LeBron James of the Los Angeles Lakers during a game against the LA Clippers at the ESPN Wide World Of Sports Complex on July 30, 2020 in Lake Buena Vista, Florida.
Mike Erman | Getty’s paintings
How Disney considers ESPN a strategic partner, CEO Bob Iger and ESPN chief Jimmy Pitaro have had early talks about involving skilled sports leagues as minority investors, including the National Football League, National Basketball Association and Major League Baseball, in accordance with people familiar with the matter.
ESPN has held preliminary talks with the NFL, NBA and MLB about various latest partnerships and investment structures, people said. In a statement, an NBA spokesperson said, “We’ve got a long-standing relationship with Disney and sit up for continuing discussions on the future of our partnership.”
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ESPN, NFL and MLB spokesmen declined to comment.
The talks with the NFL got here about the league’s desire for the company to take a stake in its media assets, including the NFL network, NFL.com and RedZone, said individuals who asked to stay anonymous because the conversations were private.
The NBA and Disney have touched on many potential structures around renewing media rights, people said. Disney and Discovery Warner Bros they’ve exclusive negotiating rights with the NBA until next yr.
Iger said last week in an interview with CNBC’s David Faber that Disney is in search of a strategic partner for ESPN because it prepares to maneuver the sports network to streaming. He didn’t elaborate on what exactly that meant, aside from to say that the partner could add value through distribution or content. He admitted that the sale of shares in the company is feasible.
Disney owns 80% of ESPN. Hearst owns the remaining 20%.
“Our position in the sport could be very unique and we would like to remain in this business,” Iger told Faber. “We shall be open to finding strategic partners who could help us with distribution or content. I’m not going to enter an excessive amount of detail on this, but we’re optimistic about sport as a media property.”
In theory, a shared subscription streaming service between multiple leagues could eventually provide consumers with latest game packs and other progressive ways to eat content.
The move could be logical for Disney because it tries to maneuver away from the traditional cable subscriber model and underscores how keen the company is to seek out a solution for the sports network as the number of line subscribers declines. Despite this, ESPN’s rankings have increased in recent years for major sporting events. There isn’t any higher partner for sports content than the leagues themselves.
On the surface, this may increasingly make less sense with the NBA, NFL and MLB all signing lucrative media rights deals with multiple media partners that drive team revenues and player salaries with a range of media corporations.
Skilled sports leagues may face conflicts of interest in the event that they take a minority stake in ESPN. Owning shares in ESPN can annoy Disney’s competitors, e.g Comcastby NBCUniversal, fox, Amazon, Paramount Global AND Apple, who help leagues make billions of dollars by participating in bidding wars for sports rights. Taking an ownership stake in ESPN could give leagues an incentive so as to add value to the entity quite than making deals with competitors.
There would even be hurdles for Disney. ESPN also employs tons of of journalists covering major sports leagues. Selling the ownership stake to the leagues could overshadow the perception of objectivity of ESPN’s reporting apparatus.
Despite this, the leagues are already ESPN’s business partners. It’s possible ESPN could put in place measures to make sure reporters proceed to cover the leagues while minimizing conflict, nevertheless it adds one other layer of complexity to any deal.
ESPN in first place
ESPN is attempting to forge a latest path as a digital broadcasting entity. Disney realizes that ESPN won’t have the ability to make as much money as before under the traditional TV model.
Selling a minority stake in ESPN to the leagues could mitigate future rights payments, allowing Disney to raised compete with the big balance sheets of Apple, Google and Amazon. It could also guarantee ESPN a regular stream of premium content from the leagues.
Through the final quarter, Disney’s bundle of linear TV networks continued to see revenue growth as pay-TV provider affiliate fee hikes — largely driven by ESPN — offset the tens of millions of Americans who switch from cable TV every yr. The trend finally ended last quarter, in accordance with people familiar with the matter. Accelerating program cancellations overwhelmed the increase in fees, and linear television revenues aside from promoting began to say no.
“So much has already been said about renting [sports right] versus possession,” Iger said last week in an interview with CNBC. “When you can rent it out and still make rental profits, which it has been and we consider we’ll proceed to do, there’s value in staying there. We’ve got great relationships with Major League Baseball and the National Hockey League, various college conferences and of course the NFL and NBA. It isn’t nearly the live sports coverage of these leagues, these teams, but in addition all the shoulder shows that ESPN throws out and what you may do about it in the streaming world.
ESPN would really like to rework itself into a streaming hub for all live sports. Management would really like to launch a feature that enables ESPN.com or the ESPN app to direct users to games irrespective of where they stream, CNBC reported earlier this yr.
While getting a deal with skilled sports leagues would not be easy, Disney appears to be pushing the boundaries of its considering to organize for a streaming-dominated world that features a full portfolio of sports rights.
“If [a partner] they arrive to the table with value, whether it’s content value, distribution value, or equity, or simply helping to lower business risk – that would not be the foremost driver – but in the event that they come to the table with value that can enable ESPN to maneuver to a direct-to-consumer offering, we’ll be very open about that,” Iger said.
WATCH: Disney CEO Bob Iger talks to CNBC’s David Faber about ESPN and its future
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