BTIG analyst Rich Greenfield this morning said of Disney's plans for an ESPN OTT network, “They're not currently prepared to go direct to consumer." Greenfield, who on Friday downgraded Disney’s stock due to ESPN’s rights costs, appeared on CNBC's "Squawk Box" and said of Disney's OTT plans, "ESPN is not a property they can do it with. The reality is doing it in the U.S., actually launching that business, would be a very bad decision for Disney.” CNBC's Andrew Ross Sorkin asked, “Do you think it's coming three to four years from now?” Greenfield said, “I don't think they can do it anytime in the foreseeable future. The problem is, when you look at Disney and ESPN specifically, ... it's all sports all the time. If you're only a football fan, you're not going to subscribe for the full year. We saw that even with (Dish Network's) Sling. People signed up for Sling, because you can get TBS and TNT, and so they got TBS to watch the (MLB) pennant race, and then they canceled Sling."
WILL PEOPLE STAY? CNBC’s Rebecca Quick said, "I know it looks startling to see how many people have left the subscriber ranks, but I do feel like ESPN, despite how much people pay for it right now, the hardcore addicts would pay two, three, four, five times as much. So even if the numbers come down, can't they raise rates on the remaining subscribers and make up for the ground that they've lost?” Greenfield responded, "Remember you lose the casual fan. When you do that, you don't get the 'stumble upon.' How many people end up watching 'Monday Night Football' (when) they’re flipping through channels? They’re not the super fan, but they end up watching." Greenfield added, "The problem is that big multichannel bundle at roughly $80 is under a lot of stress. ... If ESPN tries, they certainly can try, but they've been having a harder time getting the size of increases that they got when they signed 'Monday Night Football' for the first time. That’s when they were growing double digits on the rate side. It's getting a lot harder. There’s just a lot of pressure." Greenfield continued, "If you had a choice of having ESPN or not having ESPN, do you think more than half of the households in the U.S. would say, 'I have to have this'? I think there are 30-40 million ridiculously crazy sports fans, but would you pay for ESPN for the entire year? Remember, you can subscribe just during football season. If you could buy discretely, there's a continuity risk." Quick said of making it a monthly payment option, "That seems like it would be crazy for them to do that. Just lock it in, you can subscribe over-the-top, but pay for a year."
TRUTH SEEKING: Greenfield said of Disney Chair & CEO Bob Iger, who in August said an ESPN OTT net could feasibly launch now, “I think he's trying to tell the street they are capable of doing something that they would never do. I think it's a fine point in terms of the clarity. They're not actually going to do it, and so whether they are technically prepared -- which I would still question whether they could actually deliver that product and it would actually work to millions of people -- the reality is they're not going to do it.” Sorkin asked, “So you’re saying he’s straight-up lying?” Greenfield responded, "We're saying he's not being honest with investors about their preparedness to actually take this product to market anytime in the near future" ("Squawk Box," CNBC, 12/21).
SKINNY DIPPING: CNBC’s David Faber said, “Disney signed up some of these deals with the cable providers -- the Comcasts, the Charters of the world -- took price increases for ESPN, but said we can be available to a smaller percentage of your subscribers than some of the other networks are, namely giving them more flexibility to offer these skinnier bundles, if you will, that don't have ESPN." Faber continued, "There may be tens of millions of people who want ESPN in this country, but it may not be 100 million, it may not be 80 million" ("Squawk on the Street," CNBC, 12/21).
