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SBD Global/October 15, 2013/Media

ESPN's X Games To Be Reduced To Two Domestic Events After $30 Million Loss

The Global X Games, which debuted this year, lost more than $30M, leaving ESPN execs "with no choice but to end," according to Tripp Mickle of the SPORTSBUSINESS JOURNAL. Two weeks ago, the company issued a press release that said "it was canceling future international stops in Barcelona, Spain; Munich; Tignes, France; and Foz do Iguaçu, Brazil, and instead concentrating on two domestic X Games events." The property's demise "highlights a rare failure for ESPN." Action sports observers and sources familiar with Global X Games' struggles said that "the property's failure stemmed from a flawed business plan and poor execution." The company's sales team "struggled to land sponsors, its production team failed to control costs, and the addition of new TV broadcasts created a glut and diluted viewership from an average of 1 million in years past to just 497,000 viewers this year." Wasserman Media Group President of Action Sports & Olympics Steve Astephen said, "The P&L [profit-and-loss statement] has to be proper when you expand into a new business. The events were great. ESPN did a great job with the events. The crowd was happy. But you have to build it. That's a seven-year business plan." The company "hoped to find six to eight global sponsors to support the event." ESPN priced deals at $15M a year, "more than three times what action sports sponsors typically paid, and it hit the market with the new offering about 12 months before the first event." The effort "was rushed and incomplete." Sources said that in some pitches, for example, its sales staff could not tell potential sponsors "what German network the Munich event would be on" because ESPN had not yet cut broadcast deals there. The sales team "only cut three global deals." Two "were with traditional action sports sponsors Red Bull and GoPro," which balked at the $15M price tag and instead agreed to deals that sources valued at $10M a year. The third was in the auto category, "which Ford and Jeep split." ESPN had other revenue streams for the event, such as TV syndication, advertising sales, local ticket sales and domestic sponsorships with groups like the U.S. Navy, but people familiar with its business plan said that global sponsorships were supposed to provide at least 50% of its $100M budget for Global X, "and it fell short of hitting those numbers" (SPORTSBUSINESS JOURNAL, 10/14 issue).
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