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What Is In ESPN’s Future?

Jason Barrett

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If you imagine the world of traditional television as a fortress on a mountaintop, one whose walls are crumbling due to heavy fire from players like Netflix NFLX 4.47% and HBO and Amazon Prime, then the seemingly impregnable tower at the center of the fortress would have to be ESPN. Why? Because the Disney-owned channel has the one thing that has managed to maintain its value while everything else gets completely obliterated: Namely, exclusive rights to a world of sports content. But is that enough—and if so, for how long?

You can tell that this kind of concern is weighing on the minds of Disney DIS -9.72% investors, because the stock dropped by close to 10% following the release of the company’s quarterly financial report, despite the fact that the overall numbers for the entertainment conglomerate were pretty good. Almost every questionon the earnings conference call was about ESPN and the ongoing loss of both subscribers and profits.

In a nutshell, the big fear is that the network’s lucrative stranglehold on sports is disintegrating, pulled apart by a combination of cord cutting, streaming via digital services and competitive pressures from all sides. There have already been rumors of cost-cutting and the channel has shed a number of high-profile (and expensive) personalities such as Grantland founder Bill Simmons, now at HBO.

Disney CEO Bob Iger spent much of his time on the earnings call talking about ESPN, and about how he doesn’t see much impact from cord cutting for at least the next five years or so—an estimate that at least some analysts think is absurdly optimistic. Iger also reiterated comments he has made in the past to the effect that if ESPN wanted to, it could come up with its own over-the-top service similar to HBO Now, and that a substantial number of subscribers would likely pay for it.

The Disney CEO also noted that 83% of all multichannel households turned to ESPN in the first quarter of this year, and that 96% of all sports programming is watched live, which he called “particularly valuable in today’s rapidly changing advertising marketplace.” And here are some media-industry analysts who agree with Iger that the existing “moat” around ESPN’s content is still pretty wide.

Ben Thompson, an analyst who writes the subscription newsletter Stratechery, said in a recent update that “ESPN is far better positioned for a world where they must go over the top to consumers than people give them credit for.” Even if ESPN was to charge more than $30 a month per subscriber—as a recent analysis said they would, in order to maintain their existing revenue — Thompson called that “a very realistic target.”

Not everyone is quite as sanguine, however. Analyst Eric Jackson said the channel might be able to engineer a transition to an over-the-top digital version of its existing service, but there are still some large question marks associated with that transition. As he put it:

“What if OTT and any new digital format is one-tenth as profitable as the Euro-socialist cable bundle? If you trade analog dollars for digital dimes, how do you wave your hands and chance basic economics?”

One of the things that makes ESPN very different from other streaming success stories such as HBO and Netflix is that the sports broadcaster’s content has an extremely short half-life. Netflix may not mind paying hundreds of millions of dollars for a TV show because it knows it can rebroadcast and license that content forever, but ESPN’s library consists of things that only have value for a few hours.

On the one hand, this short life-span is the channel’s biggest strength: When a major sporting event is taking place, people want to see it right away, and they are willing to pay handsomely for that ability. But if competitive pressure continues to increase, that life-span could become a serious weakness.

 

One potential source of competition for ESPN, ironically, is the very sports leagues and franchises that it relies on for its livelihood. Major League Baseball’s internal streaming and mobile technology operation, known as BAM, has quietly become a powerhouse in that part of the market, and now it has signed a deal to do all of the broadcasting for the NHL as well. Thompson argues that most leagues will opt for the broader reach of ESPN rather than go direct, but it’s unclear how many will feel that way, or for how long.

ESPN has signed expensive long-term contracts with most of the leagues it deals with, but if more and more of them start to pursue their own over-the-top deals via providers like BAM or even Yahoo and other outlets, then ESPN’s iron grip on live sports could continue to weaken.

If you’re an investor in Disney because of its ESPN stake, these are some of the questions you probably want to ask yourself: How much value do those existing contracts have as the TV market continues to implode? What could potential competitors, including the leagues themselves, do to ESPN’s margins? And if it decides to (or is compelled to) offer its own over-the-top service, how many people would likely subscribe to it directly, and how much would they be willing to pay?

Credit to Fortune who originally published this article

Sports TV News

FanDuel TV Strikes Deal With ONE Championship Martial Arts

“We’ve long respected the content the ONE Championship team is producing and are looking forward to bringing their action to our audience through FanDuel TV and FanDuel+.”

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FanDuel TV and ONE Championship Martial Arts have struck a deal that will see the MMA, Muay Thai, kickboxing, and submission grappling series air weekly events on the newly launched channel.

“We’re eager to continue expanding the variety of content we’re offering at FanDuel TV to introduce our audience to emerging sports,” said FanDuel Chief Commercial Officer Mike Raffensperger. “We’ve long respected the content the ONE Championship team is producing and are looking forward to bringing their action to our audience through FanDuel TV and FanDuel+.”

ONE Championship is a top-five global sports property for digital viewership and engagement according to Nielsen measurements.

“We are thrilled to join the FanDuel TV lineup and give our passionate U.S. audience yet another way to engage with ONE Championship,” said ONE Championship Chairman and CEO Chatri Sityodtong. “Having a quality partner in FanDuel will help raise the profile of our company in the region and provide their viewers with action-packed martial arts events like they have never seen before.”

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Bob Costas Re-Lives First Announcing Assignment For NBC

“My biography usually says I began with them in 1980, but technically the first time I was on the air with them was in December 1979.”

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Legendary sports broadcaster Bob Costas appeared on KNBR’s Tolbert & Copes Thursday to discuss the death of Baseball Hall of Famer Gaylord Perry. But before the conversation turned to the recently departed pitcher, the show asked Costas about what he has announced that would surprise someone. He reminisced about his first time on the air for NBC.

“My very first assignment for NBC, my biography usually says I began with them in 1980, but technically the first time I was on the air with them was in December 1979,” Costas recounted. “There was a program on NBC then called Sports World. It was an anthology series that was their answer to the gold standard, ABC’s Wide World of Sports.

“So they traveled the globe, like Wide World of Sports did. So they sent me, wearing a red NBC jacket, to Tokyo to cover a sumo wrestling tournament with seven-time world power-lifting champion Larry Pacifico as my color man. Now, this is all the Japanese I learned as we came on the air: ‘Minasan kon’nichwa watashinoamaeha Bob Costas’, which means ‘Hello everyone, my name is Bob Costas’. If ever there was typecasting, when they sat and looked at their roster of announcers and went ‘Who should we send to the sumo wrestling? It’s gotta be Costas, who’s entire body weight would constitute one meal for the sumo wrestling champion.”

Costas departed NBC Sports in 2019 after 40 years with the network, announcing MLB, NBA, and the Olympics, in addition to his work with the network’s sumo wrestling coverage.

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Matt Leinart, Alex Smith Make Wager Over Pac-12 Championship Game

“I gotta be honest with you: I’m not that nervous. I know that sounds kind of arrogant and confident.”

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FOX Sports analyst Matt Leinart and ESPN analyst Alex Smith have made a friendly wager over the upcoming Pac-12 Championship Game.

USC, Leinart’s alma mater, is slated to play Utah, where Smith attended, in the game Friday evening on FOX from Las Vegas.

The two agreed to don the other player’s jersey. “At least it will be 11,” Smith said, noting he and Leinart both wore the number during their playing days.

“I gotta be honest with you: I’m not that nervous,” Leinart said when presented with the offer. “I know that sounds kind of arrogant and confident.” Smith jokingly responded by calling USC “Free Agent University”. He added he would overnight Leinart a jersey to ensure he had one if the Utes were victorious.

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