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New Survey Indicates ESPN Won't Like a Cord Cutting World

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The Worldwide Leader's economics work today, but maybe not for that much longer.

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A new survey from research firm BTIG suggests that ESPN has much to fear from a world in which today's pay TV model has gone away.

ESPN is the most expensive component of any cable or satellite TV package right now at over $6 per month, and Disney gets that money whether people watch or not. In a world where such bundles go away, in theory only people truly interested in the ESPN family of networks will subscribe to them. Therefore, ESPN will have to charge a lot more in an age of unbundled TV channels to keep its revenue level the same. This is old news; a Wall Street analyst estimated last year that ESPN and ESPN2 would have to cost about $36 a month in a standalone package in order to keep the same level of revenue as today. Similar estimates with similar prices have been popping up for years.

This new survey showed that only 6% of respondents would be willing to pay $20 per month for a standalone package of ESPN and ESPN2, and 85% were a firm "no". The $36 per month estimate was based on about 20% of pay TV subscribers going for it. If the estimate's methodology was solid, then the price would have to be higher than $36 a month if the proportion of people paying for it is capped at 15%.

It also showed 56% of respondents willing to drop ESPN and ESPN2 if it meant saving money on their monthly bills. ESPN believes it has contracts that prevent such a deal, and it's going to go to court with Verizon soon to prove it. Essentially, a TV provider must include ESPN in the basic tier or else Disney won't let the provider carry the channel at all.

At least two and a half years ago (if not further), stock analysts began to downgrade Disney shares over concerns about ESPN. BTIG's Rich Greenfield, who conducted the survey, did the same last month despite the massive success of the new Star Wars movie over concerns about ESPN's expensive long-term contracts.

This matters to the SEC given that ESPN wholly owns and operates the league's network. The SECN has been a wild success so far, and its presence may buoy the network in one region of the country. After all, the main case in ESPN's favor right now is that live sports are the only thing that no one DVRs or tries to watch later. If you care, you have to show up on time and sit through commercials. Not to mention that the Worldwide Leader is definitely not getting everything it could out of its digital offerings, given that streaming a game means you sit through the same five commercials 100 times and see the "Commercial break. We'll be right back." message over and over.

Of course, an a la carte world could mean college football fans purchasing ESPN and its family of networks for September through January and sitting out the rest of the year. That would mean either even less revenue or an even higher cost (or both).

It's unclear how or when we'll get to the place where all TV is just traffic on the Internet, but make no mistake, in the future everything that can be traffic on the Internet will be. That future probably means less overall revenue for ESPN, which means less overall revenue for college sports programs that don't have much experience in gracefully trimming budgets and that issue decades-long bonds to pay for expensive facilities. It may not be a pretty future in a lot of places.