average (it's a little higher than $9). Either everyone is lying/wrong or that's what they are getting. And even in Sling Blue, that's a plausible number. There are about 40 channels in that package for $40/mo, and a lot of them are second-tier (generously). If you get all three broadcast networks that Sling carries, it's an extra $5/month.

Here's one source, there are many many more. I can't find anyone who calls BS on the number.

ESPN long has secured far higher carriage fees from cable providers than other content providers. Each cable customer pays about $9.42 per month for ESPN and its networks, compared with an average of 49 cents for other U.S. networks. ESPN's channels account for 7% of the average American cable bill of $126 per month.

That's an Investopedia article, citing WSJ. The WSJ article is paywalled, but here are the relevant paragraphs:

Every big media company is carrying out a tricky shift from the traditional TV business, which has been very lucrative, to a streaming world where the economics are more uncertain. Consumers for decades have paid for large bundles of channels under long-term, hard-to-cancel cable contracts.

That system means that many consumers who don’t watch ESPN are paying for it in their packages. ESPN gets a $9.42 slice of the average cable TV bill—it collects fees from cable providers for each customer—compared with an average of 49 cents per subscriber for other U.S. cable networks, according to S&P Global Market Intelligence.

So if ESPN is getting $9/month, and the rest of the Blue lineup gets $0.50 per, that still keeps carriage fees under $30/month, leaving enough room for Sling to eat too.

Having folowed the sports market news for a while, ESPN is positioning themselves to be able to offer ESPN itself (not the also-ran stuff on E+) direct while also still keeping it in bundled lineups. Understandably, that has a lot of bundled-providers skittish--if I didn't need a bundle, whether linear or over the top, to get ESPN, I'm not sure why I'd keep it*--and that's partly what's behind this Charter/Disney spat.

-----

*: Who am I kidding? I will keep Fubo, because that's the one-stop shop for just about all sports programming you can think of, short of Peacock, which I also have thanks to the Premiere League. #COYS.

I know those are the numbers out there, I wasn't debating that. My point is that the economics would be necessarily different in streaming if that's the only way to get it. Sling can't be left with a few bucks left to support all of that infrastructure, which is different from hosting on-demand static video. I'm sure Disney's endgame, if they keep it, is to go direct, but redistributing the same income among only people watching sports, I don't think that's tenable.

Businesses are not in the business of getting less money for the same thing without also reducing the costs. The stock market will eviscerate you for that. And if anything, costs of DTC go up, becuase in addition to paying rights fees and the cost to develop the programming, you also have to pay for the distribution mechanism.

Then again, maybe "evisceration" is exactly what is happening with DIS.

Longer term, there are only two ways for this to go: either the market will pass along lower revenue to the various sports leagues via reduced rights fees, or Disney et. al. somehow figure how to make the current economics of all of this work. I am with you: I don't think the latter is going to happen, and the former is going to be painful for a lot of people.

It reminds me of what a mentor once said: Every time someone says "reduce costs", that translates to "pay someone less."

They may not want to make less money, but that doesn't mean they have a choice. I think maybe what I'm saying is that stuff rolls down hill. If it's not workable for the media companies, the leagues won't have anyone to buy their rights. But it's clear that consumers aren't going to hang out with cable, so to your point, some new arrangement has to work out.

Maybe the better question is whether or not sports will change the way the rest of television has. It seems counterintuitive, but you can generally get more stuff, much of it better quality, for less money now. Even basic cable for me was $40 over Internet only, but now I spend about $30 a month on commercial-free things including what used to be premium extras (Disney+/Hulu and Max). You can spend less or get even more if you don't mind ads.

Is there a market for sports fans that will pay $30 a month? I'm skeptical, if only because people are used to getting their local teams free on broadcast.

I'm admittedly a horrible person to judge sports value, since I only watch the US Open and Olympic volleyball. I don't get people who want every game every week.

Well, I subscribe to the MLB package, mostly for games of one team (plus an occasional other game of interest). The list price for that is something like $130 per year, for 6 months of games. It annoyingly does not include playoffs, so I have to scramble to be able to watch that. So basically $22 a month just for baseball.

OTOH, I'm the target market - a big fan, someone who can't get his team's games on local cable, has disposable income, etc. From the perspective of the sport, I'm sure folks like me are basically bonus revenue that simply didn't exist 15 years ago. And, it isn't obvious there are enough people who would pay that much to replace the cable dollars. So I agree, this falls into the category of "if something can't go on forever, it will stop."

A small correction to your post, Jeff - for NFL football, people are used to getting games free on broadcast. For MLB, NBA, NHL, and increasingly college football and basketball, you need cable or a streaming package of some kind.

I spent Saturday afternoon with 100,000 people who spent about $50-$100 each to watch nothing happen while CBS aired commercial after commercial, so there might be a market

Jeff:

I don't get people who want every game every week.

And those folks don't understand people who would want to go to Walt Disney World on a monthly basis and join an online community to debate why Rip Ride Rockit > the current state of cable TV.

Jeff:

I don't get people who want every game every week.

It's escapism. I grew up with ESPN and the regional sports network on all the time. I have less time for sports now but I will still watch what I can. I'm just not interested in paying for it anymore.

I get escapism, everyone needs that. But can you really watch all the games every week? Of course not. Seems more like some folks find value in knowing that they could watch any game. To each their own, I guess.

That's all kind of a sidebar though. We know from watching this business that people will pay a ton for special access. And more people complain about the price of Orlando parks. People are not always logical about money and how to spend it, so we'll have to see how televised sports shake out. My guess is the financial ecosystem is untenable when non sportsball fans aren't diluting the per viewer cost the way they did with cable.

The regional sports fees are getting out of control, which is the main reason we cut the cord. In Chicago, as an example, the regional sports fees are $18.35 per month on XFinity. They were $6.20 per month back in 2020. At the same time the Bulls, Blackhawks, Cubs, and White Sox have all left WGN. How do you get kids into the game if they can't watch it?

I was paying nearly $500 for 3 months of the NEWSPAPER...until saying that number out loud was enough for my wife to agree to drop down to Sunday only delivery. I feel like I am getting a raise.

I keep thinking about how much I miss the dead-tree version of NYT. Then I realize what it would cost, and snap out of it.

I was shocked at how difficult it was to cancel my subscription to my local paper 10 or so years ago. When it was time to renew, I told a rep that called that I wasn't interested in doing so. Within a few days, the route driver for my area stopped by one evening to offer me a deal to stay on. I politely declined and she kept giving me offers for ad days and weekends. I just wasn't interested. I continued to receive a paper daily for several months and it slowly declined to ad days and weekends, then just weekends, then just Sundays until they finally stopped showing up altogether about 18 months after I didn't renew. It's no wonder the business struggles.

Also, it looks like Monday Night Football was enough to get Charter/Disney on the same page, though I haven't seen whether or not Charter will be able to separate ESPN into a higher tier.

Not theme park news, but since we were talking about it, Disney is now officially breaking out the "sports" category, which is mostly ESPN. From The Hollywood Reporter:

The sports unit had revenue of $16 billion and profits of $2.9 billion in 2022 — more than Disney's entire entertainment business that year — as the company prepares a new financial reporting structure.

That was the subhead, but here's the important context:

Indeed, a deeper read of the finances show that most of ESPN’s revenues came from pay TV carriage fees ($10.1 billion), compared with advertising revenue of $4.4 billion. As cord-cutting has worsened, ESPN has bore the brunt of it for Disney, thanks to its lucrative carriage deals.

Assuming that the carriage fees have to translate to income via streaming, that's gonna be a neat trick that either proves people will pay for it, or they won't and the leagues will all have to figure out how to adjust.

That last sentence is a great summary of what I was trying to say (but less concisely) upthread.