The Walt Disney Company just agreed to acquire a one-third stake in MLB Advanced Media. The move is part of Disney’s plan to enhance their video streaming services, and hopefully help curb their cord cutter problem.
Bloomberg reported the deal yesterday after speculation began a few months ago. Disney’s purchase is said to value MLBAM at roughly $3.5 billion. Disney also has a four-year option to buy an additional one-third stake, which would make them majority owners of MLB’s online media leg.
Disney, who owns ESPN and ABC struck this massive deal in order to bolster their live streaming on-demand video services. The fear of cord cutters is more real than ever. Over the last two years ESPN’s cable television subscription numbers have gone down by seven million.
BREAKING: Disney gets 1/3 of MLB's Bam Tech at $3.5B valuation. Four year option to buy another 1/3, source says #sportsbiz #MLB
— Scott Soshnick (@soshnick) June 30, 2016
MLBAM is real force in mobile, online and live streaming services. One of their most successful solo endeavors is their MLB At Bat app. They currently run every MLB team website, as well as MLB.com. They also provide live streaming services for WWE Network, March Madness on Demand, HBO Now, PGA Tour Live and WatchESPN.
WatchESPN is the live streaming branch of ESPN. This new deal will allow them to enhance their services. It also gives them the option to go the rout of HBO and provide their live streaming completely separate from cable subscriptions.
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Disney will undoubtedly begin to offer more live streaming sports coverage through WatchESPN. ESPN’s new deal will also allow them to provide more niche sports direct-to-consumers, as they did last summer with the Cricket World Cup.
Live sports have become some of the most financially viable programming on television. Unlike pretty much every other sector of TV, sports fans tune in during a live event and rarely record or watch a game later on-demand. Yet ESPN’s cable subscription numbers have dipped.
WatchESPN is only available for customers who already pay for the network through cable television packages. If the cord cutter generation keeps on growing ESPN may have to offer their live streaming Watch services as a stand-alone product.
HBO began working with MLBAM in 2014 to create their direct-to-consumers over-the-top video on demand service, HBO Now. Since it officially debuted last April it has reached 1 million subscribers. But ESPN President John Skipper said in April that his company doesn’t plan on selling directly to consumers just yet.
“That’s not what we’re going to do…We don’t sell it alone right now because we generate more revenue by being in a larger package, being ubiquitous across the households in this country, in which we can sell advertising. That simply works better for us.”
Even if this deal doesn’t see WatchESPN become available directly to consumers right away, Disney is making the right strategic move now. Stand-alone live steaming services are the way of the future.
Live sports have been less susceptible to cord cutters for now, but Disney is making sure they will be ready when the numbers dictate otherwise.