A Look at ESPN’s Omnipresence
With its right to broadcast the 17 Monday Night Football games, ESPN (NYSE:DIS) is the most admired sports television franchise. The network recently re-upped its contract with the NFL until 2021, and it continues to get bigger all the time in other aspects. But at some point you have to ask, has ESPN become too large?
ESPN succeeds as a business because its model is different than, say, NBC (NASDAQ:CMCSA) or CBS (NYSE:CBS). The network channels make money from advertising. So does ESPN, but it makes even more from its cable-subscriber fees — they average $4.69 per household per month according to the research firm SNL Kagan.
How far-reaching are ESPN’s tentacles? Last February, it was in its 100 millionth American home. The next closest national network, TNT (NYSE:TWX), is dwarfed by the giant, taking in only $1.16 from about the same number of homes.
The possibility of change exists as ESPN saw a new …
internal employee. John Skipper, take over the helm as president on January 1. For now, he is expected to keep things moving along, but he will face some challenges.
Challenges for ESPN
One point of criticism is the network’s slogan: “The Worldwide Leader.” As the leader, it has increased the price of sports-rights packages that ultimately are passed down to the consumer via everyone’s monthly cable bill.
As a news source, it has been accused of downplaying negative stories in an effort to keep its strong relationships with athletes, teams and leagues. While fans can usually always find the live games they’re interested in on ESPN, it’s not the same network fans used to love.
ESPN began as an outsider. When it started in 1979, everyone wondered how you could fill 24 hours a day of sports programming. “SportsCenter” was the network’s first hit with Keith Olberman and Chris Berman. Sports fans used to only getting a few minutes of sports news at the end of their local broadcast could now find breaking news with ESPN and its celebrity anchors.
The network expanded in 1987 thanks to the NFL moving its games to it after ESPN won the rights by bidding $153 million; subscriber fees came in at pennies. Fast forward to the present and ESPN has grown exponentially with ESPN2, ESPN News, ESPN Classic, ESPNU, ESPN Deportes, 47 international channels, the country’s biggest sports-radio network, a website with 52 million unique visitors per month, a $100 million theme park in Florida and ESPN Zone restaurants.
ESPN is everywhere whether it’s on your …
computer, in your neighborhood or on your smartphone.
In 2011, ESPN reported revenues of $8.5 billion. It is a cash cow for its parent company, Disney (NYSE:DIS). Forget about Disney World — Briston, Conn. is the place to be for the company.
The new president, Skipper, has already proven himself in other roles. Since coming aboard in 1997, he has overseen ESPN’s content division during the last six years. In this time, domestic TV audience increased 31 percent. Skipper said back in 2010 to PaidContent.org, “We believe in live. We believe in live. We just think at this point with technology and people’s expectations and the ability to get instant information, we believe in live.”
Everything Comes at a Cost
Keep in mind live TV comes at a cost. Skipper has signed deals for $2.4 billion (2005 – baseball), $7.4 billion (2007 – basketball with TNT), $500 million (2011 – a collection of college sports) and the $15.2 billion Monday Night Football extension.
ESPN is not immune to …
the challenging economy as cable subsrcibers have been cutting costs by getting rid of cable. Is the network concerned about this? Apparently not as ESPN CFO Christine Driessen said, “We’re the best value, bar none, in town. At the end of the day, with regard to à la carte, the viewer will pay more and get less.”
In addition to its loyal male viewership always hungry for sports programming, the network does offer some great journalism. Its “E:60” and “Outside the Lines“ programs are constantly nominated for Sports Emmy Awards as well as its 30 for 30 documentaries and its “ESPN: The Magazine” with its investigative journalism.
But it has been criticized for its coverage of last July’s “The Decision,” which ended too many months of speculation on where LeBron James would hang his hat. More recently, ESPN was criticized for its handling of the Penn State scandal.
At the end of the day, this underdog has found success and will continue to do so with its story lines and live coverage. And yes, fans will continue to pay for it.