As The Walt Disney Co. studies when to create a standalone, direct-to-consumer version of ESPN, MoffettNathanson senior research analyst Michael Nathanson is calling time out.
Nathanson said he thinks Disney would be better off keeping ESPN in the Disney bundle with Disney Plus and Hulu.
The combination “will deliver enough premium content to reduce churn, aggregate engagement and substantial non-programming cost savings,” Nathanson said.
“We believe that a sports-only streaming app is a tough model and that sports integrated in a general entertainment service a la Peacock or Paramount Plus makes more sense,” he said. “Given the current light penalties for cheating the MVPD system, we would argue that Disney could create more stickiness and audience flow integrating ESPN into Hulu and Disney Plus than trying to build a standalone premium service.”
Nathanson notes that the current Disney bundle of Hulu, Disney Plus and ESPN Plus has a churn rate lower than Netflix and three times lower than the rest of the streaming industry.
Nathanson also noted that the bulk of Disney’s current 25 million ESPN Plus subscribers are already bundled customers. (The bundle has 20 million three-service subscribers.)
