To remind you, The Medium identifies a few key trends each fiscal quarter that reveal the most important tensions and seismic shifts in the media marketplace. The key trends help you answer a simple question: "What's next for media, and where's it all going? How are the pieces lining up for business models to evolve, succeed, or fail?"

Read the three key trends The Medium will be focused on in Q3 2023. This essay focuses on "Legacy media companies are throwing in the towel on their bets to own the consumer relationship in streaming and beyond" and "There is a less-discussed lens on how the demand for “premium content” is being redefined by creators, tech companies and 10 million emerging advertisers."

If you watched the excellent interview CNBC’s David Faber delivered with Disney CEO Robert Iger from Sun Valley on Thursday (transcript here) — so good that CNBC rebroadcast it at 8pm that evening —you witnessed Iger eloquently toss aside his long-term vision he had left Disney with in 2021. That vision was greater, global scale to compete with the likes of Netflix.

Now, he is open to reducing the company's size, even selling its prized broadcast and cable networks.

Iger’s most notable reveal was that Disney is open to strategic partners for ESPN “that could either help us with distribution or content.” Iger is the archetypal legacy media executive who started his career at ABC 49 years ago. His best business as CEO has been ESPN, which ABC bought in 1984 while he rising the ranks as an executive, and which Disney acquired when it bought Capital Cities/ABC in 1996. ESPN has been Disney's profit engine because of its enormous reach of cable subscribers (across multiple ESPN-branded channels), reliable revenues from affiliate fees and advertising revenue. It produced $2.5 billion in cash flow in 2021, almost 50% of Disney's $5.5 billion in cash flow from operations that year.

So, with that in mind, my guess is he is saying “the past is precedent”, and ESPN’s future in streaming will need to look much like its past. It’s not hard to imagine he will sign some form of a distribution agreement with Comcast that will help get ESPN’s DTC app maximum distribution in the U.S. on Comcast’s the Xumo Stream Box, which will be rolling out to Comcast, Cox and Spectrum customers this year. Comcast has the potential to reach 68 million households nationwide as a result of this partnership (I wrote about this in April). 

A deal like this would hit a lot of needs for both parties involved:

• It would achieve “something else” in exchange for the $9B+ Disney will end up paying to Comcast for Hulu in January 2024;
• It would be a win for Comcast which is increasingly focused on sports, and needs a better exclusive value proposition for its Xumo initiative (which in turn could boost both broadband subscriptions for those services and enable them to raise prices sooner); and,
• It could reduce the cost of ESPN as a DTC-only service — which is its planned future and is currently projected to be $20 to $30 per month in addition to advertising revenues and other sources of revenue — by ensuring scale and bundling it with Peacock and other apps.

Key Takeaway

EA Sports and ESPN would both benefit from a DTC partnership. However, EA's robust vision of retail-first, consumer-first models for Gen Z and Gen Alpha consumers exposes the limited ambitions of Iger’s vision of solving for ESPN’s future.

Total words: 1,500

Total time reading: 6 minutes