People of IPR
Thu August 15, 2013
Why ESPN Reigns Supreme In Covering Sports
Originally published on Thu August 15, 2013 4:58 pm
ESPN is the champion of sports media. If you look at the numbers, the 34-year-old network does reign supreme when it comes to covering sports.
The network’s value is estimated between $40 billion and $60 billion — that’s at least 20 times bigger than the New York Times Company.
Just this month, more than four million people watched ESPN’s “NASCAR Spring Cup,” making it the top cable sporting event of the week.
So how does ESPN live up to its tagline of “The Worldwide Leader in Sports”?
The Atlantic’s business editor, Derek Thompson, says the media giant has fine-tuned a business model that others find hard to beat.
- The Atlantic: The Global Dominance of ESPN
JEREMY HOBSON, HOST:
From NPR and WBUR Boston, I'm Jeremy Hobson. It's HERE AND NOW.
Fox is about to launch a new sports network, Fox Sports 1. It's an attempt to challenge the champion of sports media, ESPN. And if you look at the numbers, the 34-year-old network does reign supreme when it comes to covering sports. It's value is estimated between 40 and 60 billion dollars. That is at least 20 times the size of the New York Times Company. So why is ESPN so dominant in sports media? Our friend, Derek Thompson, who's business editor at The Atlantic and has just written about that, is with us from New York to discuss. Hi, Derek.
DEREK THOMPSON: Hi, Jeremy.
HOBSON: So why is ESPN so dominant and so valuable?
THOMPSON: Right. So when I started researching for this column, I knew ESPN was popular, but I didn't realize how rich it is. Like you said, it's worth - it's been valued somewhere between 40 and 60 billion dollars, which means that as a part of the Walt Disney Company, which is the conglomerate it belongs to, if you took out ESPN and held it on to one side, it would be worth more than the rest of the Walt Disney Company combined potentially.
THOMPSON: That's all its movies, all of its amusement parks, all of its merchandise and the rest of its TV shows. I mean it's just an astonishing thing. And it really comes down to this. Nothing in television is more valuable than sports. And ESPN own sports in a way that no other channel is synonymous with its subject.
HOBSON: But is it doing something right? Is there something about the business model or is it just lucky it was there? It became the place where you go to watch sports on television.
THOMPSON: Right, yes. Let's get into this, dig into the business model itself. What happens is when you pay a cable bill, you're not just paying the cable company. About 40 percent of that cable bill, let's say $35, goes to the media companies that provide those networks. Those fees are called subscription fees, and ESPN gets by far the highest subscription fee.
Every single month you pay - if you have pay TV, you pay about five to six dollars to ESPN. That adds up across the 100 million households that pay for television every year. It adds up to about $6.5 billion before ESPN has sold a cent of advertising. It's really astonishing. And the reason they can do this is because of the unique quality of sports.
What you've seen is the last few years is that people have learned to time-shift dramas and comedies with Hulu and Netflix and DVR. But the one thing that you really have to watch live still are sports. They lose their social currency the second the game is over. And so advertisers know this, and they're charging a premium for the people who have live sports.
HOBSON: You could just DVR, but then you have to tell all your friends to not say anything to you about it. You can't go on Facebook or Twitter.
THOMPSON: Right, exactly.
HOBSON: Why hasn't any other network been able to replicate what ESPN has done so far?
THOMPSON: Right. So ESPN has been in this game for a long time. They've built up this portfolio of sports rights across the most popular sports leagues in the country, you know, for the last three decades. And basically it goes back to the strategy that was hatched about 10 years ago.
When John Skipper became the president - you know, there was this feeling that the company should invest in the so-called long tail of entertainment with the Internet. But instead he said, no. I'm going to invest in the fat head. I'm going to put all of my money on live sports and the most popular networks - I'm sorry, in the most popular leagues. And it's paid off huge and it's created this marketplace where if you want to get in and buy competitive live sports rights, there's not a lot of options for you. So the only option really is for an established player like Fox Sports to create a national sports network out of whole cloth.
HOBSON: And we'll have to see whether Fox Sports 1 can be successful in challenging ESPN. Derek Thompson, business editor at The Atlantic. We've got a link to his column at HEREANDNOW.org. It's called "The Most Valuable Network." Derek, thanks as always.
THOMPSON: Thanks, Jeremy.
HOBSON: And just ahead, Syrian President Bashar al-Assad has always blamed the conflict in Syria on terrorists. So was he right? We're back in a minute with that. HERE AND NOW. Transcript provided by NPR, Copyright NPR.