ESPN+ leverages UFC appeal to double subscriber base to 2 million in five months

Disney announced in its Q1 earnings call on Tuesday that its sports-centric streaming service ESPN+ had surpassed two million subscribers, doubling its subscriber base in less than five months.

Launched in April 2018, Disney revealed in September 2018 that it had taken less than five months to surpass one million subscribers. Disney’s $1.5 billion gambit securing the exclusive US rights for the UFC in May 2018 has started to pay off, setting a viewership record in January 2019 when ESPN+ streamed the combat sport for the very first time.

ESPN+ gained 568,000 new subscribers over UFC’s debut weekend and according to Disney’s chief executive officer Bob Iger:

‘’The fact that 49 million Americans, 15% of the entire population, watched ESPN content on linear TV that day, and millions more engaged on other platforms including ESPN+, speaks to the enduring power of live sports, the strength of the ESPN brand and the value of the UFC rights we acquired. We (Disney) expect the expansion of combat sports content on the streaming service to drive continued growth in the months ahead”

ESPN+ runs on BAMTech’s platform, which it acquired in August 2017, and delivery has been reliably stable even during peak live streaming consumption, handling “0.5 million sign-ups” without issue. Disney will also run Disney+ on the platform when it launches later in 2019, further illustrating Disney’s ‘number one priority’ remains direct-to-consumer (DTC).

Building foundations for future growth

Disney broke out metrics for its DTC and International divisions for the very first time in its Q4 2018 earnings, reporting $918 million revenue, 1% down on Q4 2017 and a segment loss of $136 million. The operating loss, which increased from $42 million in Q4 2017 was down to the “ramp-up” in investments in ESPN+ and the costs associated with Disney+.

Disney appears to be attracting a large enough subscriber base to recoup its investments on sporting rights and content for its DTC propositions, but investing in premium content will be key to retaining these customers. Its growing sports proposition is managing this thus far, but still has a long way to go. If all two million subscribers pay the monthly cost of $4.99, Disney will only recoup $9.98 million per month, equating to 39.9% of what it pays out to the UFC each month. Disney will also be generating revenue from ESPN’s linear channel as part of the deal and it is still in the early days of building its subscriber base, but the UFC is just one of many rights on its increasingly costly rights portfolio.

ESPN+ customers can also access live MLB, NHL, UEFA Champions League and English Premier League alongside its UFC events, as it aims to advance its subscriber acquisitions, although don’t expect it to double its subscriber base again in the next five months. As a further incentive for new sign-ups, Bob Iger announced that Disney would be looking to provide discounts for users who buy ESPN+, Disney+ and Hulu.