News

ESPN on Xbox: No Cord-Cutter

6/21/2010 4:22 PM Eastern

The news last week that ESPN will
stream some 3,500 live games per year to Microsoft’s
Xbox 360 consoles prompted a wave of virtual
cheers across the Web: I can finally cancel my
cable TV!

As TechCrunch’s MG Siegler wrote in a post shortly after Microsoft
and ESPN announced the deal at the E3 show in Los
Angeles, live sports “was the only thing holding me back from
completely canceling my cable subscription. As soon as this
goes live, I’m done with cable forever.”

Dozens of Twitter posts echoed the belief that
ESPN3.com on Microsoft’s gaming console would
liberate them from Big Cable. “Oh hells yeah people.
ESPN coming to Xbox 360,” wrote one user.
“Between this, netflix, hulu and other streams …
Well it might be time to cancel Cable TV.”

The elation probably is unwarranted. Did anyone
really believe ESPN would do anything to undercut
its incredibly lucrative core TV business?

First, ESPN3 doesn’t offer the programmer’s
highest-profile events — such as Monday Night
Football
— which are still only available through
a pay TV subscription. Also, to get ESPN3.com on
Xbox 360, your broadband provider (i.e., your cable or phone
company) needs to already have a deal to offer ESPN3. Plus, you
must subscribe to Microsoft’s Xbox Live Gold service, at $7.99
per month or $49.99 per year.

On that first point, it’s not clear that World Cup soccer, cricket,
Wimbledon matches and the occasional Major League Baseball
and National Basketball Association game will satisfy the
appetite of your average U.S. sports fan. ESPN3 is, in general,
more of a long-tail play for less-popular sports.

Pay-TV services will still be the only way to watch regional
sports networks and other cable sports programming, such as
TNT’s NBA and TBS’s MLB coverage.

Even when there is a game on ESPN3 you want to watch, blackout
restrictions apply. So, for example, even though the June 16
Phillies-Yankees game was scheduled to be available on ESPN3,
YES Network and CSN Philly had dibs on the live broadcast.

Microsoft has sold around 40 million Xbox 360 consoles
worldwide. However, it’s worth noting that ESPN’s deal with
Microsoft doesn’t technically increase the potential audience
reach of ESPN3.com, which remains at around 50 million
households. In other words, 50 million people in the U.S. already
had the ability to access ESPN3 on their HDTVs by
simply hooking up a PC (although the Xbox 360 tie-in
admittedly will make the process easier).

ESPN’s goal with Xbox is to enhance the value
of the ESPN3 subscription, to drive views and ad
impressions. Xbox 360 also will let the sports programmer
provide new kinds of social-networking
features, including “team affiliation,” to let users declare
their favorite teams and see how many other
people in the Xbox Live community are also fans.

The point obviously isn’t to cut out its cable, satellite
and telco partners. “This was a deal in which
we were mindful of our existing relationships,” Matt
Murphy, senior vice president of digital video distribution
for Disney and ESPN Media Networks, said.

For now, “cord cutting” remains something of an urban legend.
The overall number of pay-TV households continues to
grow — a net increase of 580,000 in the first quarter of 2010,
although cable is losing share to satellite and telcos, according
to Leichtman Research Group.

Of the cable subscribers surveyed who were likely to “cut
the cord,” less than 1% gave as their reason the ability to get
all the programs they want on the Internet or in other ways,
LRG found.

The convenience of getting ESPN3 on TV through Xbox won’t
change that much.

September