The big question is whether Disney can collect the additional revenue without losing valuable customers who currently watch ESPN on regular TV packages. ESPN generated $6.04 per subscriber per month in carriage fees in 2014, or $7 billion for the full year, according to SNL Financial. That's more than four times the amount for TNT, the second-most expensive network.
That income could be at risk if there are enough die-hard sports fans who mainly subscribe to cable only because they want to get ESPN. The package won't include local broadcast networks that carry major NFL games, but it's simple enough to get a high-definition antenna and pick those up for free.
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Both ESPN and Dish contend that they are targeting the 12 million homes that have broadband Internet but no traditional pay-TV packages. "We think we can find a sweet spot of target consumers," a Dish spokesman said. For its part, Disney said "this will support the overall multichannel subscription model, while offering viewers yet another way to access Disney and ESPN content."
Indeed, ESPN and Dish appear to have taken careful steps to prevent the loss of valuable cable subscribers. A person familiar with the matter pointed out that the service will have a "single stream" policy that prevents different people in the same household from watching different channels. That limitation alone will likely prevent many homes from being tempted to "cut the cord." The restriction "makes the service completely unusable in a multi-TV household," said Todd Juenger, an analyst at Sanford C. Bernstein.