Next Up on ESPN: Harvard Lacrosse, Fencing for Only $5 a Month

(Bloomberg) -- Since the dawn of TV, networks have looked for programs that draw the largest possible audience. ESPN will flip that model on its head Thursday with a new online service offering dozens of niche sports from cricket to lacrosse in one low-cost package.

ESPN+, as the new product is called, will sell for $5 a month and feature more than 10,000 live events a year, including monthly boxing matches, daily soccer games and college sports like wrestling and gymnastics. It will also be the permanent home of some of ESPN’s original content, such as a “30 for 30” documentary on controversial Indiana University basketball coach Bobby Knight that makes its debut Thursday night.

The move is part of a strategy by ESPN parent Walt Disney Co. to sell its massive volume of programming directly to consumers who are increasingly at ease with video streaming. As viewership on traditional networks falls, the Burbank, California-based media giant thinks it can bypass distributors and capture some of the value investors are putting on subscription businesses like Netflix Inc.

“We have been a wholesaler to those services in the past, and now we’re going to be a retailer,” said Kevin Mayer, Disney’s longtime chief strategy officer who now heads the company’s new direct-to-consumer division.

The new service will be accessible through a redesigned ESPN app. Subscribers will get programming with a reduced advertising load. That means no banner ads or commercials that run before the video starts. Viewers who get ESPN through their cable or satellite provider will still be able to log into the app to watch as they did before.

Ivy League

ESPN plans to pitch the product to superfans who can’t get enough sports, as well as to audiences the company calls underserved, such as small college and minor sports devotees. ESPN marketers will mine databases of fans, while ESPN anchors will pitch the product on TV.

Last week, the Ivy League became one of the first of the smaller conferences to sign on to the service. In a 10-year deal, ESPN+ will feature some 1,100 annual matches from more than 30 sports at Harvard, Columbia and the other universities, including football and basketball. Rights fees paid to the colleges by ESPN will offset some of the cost of producing the TV coverage, Robin Harris, executive director of the league, said in an interview, while boosting viewership among fans, parents and alumni.

As part of the shift, the Ivy League will no longer sell its own $16-a-month digital service. “This is a terrific opportunity for us promote all of our sports,” Harris said.

Tailored Content

ESPN executives promise more such deals and more tailored content, so fans of a particular team or sport will get scores and videos that relate to them. Should audiences for boxing surge, for example, then more combat sports will be added, according to Jimmy Pitaro, ESPN’s new president.

“It’s the promise of the internet, it’s data, it’s seeing what’s working and what’s not,” Pitaro said.

The company is also creating a sort of iTunes for other sports packages, beginning with a $25-a-month Major League Baseball offering that allows viewers to watch everything but their home team. Ultimately, customers will be able to buy individual games or seasons. The company may also sell ESPN+ through traditional pay-TV providers.

The ESPN product is a prelude to another streaming service launching later next year that will feature Disney movies and TV shows, including billion-dollar franchises such as “Star Wars” and Marvel superheroes.

Losing Money

While ESPN+ isn’t offering content from the priciest leagues, the National Football League and the National Basketball Association, the proposition is still expensive. The service could lose $105 million this year, based on 1.4 million subscribers signing up, before turning a profit of $37 million next year, according to Evercore Group analyst Vijay Jayant. Morgan Stanley’s Benjamin Swinburne sees losses extending to 2020, when the subscriber count hits 1.75 million.

Disney’s Mayer declined to comment on the subscriber numbers, but said the service was a long-term endeavor.

“We’re investing,” he said. “It’s going to be some number of years, not huge, where we are at a loss-making position. But we do believe, in the not too distant future, this will be profitable.”

To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net.

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Mark Schoifet, Rob Golum

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