The Wall Street Journal has an interesting article today about ESPN's efforts to experiment with online video offerings via its WatchESPN app for smartphones and tablets. You can watch games live via the WatchESPN app, but you must be a cable subscriber to do so. What about the "cord-cutters" - i.e. the young people who have never bought cable television subscriptions, or who have terminated their cable television in favor of simply having Netflix and other modes of viewing programming of interest to them? Those folks can't take advantage of WatchESPN. Why not? Well, it's all about worries regarding cannibalization. Sound familiar? Most incumbent firms facing disruptive threats are fearful of embracing innovations that might cannibalize their core business. Of course, they often end up in a situation where someone else just comes along and eats their lunch, after they spent years worrying about eating their own lunch. Here's an excerpt from the article:
Mr. Skipper, a 59-year-old former Spin magazine executive who took the
helm of ESPN in 2012, acknowledged a "dissonance" between its instinct
to disseminate its content as widely as possible and the usage
restrictions designed to safeguard the core television business.
"There's no denying there's a certain element of protection and
defense," he said.
How worried should ESPN be? Well, the article cites the fact that the firm lost approximately 1.5 million subscribers between September 2011 and September 2013. In other words, cord-cutting is a real phenomenon that is beginning to put pressure on ESPN. Will it cause them to embrace an even bolder business model? Well, the article notes that HBO is considering selling separate subscriptions to its HBO app for smartphones and tablets (i.e. subscriptions for those who are not purchasing HBO already via their cable company). If HBO takes the plunge, I would expect others to follow. ESPN will face pressure to move in a similar direction. Who moves first? It will be interesting to watch.