Disney’s ESPN Subscriber Fee Continues to Inch Upward

October 26th, 2010 by Trefis Team
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Trefis
DIS: The Walt Disney logo
DIS
The Walt Disney

Despite the recessionary environment, Disney-owned (NYSE:DIS) ESPN, the worldwide leader in sports programming has seen its subscriber fees grow consistently throughout the years. Subscriber fees increased from around $2.60 per month in 2005 to about $3.20 in 2009 [1].  The fee hikes can be attributed to ESPN’s wide viewership and the popularity of its sports programming compared to offerings by competitors like Fox Sports, owned by News Corp (NASDAQ:NWS), and CBS Sports, owned by CBS (NYSE:CBS).

ESPN’s mass popularity, leadership in sports broadcasting and the multi-year nature of fee contracts should allow it to continue to increase its Fee per Subscriber despite the economic slowdown. We currently have a Trefis price estimate of $37.44 for Disney’s stock, about 8% above the current market price of $34.75.

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Household penetration rates remain strong

Cable and satellite providers, such as Comcast (NASDAQ:CMCSA), Time Warner Cable (NYSE:TWC), and DirecTV (NASDAQ:DTV) typically pay a monthly fee to ESPN to make the sports channel available to its subscribers. ESPN’s core strength is in its penetration power. It covers 98% of all US pay TV households and 86% of all TV households [2].

Even though ESPN’s subscriber fee is 2-3 times greater than the next most expensive channel, [3] it is able to sustain viewership due to its ability to win broadcast rights for major sporting events such as FIFA, NBA, and the PGA tour.  Market research firm SNL Kagan estimates that sports channels account for nearly 40% of cable fees, and that ESPN has the highest subscription fee amongst the top five cable channels [3]. It should also be noted that ESPN charges a higher fee for its high definition (HD) TV service, which is gaining popularity among viewers and also proving to be more valuable for cable operators.

The average of Trefis member forecasts for the ESPN Fee per Subscriber indicates an increase from $3.50 per month in 2010 to $3.85 per month by 2016. This is in comparison to the baseline Trefis estimate of an increase from $3.30 per month in 2010 to $3.63 per month by the end of the Trefis forecast period. These member estimates imply an upside of 1% to the Trefis price estimate for Disney’s stock.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of Disney’s stock to ESPN Fee per Subscriber.

Our complete analysis for Disney’s stock is here.

Notes:
1. Historical data on ESPN Fee per Subscriber is sourced from broadcastingcable.com and jsonline.com
2. As reported in the company’s SEC filings
3. A Wall Street Journal article sourcing research by SNL Kagan