SBJ/March 11-17, 2013/Opinion

Thoughts on ESPN’s global challenges and the market at 14,000

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Don’t lock in ESPN’s global domination of the media marketplace quite yet. If anything, the last year has proved the challenges of doing business on the international front, even for the Worldwide Leader.

The company’s global expansion plans have been significantly curtailed in the U.K., Europe and Asia. First, ESPN sold its 50 percent interest in ESPN Star
Sports last year to News Corp., but will remain in the region as a digital player, largely behind its ESPNCricInfo.com. Then just last month, ESPN confirmed what had been speculated for a few months: that it was scaling back its U.K. business.

This was the more surprising move, because while ESPN had been doing business with Fox in Asia for more than a decade, its television foray into the U.K. was a more hyped but short-lived experience. ESPN made a much-publicized entry into the market in 2009 when it took over the business of Setanta Sports, but after only three years, it is getting out of the television business and has sold its U.K. and Ireland TV channels to British Telecom. These are primarily the ESPN and ESPN America channels and rights package that include the FA Cup, Scottish Premier League, UEFA Europa League and the Bundesliga.

Surprisingly, ESPN’s decision wasn’t reported on with great fanfare by the London press, and it certainly wasn’t met with glee that the big, bad American media giant had “failed.” The coverage was simple and straightforward: The Financial Times stated the moves came as ESPN “explores an exit from the U.K.” The Guardian also noted that ESPN was “exploring an exit” after it “lost several big broadcast deals.”

To me, the move means that ESPN, as it has in Asia, will be putting its resources behind its digital news and information business in the U.K. and Europe.

There were a few pivotal issues that forced ESPN’s hand out of the TV business in this region. First, there are entrenched players in both distribution and content production, like BSkyB. There is also an aggressive new player in BT that emerged to upset ESPN’s vision. BT’s three-year deal to win live rights to the English Premier League in June had major implications, and eventually was the key reason ESPN was forced to alter its plans in the market.

BT knew it needed the EPL as it plans to launch new sports channels. It understood that those live rights, especially the EPL, would allow it to penetrate the market. Because of BT’s business need, ESPN saw the cost of the EPL’s rights increase to a point where it couldn’t match.

One other issue that hurt ESPN is the short-term nature of the EPL’s deals. Unlike recent long-term TV packages in the U.S., three years is a short window to build a business. You roll out your product in year one, and after that, you’re immediately renegotiating. As a business, ESPN couldn’t build any momentum after losing the EPL, and without the EPL, there was no business to build around or way to build credibility.

ESPN officials point out that in its three years it built an asset that BT acquired, as well as absorbing much of its personnel. But while BT will continue to sublicense the ESPN brand for a period of time, look for ESPN to put its efforts and resources in the U.K. and Europe behind its digital offerings like ESPN.co.uk, ESPNFC.com and ESPNscrum.com.

I’m not showcasing ESPN’s global roller coaster to demonstrate failure, but rather to bring to light the challenges of extending a business, even one as successful as in Bristol. What I take away from it is that there is no cookie-cutter approach to international strategy. Plans can rapidly change because of wild marketplace fluctuations, as in the U.K., or when fundamentals must be weighed against long-term decisions about business growth, as in Asia. So for now, look for ESPN’s presence in these regions to be primarily focused on the digital space.

> ARE YOU AN EVERTONIAN?: While on the subject of the strength of the EPL, results from an exclusive study will be published this week by SportsBusiness Daily Global that shows that avid EPL fans in the U.K. consistently demonstrate more passion toward their favorite club and spend more time and money supporting it than U.S.-based NFL avid fans do with their team.

A couple of tidbits: EPL fans seek information about their favorite team more frequently than NFL fans, both during the season and in the offseason. During the season, 61 percent of EPL fans look every day for news, scores, standings or other information about their club. For NFL fans, 44 percent do the same. In addition, avid EPL fans spend roughly 11.6 hours a week following their favorite team, nearly two hours more than the average avid NFL fan. The survey, done on behalf of SBD Global by Turnkey Intelligence and Toluna, was conducted in the U.S. and U.K. during the weeks leading up to the end of the EPL winter transfer window and the NFL playoffs. Check out SportsBusiness Daily Global for the full report.

> BOUNCING BACK: When the stock market hit an all-time high last week, I instantly recalled a quick hit we did years ago with Fox Sports Chairman David Hill. It was in December 2008, the Dow was in the mid-8,000s, and we asked executives what resolutions they were making or would like to see in 2009. Hill’s response: “That the Dow gets back to 14,000 quickly!” He was surely stating what many were wishing, and nearly 51 months later, it happened.

> A WRAP ON CHAMPIONS: We sign off on our Champions of 2013 with a look at the life of Harvey Schiller. This year we featured each of our six recipients separately as opposed to running as one special insert. I hope you have enjoyed the stories of their careers, accomplishment highlights and regrets as much as I have. Each writer — Bill King (Ron Shapiro), John Lombardo (Pat Williams), Michael Smith (Roy Kramer), John Ourand (Rosa Gatti), Terry Lefton (Donald Dell) and Tripp Mickle (Schiller) — brought their own style and form of storytelling, which I believe made for six unique profiles. A special thanks goes to Assistant Managing Editor Tom Stinson, who handled the day-to-day aspects of this extensive project, working with the writers, setting the schedules, shaping the stories, selecting all of the imagery and working on the final look and feel of the piece with our designer Corey Edwards. Each profile brimmed with life, and Tom and I also talked in detail about each of these individual features in our weekly video segment that can be seen on our website in our “In The Studio” section. We thank this year’s class and look forward to hearing more of their stories during a panel at the World Congress of Sports in Naples, Fla., in a few weeks.

Abraham D. Madkour can reached at amadkour@sportsbusinessjournal.com.

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