Even ESPN Wants You to Cut the Cable Cord

The ESPN logo is displayed outside L.A. Live, which houses the ESPNZone, in Los Angeles, California, U.S., on Tuesday, Aug. 31, 2010. Time Warner Cable Inc.'s negotiations to renew rights to ESPN may be held up on a demand by the sports channel's owner, Walt Disney Co., to be paid for a related website, people with knowledge of the talks have said. Photographer: Jonathan Alcorn/Bloomberg via Getty Images
Jonathan Alcorn/Bloomberg via Getty Images
The days of fat cable bills may be coming to an end sooner than you think.

Disney's (DIS) majority owned ESPN is starting to explore the possibility of offering its suite of sports programming through the wide array of Web-based services that are starting to get off the ground.

Bloomberg reports that the undisputed top dog in sports programming has held preliminary talks with the companies rolling out online TV services. ESPN chief John Skipper isn't naming names, but it's a safe bet that Google (GOOG), Sony (SNE) and Intel (INTC) -- three behemoths with Web-based offerings either on the market or about to become available -- may be in the mix.

Apple (AAPL) is another no-brainer, even if it has yet to announce its entry into this suddenly crowded market.

Live Sports Changes Everything

Cable and satellite television providers are nervous, and rightfully so. They are being challenged.

Market watcher UBS (UBS) estimates that the pay TV market in this country shrank by 208,000 households through the first half of the year. It estimates that there will be 250,000 net defections for all of 2013, If so, this would be the first year that the industry suffers a decline.
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It's a pretty gloomy scenario in light of the improving economy and the ramping up of new housing construction, two factors that would seem to push demand for pay TV higher. However, consumers are clearly tired of their ever-rising monthly TV bills. They're over paying for a package of dozens if not hundreds of channels when they're really only watching a handful of them.

Live sports has been the one thing tethering a lot of homes to illogical contracts. Netflix (NFLX) offers a growing catalog of movies and TV shows, but no live sports. Installing an HD antenna is a great way to get local broadcast channels, but it lacks the athletic events airing on ESPN and lesser rivals.

ESPN is the reason why so many lesser cable networks are alive today, since it's the reason a lot of football, basketball, and baseball enthusiasts are still writing big checks to their cable providers. Will it really give that up to pursue Internet deals that may hurt Disney's own smaller cable properties?
Yes. It may not have a choice.

Crazy Like a Fox

Fox (FOX, FOXA) introduced Fox Sports 1 on Sunday. The national 24-hour cable channel isn't something that ESPN can take lightly. It rolled out across all of the major distributors since it merely overtook Fox's own poorly viewed SPEED cable channel. Fox also isn't afraid to compete against ESPN as major contracts come up for renewal in the future.

It's probably not a coincidence that ESPN is having preliminary talks with Internet-flinging platforms just as Fox Sports 1 is hitting the ground running. ESPN doesn't want to let Fox beat it to the punch.

This doesn't mean that ESPN is desperate. Skipper claims that Internet TV platforms will have to pay as much if not more than what cable and satellite television providers are shelling out for ESPN. The sports network may even require subscriber minimums so the service providers will have to pay ESPN if they don't get enough premium users signing up for ESPN.

However, it's the beginning of the end of the "one size fits all" TV programming that frustrates consumers. Viewers will have to pay up for the popular channels, but a la carte pricing should benefit the many homes out there that only watch a few of the available channels.

Apple is No Bench Warmer

Let's not dismiss the role that Apple may play here.

Apple and Disney have been chummy in the past. When Disney acquired Pixar, Steve Jobs became Disney's largest individual shareholder. It's a relationship that has expanded over the years with Disney providing digital content via Apple's iTunes long before many of Hollywood's other studios followed suit.

Apple is working on a smart TV. Jobs even told his biographer before he died that Apple had finally "cracked" the problem with TV as it's being presented now. We don't know when it will hit the market, or even if it will the market, but it's a safe bet that a big part of Apple's inevitable TV push beyond its Apple TV box will involve a digital premium TV service.

Is Skipper talking up Internet pay services because Apple will announce its entry into this market at next month's iPhone event? Well, let's not get ahead of ourselves here. We still need to play the game to smoke out a winner.

But for now it seems as if Disney's ESPN is ready to give sports fans what they've been wanting for almost as long as they've been craving a Chicago Cubs World Series victory.

Motley Fool contributor Rick Munarriz owns shares of Walt Disney and Netflix. The Motley Fool recommends Apple, Google, Intel, Netflix and Walt Disney. The Motley Fool owns shares of Apple, Google, Intel, Netflix and Walt Disney.

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