Imagine one football player's amazing championship season. For decades, that has been the story of ESPN.
Now, as media conglomerates other than owner Walt Disney launch their own sports-focused cablers, the question is whether the Bristol, Conn.-based powerhouse can dominate the field or if it must share the pigskin with other players.
CBS Corp., NBCUniversal and, this year, News Corp., have made moves to grab some of ESPN's most cherished trophies: sports fans. And don't forget networks backed by the sports leagues themselves, such as the MLB Network or NFL Network. More single-sports nets have also started gaining traction, including NBCU's Golf Channel and the independent Tennis Channel.
As more and more players crowd the field, won't the attention of fans be splintered the way the glut of entertaiment networks have nichified the rest of the video universe?
"You can still only have one NFL, one MLB, one NHL and one NBA," says Larry Gerbrandt, principal at consultant Media Valuation Partners. "You're not increasing the supply of sports. You're paying higher prices for it and everyone has the same number of hours to fill."
At first blush, the land-grab around sports would seem to be a way for big media companies to deal with the new realities of TV viewing. At a time when more viewers have the ability to skip past or otherwise ignore the commercials that support their TV habit, and fewer people tune in to watch favorite programs live, sports has proven remarkably resistant. The Super Bowl, "Monday Night Football" and "Sunday Night Football" remain some of the biggest same-day attention-getters around, and marketers are willing to pay hundreds of thousands to millions of dollars to have their products appear alongside them.
But advertising isn't the key to ESPN's success. While the network does well in the ad-sales market, that revenue stream gushes or trickles to the tides of the economy. But because the appeal of major sporting events remains undiminished, video distributors -- think Comcast, Time Warner Cable and DirecTV -- are willing to give ESPN some of the highest per-subscriber affiliate fees in the industry.
Such fees are usually sewn up for years, and present a much more stable pillar of revenue. Indeed, more than 70% of ESPN's revenue comes from affiliate fees, according to research from Credit Suisse analyst Michael Senno.
That's why the ESPN playbook reads: Lock up distribution deals while managing the costs of securing content.
"We have just gone through the tail end of a long-term extension of our distribution agreements," says Sean Bratches, ESPN's exec veep of sales and marketing. "We have done a similar cadence of deals on the content side, securing access to content for decades to come."
For all its care over spending, it's the fees paid by distribs that are most responsible for keeping ESPN ahead of the pack. According to SNL Kagan, this year, ESPN should get a whopping $5.54 per subscriber from its affiliates, plus another 70Â¢ per subscriber for ESPN2, 21Â¢ for ESPNews and 20Â¢ for ESPNU. Other networks' per-sub returns seem comparatively paltry: 33Â¢ for NBC Sports Network; 20Â¢ for CBS Sports Network.
You would think that by dint of its top position, ESPN would find growth harder to come by. And yet, its average per-sub fee in 2013 increased 50Â¢ over that of 2012, per SNL Kagan, and rose 27Â¢ between 2011 and 2012. Most other networks see improvements of a penny or three each year.
The only sports programmer that approaches ESPN's numbers is the NFL Network, which is expected to secure $1.34 per subscriber this year, according to SNL Kagan. And it's football that is essential to ESPN's well-being.
With its "Monday Night Football" securing top ad prices from sponsors and posing a giant draw for subscribers, ESPN must "do everything possible not to lose the NFL," Gerbrandt says. At the same time, the big sports leagues will have more companies vying for rights to their games, which "inevitably means the NFL and others are playing more companies off against each other," he adds.
Indeed, ESPN will have to be disciplined when it comes to managing costs. While many of its sports rights deals are already negotiated, its NBA contract is set to expire after the 2015-2016 season. And it faces an increase in costs as new deals for "Monday Night Football," Major League Baseball and a new college football playoff go into effect. Goldman Sachs analyst Drew Borst estimates sports programming costs will rise by more than $450 million in ESPN's fiscal 2014, and more than $600 million in its fiscal 2015.
Already, ESPN has walked away from one sports provider that has shown some recent ratings weakness -- an attempt, perhaps, to keep rights fees in check; NASCAR races will no longer appear on ESPN after 2014. At the same time, the network has lured other premiere events away from longstanding roosts, snatching Wimbledon rights from NBC in 2011. The finals of another grand slam tennis event, the U.S. Open, will move to ESPN in 2015, after airing on CBS for 45 years.
Yet even as it works hard to remain sports' most valuable player, the onslaught of rivals will make future championship seasons a tougher fight.