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Welcome back to The Varsity. I’m John Ourand, typing away on the Acela to New
York. Alas, I’m not going to make my way out to Bethpage this weekend. But I’m fascinated by the controversies making news this week: from all the animus directed at Bryson DeChambeau (“a captain’s nightmare,” per Golf Channel’s Brandel Chamblee) to
questions about how much the U.S. Ryder Cup team is being paid, and where that money is going.
Before we begin, Needham analyst Laura Martin just published quite the take on Disney’s Jimmy Kimmel problem. “We argue that Disney should shut down (not sell) ABC,” she wrote in a report released this morning. Needham then proposed that Disney should put ABC’s programming on Hulu, where it wouldn’t be subject to the whims of Trump or Brendan Carr.
🚨 In the Arena: I’ve had a wave of positive feedback for our inaugural sports media conference with
MoffettNathanson, In the Arena, set for October 16 in New York. Our all-star lineup includes Adam Silver, Gerry Cardinale, Michael Rubin, Eric Shanks, and Derek Chang, among others—plus Roku’s head of sports, Joe Franzetta, who confirmed this morning. A few tickets are left. You can
claim them here.
As you know, ESPN launched its direct-to-consumer service a month ago. For today’s issue, Julia Alexander went under the hood to determine what’s working and what isn’t. You can access her must-read piece below—but only if you’re an Inner Circle member.
Take it away Julia… |
Stat of
the Week: 55 Percent
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These days, executives across leagues, media companies, and agencies are
hyper-focused on how content-discovery mechanisms are impacting the long-term behavior of younger sports fans. According to a new study published by WSC Sports, about 55 percent of people who discover new sports and players through TikTok and YouTube Shorts become long-term fans. In many ways, this is the proof point undergirding NBA commissioner Adam Silver’s enthusiasm over his league’s “highlight culture.”
Anyway, this is the kind of
adoration that matters, even if it doesn’t show up in the ratings immediately. Indeed, the most sophisticated leagues are all learning to use social platforms as top-of-funnel drivers to convert passerby viewers into more engaged fans. How successful they are will certainly impact the next generation of media rights deals.
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- The Pat McAfee show: It’s happy days for Pat McAfee. College GameDay is seeing its best ratings in roughly 40 years; linear ESPN viewership for McAfee’s YouTube series is increasing; and McAfee is having a blast finding new daredevil antics to end each College GameDay broadcast. McAfee, once a headache for Jimmy Pitaro and Bob Iger, is now someone that ESPN’s head of content, Burke Magnus,
can’t imagine his network living without.
In a new interview with The Athletic, Magnus said that ESPN is very much committed to McAfee once his five-year contract expires in 2028. But how the partnership will change is still unclear. For instance, McAfee used to regularly appear on WWE events but stepped back to focus on GameDay.
Now that major WWE events are on ESPN, could we see McAfee return? I’ll take that bet. - Netflix Premier League: As John pointed out last week, the market for sports rights in the United States is so saturated that it’s driving media companies to cast their eyes (and dollars) abroad. The NFL and NBA are hyper-focused
on international expansion, with the NBA seemingly moving closer to launching a 16-team league in Europe. (Alas, perhaps the memory of the NFL Europe still lingers, even if those were quainter days…) But with very few major rights packages set to hit the market in the next couple years, there are even fewer that will be valuable to both traditional media companies and disruptors like Netflix, Apple, and Amazon.
One exception is the English Premier League. A fascinating sports
bidding war might soon erupt over the U.S. rights to the EPL, which are currently held by NBC through 2028. Adam Kelly, president of IMG, told Variety last week that he thinks Netflix would likely bid for some Premier League rights, including potential global opportunities. That certainly tracks with conversations I’ve had with folks at Netflix who want global, event-driven sports. Netflix already secured the 2026 Women’s World Cup. The real question is who
will outbid whom: Ted Sarandos or Brian Roberts? - An MLS experiment: Some of the smartest sports people I know are worrying less about the maximum number of streaming services Gen Z will sign up for and more about which nontraditional platforms are most effective at boosting a sport’s popularity with Gen Alpha. Some organizations, like the Australian Open and the NFL, are hosting pop-ups in Roblox, a
gaming platform with more than 100 million daily active users, with a reported 40 percent under the age of 13. Bundesliga is teaming up with YouTube creators for nonexclusive coverage of the German soccer league’s Friday games. And MLS teamed up with EA Sports to broadcast MLS games live within FC Mobile.
As to the latter, those games saw “a lot of live tune-in” and “a lot of higher in-app engagement,” John Reseburg, who runs marketing and comms for EA Sports,
told Sports Business Journal. Reseburg declined to comment on whether EA has proposed this arrangement to any of its other partner leagues, not just in soccer but also UFC, F1, PGA Tour, the NFL, etcetera. But I imagine that executives at some of these leagues might be inclined to try a
similar experiment.
For instance, Madden is one of the most popular video game franchises in the world, and still growing—it was the sixth-best-selling game in 2024. If Gen Alpha is spending more time with video games, and less time watching in more traditional settings, leagues will have to reach them in their increasingly virtual worlds. Roger Goodell, are your ears burning?
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A month after the launch of ESPN Unlimited, what does the early data
say about the platform’s prospects for long-term success? And what does “success” even mean? |
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As ESPN’s first true foray into streaming (no offense to ESPN+, now rechristened ESPN Select)
notches its first full month, industry watchers are straining to perceive any early indications for its long-term projects. Will it be a success or an expensive flop? Have the once-ancillary parts of sports fandom, like fantasy and gambling, been enough to drive daily engagement? And perhaps most importantly for Jimmy Pitaro and Bob Iger, how much will the app offset the declining linear TV business? A decade ago, ESPN reached more than 90 million homes; today,
it’s in about 65 million homes between linear and streaming, with the commensurate decline in affiliate fees that entails. Although Disney’s streaming business has grown steadily since Disney+ launched in 2019, the profit margins on its direct-to-consumer products are far from those previously generated by ESPN and Disney’s other cable networks.
Of course, no one at Disney expects ESPN’s new streaming service to completely make up for the unceasing decline in cable revenues, but they do
expect ESPN to be everywhere. Pitaro has been relentlessly pushing the benefits of giving people a choice about where to watch ESPN. Leaning on those declining, but still profitable, distribution channels extends ESPN’s value as parentco Disney pushes customers to migrate from linear to the new app ecosystem. It also gives Pitaro and Adam Smith, Disney’s chief product and technology officer, a chance to find out what’s working for ESPN D.T.C. customers and what
isn’t.
Under Smith, who oversaw product at YouTube for more than a decade, Disney may finally deploy a “move fast and break things” approach to experimentation, which it’s desperately needed, without fear of the entire business collapsing before the streamer finds its footing. So 30 days in, what’s working? |
It’s still early for ESPN, but a month is enough time to evaluate the platform’s strengths
and weaknesses. More than a million new customers signed up for ESPN Unlimited or Fox One in the first 10 days after their respective launches last month, according to data from Antenna, with the vast majority of those subscribers heading to ESPN. Importantly, this does not include customers who are already Disney+ or Hulu customers
and upgraded their bundle to include ESPN. Also, about 10 percent of those customers chose the annual plan as opposed to the monthly, which signals long-term interest and low churn in the future. Analysts expect ESPN will attract 5 million to 6 million total new customers in its first couple of years, so reaching a meaningful percentage of that goal within its first week and a half is impressive. |
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So far, Bristol is pleased, but inaugural 30-day windows are notoriously tricky for gauging
long-term success. In 2019, Disney+ launched with 10 million subscribers in the first 24 hours, reached 50 million subscribers in five months, and ended its first year of operations with just over 86 million customers. Six years later, the service has around 130 million subscribers. Saturation, especially in the United States, is beginning to settle in.
After years of running ESPN+ and working with subscription products, Pitaro knows it’s easier to attract a swarm of new customers when
there’s something new to offer and it’s the beginning of football season in the U.S. (About 80 percent of people in the United States who follow sports said they watch football, per Statista Consumer Insights.) Meanwhile college football is experiencing a quasi renaissance, with ratings up 21 percent through Week 3. The real test for ESPN will
come when football season ends, and the 90 percent of its new users who chose the monthly subscription decide whether to stay or go. |
Of course, Disney is intent on making ESPN accessible and ultimately synergistic—part of
Pitaro’s everywhere they are strategy. It seems to be working so far. About 80 percent of people signing up for ESPN Unlimited are choosing the larger Disney bundle, per Antenna, which is central to the thesis being pushed by Iger and Joe Earley, Disney’s head of D.T.C. Indeed, ESPN may be the worldwide leader in sports, but its ultimate value is as a component part, and perhaps a centerpiece, of the Disney super-app, with its content eventually being made available in
a fully interoperable setting. Bundled subs will be able to watch Hulu and ESPN programming inside Disney+ or ESPN programming through its own app, creating more inventory for advertisers and allowing Disney to collect specific data on those different viewer cohorts and better target advertising.
One lingering question is whether ESPN Unlimited will follow the signup and churn behaviors of league-specific services such as MLB TV, NBA League Pass, and NFL Sunday Ticket, which typically
attract hardcore fans and have high churn rates. And yet, perhaps the better comparison is with the patterns of Peacock and Paramount+. While Peacock observed a slight uptick in churn following the Summer Olympics last August, there wasn’t a notable surge in cancellations following the end of football this past winter. (Churn rate hovered around 6 percent, roughly one percentage point higher than the average, per Antenna.) Meanwhile, Paramount+ saw a slight uptick following football season, hovering
around 7 percent, but that wasn’t much higher than its average churn rate, either.
More telling, perhaps, is the percentage of new customers (or gross adds) who signed up for a service in the months around football and soccer. Peacock, for example, accounted for 18 percent of gross adds across all major streaming services in the U.S. last September, doubling its October numbers. Only time, and a few more sports seasons, will reveal how ESPN manages churn. |
When you sign into ESPN Unlimited, it’s hard to escape the feeling that the app is pulling in too
many directions. Navigating the app to get to the fantasy stats or betting odds is far from frictionless, serving as a reminder that Disney is still an entertainment company trying to figure out how to create a strong tech product. And on the other end of the spectrum, the experience of watching ESPN programming (like Get Up, a core part of my daily life) via the app is not differentiated enough to incentivize anyone to upgrade from their linear package.
Again, it’s barely been
30 days, but the user experience is something they’ll have to keep improving. In the meantime, Pitaro will continue pointing to fantasy, betting, e-commerce integration, etcetera, as part of ESPN’s core offering. After all, ESPN dominates fantasy in the U.S.: More than 1 million new players joined its football fantasy leagues this year, and there are currently 14 million people playing fantasy football on its platform.
The outlook for gambling, however, is less rosy. PENN Entertainment,
which paid Disney $1.5 billion for the right to rename its sportsbook ESPN Bet, is projecting a 4 percent market share in the U.S. by the fourth quarter. Meanwhile, FanDuel and DraftKings have a combined 68 percent or so. In the month after ESPN Unlimited launched, search queries for ESPN Bet occurred 13 times less frequently than FanDuel, and 12 times less than DraftKings, per Google Trends. ESPN is well-positioned to take more market share—they have the right audience, given that 20 percent of
people who signed up for a sports streaming service over the last two years are between 35 and 44 and earn over $150,000. That demographic tends to engage with sports betting, but they’re not doing it through ESPN’s service just yet.
In short, it’s too soon to make any serious declarations, but ESPN’s early numbers are incredibly strong. The real test will come early next year, after the Super Bowl, when churn activity starts to appear. We’ll see if Pitaro’s product team
has managed to improve the actual experience by that point. But until then, no one will be sleeping too soundly in Bristol and Burbank. |
Thanks, Julia. See you all on Thursday.
John |
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Puck sports correspondent John Ourand and a rotating cast of industry insiders take you inside the executive suites and owners
boxes where the decisions that shape the entire sports business are made. You’ll hear interviews with players, network execs, and everyone in between. The Varsity is an extension of John’s private email for Puck by the same name. New episodes publish every Wednesday and Sunday. |
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An essential, insider-friendly Hollywood tip sheet from Matthew Belloni, who spent 14 years in the trenches at The Hollywood
Reporter and five before that practicing entertainment law. What I’m Hearing also features veteran Hollywood journalist Kim Masters, as well as a special companion email from Eriq Gardner, focused on entertainment law, and weekly box office analysis from Scott Mendelson. |
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