With ESPN’s direct-to-consumer plan, the network is attempting to uphold its mission statement of, “Serving sports fans. Anytime. Anywhere.”
In the process, Disney CEO Bob Iger and ESPN chairman Jimmy Pitaro are looking to make deals. Anytime. Anywhere.
Iger and Pitaro are trying, through equity stake talks with the biggest leagues and with distribution discussions with the largest digital players, to add to ESPN’s already impressive content lineup and have price points to serve every sports fan.
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It all sounds simple, but they are engaged in complicated negotiations with a full ESPN direct-to-consumer subscription product launching this fall in combination with Fox and Warner Bros. Discovery, and then ESPN’s standalone service slated for 2025.
At a fee of more than $10 per subscriber, no company has been more important to the cable bundle than ESPN, and no one has benefited more. While ESPN will still be offered on cable, Disney/ESPN are trying to stack the sports content and distribution deck even more in their favor.
In 2011, ESPN peaked with 100 million cable homes, according to Nielsen, but now is at around 71 million homes. One of the overarching goals for Iger and Pitaro is to reverse the subscriber trend with its direct-to-consumer plan.
ESPN’s goal is to sell one or two minority equity shares in the company, with the NFL and the NBA its top potential candidates.
ESPN continues its negotiations with the NFL for the league to become equity partners, executives briefed on the conversations told The Athletic. The valuation of what the league is offering in return, and the billions ESPN is worth, is one of the ongoing negotiation points of focus.
If an agreement with the NFL comes to fruition, ESPN would take control of NFL Media, which includes NFL Network, NFL+, Red Zone and NFL Films. While ESPN would still have an abundance of programming, NFL Network would continue with shows 24/7.
The volume of NFL content would be a further selling point for ESPN’s DTC product, which would mean more NFL games to go along with the 25 ESPN already owns per season.
While the digital world has led to advantages shrinking, ESPN sees alignment with Google/YouTube, according to executives briefed on their thinking. ESPN and YouTube have previously worked on partnerships, and the network is already offered on its cable-lite service, YouTube TV.
ESPN is also talking with Roku to offer the new DTC service as one of its tiles when viewers turn on its televisions, according to executives with knowledge of the discussions, and has also held talks with other digital powers, like Amazon and Apple.
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ESPN has been planning for years to launch its direct-to-consumer product by 2025. It already has a direct-to-consumer service, ESPN+, which mostly offers extra programming and not the top games, but features popular sports, like UFC and various soccer competitions.
In its internal DTC planning, ESPN has focused on offerings that will cost much less than the $100-plus per month cable often requires.
Disney/ESPN recently announced a partnership with Fox and Warner Bros. Discovery for a “skinny bundle” of direct-to-consumer sports programming in the fall that is expected to be priced at $40-$50 per month, according to network executives briefed on the plans.
Meanwhile, ESPN will take its standalone direct-to-consumer product to the market in 2025 at $25-30 per month, according to executives briefed on the discussions.
With these packages and ones like YouTube TV, which runs $70-plus per month and includes other services, such as NBC and CBS to go along with ABC/ESPN, Fox and TNT Sports, ESPN is trying to give its fans more options.
Meanwhile, the NBA is first focused on its network rights agreements, which will reach the open market in late April. Like the NFL, the NBA’s top executives are interested in ESPN, according to officials with knowledge of their thinking.
ESPN is currently in talks with the NBA to renew its rights package, which includes the NBA Finals. ESPN pays nearly $1.4 billion per year and will increase that amount, though the sides remain apart on the financials. ABC/ESPN are heavy favorites to continue with the NBA, even if an agreement may not happen before April 22, when the NBA can officially talk with other entities outside of ESPN and fellow incumbent, TNT Sports, owned by Warner Bros. Discovery.
The NBA plans to add at least one more partner, possibly two, according to officials briefed on their plans. A streamer is expected to pick up one of the new deals.
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Amazon Prime Video and NBC Sports are known top contenders. Google/YouTubeTV, Netflix and Apple have held talks about the packages, according to executives briefed on the matter.
If ESPN fails to partner with the NFL and/or NBA, then MLB and the NHL are viewed as next in line as equity partners. Iger has also said that ESPN could go to market with no partners.
Meanwhile, ESPN wants to be the solution for MLB, NBA and NHL in regional sports, hoping to offer them as part of its direct-to-consumer strategy, as add-on channels for an extra fee, so fans can watch their favorite teams. Many regional sports networks are struggling due to the dwindling of the cable bundle.
The current model guarantees franchises a multi-million-dollar upfront fee. ESPN has been more inclined to share the rewards and risks on regional sports, according to officials briefed on the discussions, and isn’t looking to write big checks on speculation.
On the horizon, after the 2025 MLB season, ESPN has the right to opt out of its $550-million-a-year deal that includes “Sunday Night Baseball” and the Home Run Derby. ESPN will consider opting out or at least renegotiating the agreement, according to executives briefed on their plans.
Staying in the business of baseball seems likely but at a reduced price. It is currently down in the batting order for Iger and Pitaro.
They are open for business and the next several months, leading into its direct-to-consumer launches, are expected to be very active.
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(Top photo on the set of ESPN’s “Monday Night Countdown” before a December game in Jacksonville, Fla.: Mike Carlson / Getty Images)
