Analyst: Placing ESPN on Sports Tier Would Harm Pay-TV Ecosystem

Needham's Martin says unbundling would raise sports rates, resulting in those subs dropping entertainment packages
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Placing the family of ESPN networks on a sports tier would not only be pricey for fans, but for the pay TV industry as well.

Those were among the conclusions drawn by Needham analyst Laura Martin in her "Future of TV" report.

Martin said that research shows that if the sports giant were unbundled from the rest of the pay TV industry's programming packages, only 20% of subscribers would purchase the networks. She estimated ESPN's combined annual revenue at some $10.2 billion, based on affiliate fees of $7.2 billion (100 million households at $6 per month), and ad revenue at $3 billion.

If only one in five households - "super fan homes," she labeled them - purchased the ESPN suite of services, there would have to be a five-fold jump from current monthly fees of $6 to some $30 in order for the programmer to maintain its aforementioned annualized revenue level. The steep hike would be needed to offset the drop in ad revenue, which would result from having a much smaller potential audience to draw from.

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