I thought the ESPN “wholesale” cost was about $5.50?
It is, but that normally presumes it’s also being subsidized by all subscribers, even those who don’t want it.
On the flip side, a streaming-only solution cuts out a lot of middlemen, meaning consumer prices can be lower while still maintaining profit margins. See digital vs. print publishing as an example: digital books cost roughly 50% of print, but the publisher makes the same profit per copy either way (based on average of 35% of cover price vs. 70% for print and digital respectively).
At the same time, the success of Netflix has also established a point of reference for consumers. If you’re going to charge more than Netflix, consumers are going to demand you justify it - HBO, for example, might be able to get away with $15/month (compared to Netflix’s $8) because they carry less content, but more of it current plus their original programming. On my cable system, HBO as an add-on is $30, but without the cable system’s normal markups (and padding so it can be reduced for sales and bundle deals), HBO could probably sell direct subscriptions for $15 and make more money per subscriber.