In the very first SportsClicker newsletter, back in Sept. 2021, the lone topic was that the full ESPN would likely go direct-to-consumer within the next five years. Our ensuing reporting targeted 2025, most definitively last month:
A little more news: It is looking ever likelier that ESPN, the mothership, goes direct to consumer in 2025. We have reported for a long time that it would happen by 2026 at the latest, pointing to 2025 as very possible. Disney is narrowing that down; if you are placing bets, go with 2025.
Last week, Disney CEO Bob Iger said on the company’s earnings call that he wants to bring ESPN direct-to-consumer in 2025:
“Basically, as we prepare to take ESPN in a DTC direction, we believe we have opportunities to strengthen our hand with entities that can provide technology support, marketing support or more content,” Iger said. “We’ve engaged in conversations with a number of different entities, and I can say that there’s considerable interest. I imagine we’ll have more to say in the coming months.”
While Iger and ESPN chairman Jimmy Pitaro are figuring it all out, they have brought in Kevin Mayer, formerly of Disney, now of Candle Media, to assist. Mayer recently offered some insights into Disney’s goals at a Yahoo Finance Invest Conference:
“We want to have content partners who can really strengthen our hand and allow us to create multiple tiers of offerings,” Mayer said. “And we want to have distribution partners, so you think digital, you think telcos, those types of players.”
This lines up with what we reported last month about ESPN potentially wanting two partners, both digital and mobile. The idea of joining forces with the major professional leagues is still in play.
One more quote to set the table when we explain what is next. This from Pitaro after Disney agreed to their Spectrum carriage deal, one that sets the stage for future contracts with other cable and satellite providers when it comes to putting ESPN+ on a sports tier and likely keeping the relationship strong when ESPN goes direct-to-consumer:
“Let’s create this opportunity to expand that ESPN platform so that ultimately when we do take our primary channels direct-to-consumer, we have the opportunity to upsell that offering to a much larger sports fan base,” Pitaro said.
So what is next …
1️⃣ Iger and company are going to figure out their new partners in the coming months. ESPN likely will offer a 10 percent equity stake in the network. Hearst already owns around 20 percent of ESPN. There could very well be multiple partners as ESPN wants the best hand it can have in distribution and product, along with a financial infusion of cash.
2️⃣ As we wrote previously, partnering with an Apple, an Amazon or another large digital company, plus a mobile player, could be ESPN’s ideal scenario. The issue in a connected world that has upended major media is that distribution is cheaper than ever. You or I, in theory, can reach as many people as any huge company, using the internet. However, there are, of course, still major advantages in distribution if you are aligned with Apple or Amazon or the telecom companies. When you consider ESPN’s portfolio of major rights, the combination can make sense for many sides.
Though it failed — and really wasn’t a great idea for the time — ESPN has correctly known the importance of the phone, dating back to 2004 when it created its own device that it smartly, and quickly, shuttered. The company knew then where distribution was heading. It was early, though, and didn’t really make sense for the consumer, at the time.
3️⃣ The leagues are still in play, but I don’t see a deal clearly working out with them.
4️⃣ Anyone would want to partner with the NFL, but I’m not really sure what it could offer as ESPN already owns rights to its games. Having the NFL on-board may guarantee a relationship with the league for a long time, but the network already has an agreement for “Monday Night Football,” highlights and more that lasts into 2033.
5️⃣ The NBA, MLB and NHL all seem to make more sense if ESPN can get access to local rights for games. When ESPN goes direct-to-consumer, if it could include a la carte offering for local teams, it would give it a stronger hand. So, if, say, ESPN DTC began at $20-25 per month, but then you could add the Timberwolves to your package for $5 to $10 per month, that adds up as a business proposition for consumers.
At the moment, the RSNs that have offered a DTC product are purposely pricing them high at $25-$30 a month for the games to sustain its cable reach. If ESPN could create a bundle where you get all of its thousands of games and then you could add your local teams, that makes a ton of sense in a partnership.
6️⃣ Negotiations are ongoing and ESPN is expected to have new partners at some point in 2024. It will then likely pursue new contracts with cable and satellite providers that follow the Spectrum deal model, allowing the network to go DTC in 2025.
7️⃣ That first newsletter we wrote back in 2021 noted how groundbreaking it would be when ESPN went DTC. While it will be a huge marker in television history, because the network is the most dominant sports platform in the history of media, the way it is working out may not be industry-changing.
8️⃣ Yes, the cable bundle is dwindling, but like newspapers and radio, there is a level where it survives and is in existence for a long time. In the same way you can still buy a newspaper, cable is going to be around, especially for an older generation. The new model ESPN is adding will have a chance to appeal to the audience that has cut cable.
9️⃣ Besides remaining in the cable and satellite sphere, it will have new partners that will attempt to make it available everywhere the sports fan wants it. But the question is: How many people who want ESPN now don’t have it?
🔟 I’d say that number is very small, but could change over time. So what is coming will be significant, but may only alter the sports media landscape depending on who ESPN picks as its new partners. That is what is next, and until those pieces are decided, the amount of shift that is coming cannot fully be figured out. The roadmap, though, is clear.
Quick clicks
Follow-up on last week’s MLB-leading newsletter: Peacock’s Sunday morning deal with MLB is up this offseason. I think there is a pretty good chance it will be renewed. … Follow-up II: One way the idea of broadcasting regular season MLB or NBA national games still could make sense in a potential direct-to-consumer streaming world is if, say, an ESPN received more exclusives. Let’s take the NBA as an example: This season, ESPN will have around 17 regular-season games each for marquee teams like the Warriors and Lakers.
That number has a bit of flexibility due to late-season circumstances. However, of those 17 Lakers games, only six are exclusive to ESPN as they are on locally the 11 other times. The breakdown for the Warriors is five exclusives and 12 also on local. If the NBA and the teams basically take over a team’s local broadcasts and sell them directly, it could potentially make some of a team’s most appealing games fully exclusive to a national provider, which would have more appeal for ESPN. It could also increase the number. A team like the Warriors could have, say, 20-30 games exclusively on ESPN and TNT while having another service provide the other 52-62 regular-season games. Last Monday, we discussed how these leagues, if they wanted to let fans have the easiest path — the Apple TV/MLS model — could offer the option of charging one fee for everything. This would probably result in less money than making viewers pay two or three times for all the games. It also could limit growth with only one major company truly promoting the sport. At this point, the Apple/MLS model feels unrealistic as an option.
…Michael McCarley, the founder of TGL with Tiger Woods and Rory McIroy, among others, said on the podcast I host with John Ourand that Woods will play five of the 15 weeks. The ratings numbers when Woods is on the ESPN telecasts as compared to when he is not will be interesting. The league begins in January. Matches are expected to take two hours to complete.
…Fox Sports’ Jason Benetti left the White Sox for the Tigers in the first big TV free-agent signing of the offseason. Benetti actually wasn’t a free agent, but the White Sox let him go as I’ve heard the Tigers were offering a much bigger deal and were said to be more amenable about Benetti’s Fox schedule. Benetti will call the same amount of games for the Tigers as he did with the White Sox, which is near 130. Mike Monaco is a candidate to replace Benetti in Chicago. … MLB Network will have Derek Jeter and Cal Ripken Jr. presenting the Rookie of the Year Awards Monday, while Wednesday, Pedro Martinez will be part of the Cy Young coverage. … In case you missed it, I talked to Al Michaels about retirement. I told him what I thought he should do and he gave his views.