In case you live under a rock, Microsoft announced a number of Xbox updates yesterday including the news that its refreshed Xbox 360 game console will give users access to ESPN games through the ESPN3 channel. The announcement is bigger than most people realize. Live sports events, many of which are only available through ESPN, are arguably the biggest content draw for pay-TV services. And now ESPN is giving consumers a way to bypass those providers’ video networks to view them.
There is one big caveat, however. While ESPN is bypassing traditional pay-TV pipes, it’s not bypassing the providers themselves. The ESPN3 channel, whether it’s accessed on a PC or an Xbox, requires that you have a subscription with a participating provider, e.g. Comcast, Verizon, AT&T, Cox, Charter, etc. No subscription, no content.
There are two ways to look at this. On the one hand, the subscription requirement could easily be removed – technically speaking – if ESPN decided to cut out the cable and telco providers. And that would change the game entirely. On the other hand, ESPN has carefully preserved its revenue streams by having operators foot the bill even for online content, which gives the sport giant serious incentive to play nice. From a consumer perspective it might sound good for ESPN to cut out the middle man, but the company has built a very profitable distribution system. ESPN wants to expand the reach of its content, but it has no desire to disrupt the existing business model.
Internet video? Bring it on. ESPN a-la-carte? Not so much.