SBD/August 31, 2012/Media

ESPN Continues To See Growth, Profit As It Expands Coverage Platforms

ESPN’s business model is featured in a cover story by Karl Taro Greenfeld of BLOOMBERG BUSINESSWEEK under the header, “ESPN: Everywhere Sports Profit Network.” Research firm SNL Kagan found that ESPN’s revenues are “growing at 9 percent a year, with a projected $8.2 billion in revenue in 2012.” Meanwhile, the net “earns one out of every four dollars earned by cable stations in America,” while it charges its cable affiliates "an average $5.13 per month for each of its 100 million subscribers (the industry average is about 20¢ per subscriber.” ESPN also is "taking in $2 billion a year in advertising revenue." Its projected '13 revenue of close to $9B "dwarfs cable players like Liberty Media and Tribune and puts it on par with traditional broadcast networks like CBS.” Through multiple platforms, ESPN “shapes the ways in which leagues, teams, and athletes are packaged, promoted, marketed, and consumed by the public.” In a “real sense, ESPN no longer covers sports,” but rather “controls sports.” ESPN President John Skipper's “most pressing priorities" were extending ESPN’s deal with MLB, which was agreed upon last week, and "crafting a bid for the newly created college football playoffs.” Skipper said both are “really, really important … but nothing is a must-have. You can’t think anything is a must-have, or you’re dead in negotiations.” Greenfield writes ESPN "has been unique among traditional media businesses in that it has flourished on the Web and in the mobile space, where the number of users per minute, which is ESPN’s internal metric, reached 102,000 in June, an increase of 48 percent so far this year.”

SPORTS ON THE GO: Seventy percent of sports content consumed on mobile devices "comes from one of ESPN’s mobile apps.” Many games broadcast on its WatchESPN app “aren’t yet carrying advertising, showing instead a 30-second ESPN logo during breaks in the action, since advertisers weren’t offered those rights when they bought time on the network a few months ago.” ESPN has “invested in creating content for a platform before business exists to support it.” ESPN Exec VP/Digital & Print Media John Kosner said, “We weren’t afraid of cannibalizing our (television) business if the fan liked it … even though the ad-serving technology just isn’t ready yet. We’re not afraid to be ahead of the market.” Greenfield writes while the “culture of the company should ward off complacency, the primacy of live rights might allow a competitor to emerge.” Greenfeld: “Could, say, NBC Sports Network or Fox buy the rights to enough high-profile sports to become a viable alternative to ESPN? … Wouldn’t cable subscribers start clamoring for the NBC Sports Network, which might lead cable operators to negotiate lower rates with ESPN? It’s possible, but still remote.” Skipper “discounts” the risk that ESPN will “overextend itself, paying too much for live sports that fail to generate new revenue.” Skipper “stresses ESPN’s multiplatform advantage.” He said, “Print, radio, broadcast television, cable television, Internet, mobile applications. To date there are no competitors who have assets in all those media” (BLOOMBERG BUSINESSWEEK, 8/30 issue).
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