Commentary

ESPN Possible New Owners: The Sports Leagues Themselves?

by Wayne Friedman , Staff Writer, July 25, 2023

Potentially selling its traditional TV business, Walt Disney may be looking at different kinds of partners. And for ESPN, how about those powerful sports leagues themselves?

When Chief Executive Officer of Disney Robert Iger mulled the idea in a recent CNBC interview -- of possibly selling its legacy TV network business -- analysts' thoughts may have turned to Disney's nearest competitors: NBCUniversal, Paramount Global, or wannabe owners Netflix, Amazon, Apple or others.

According to a CNBC report last week (followed up by a New York Times story recently), ESPN is talking with the biggest sports leagues -- the NFL, NBA, and Major League Baseball -- about a minority stake.

All these leagues have benefited for decades, in major ways, from exposure of their sports on legacy TV -- broadcast, cable, and otherwise -- as well as billions of dollars in sports rights fees.

At the moment, Disney is not looking to give up total control -- just minority stakes, according to reports.

All that makes sense. But long term, any new investor would want to know about its future plans around streaming -- which would include transitioning ESPN in whole to becoming an independent streaming platform. (Currently Disney's ESPN+, a streaming platform, has limited and live programming content).

For a while, analysts have talked up the possibility of spinning off ESP, the long-time profit business for Disney, as a separate company. For many, the rub would be how to make the transition.

Profitability for ESPN still heavily resides with the legacy pay TV system -- not just with heavy advertising revenues, but with the $10 per-subscriber-per-month pay TV distributors to the big sports network.

Iger, always careful with his words, did say Disney was thinking of bringing a “strategic partner” into ESPN. That would suggest a company with a crucial long-time interest in sports specifically.

At the same time, ESPN would be firmly in operating control.

Still, having powerful minority players could at some time down the road have a major influence on the direction of one of the most valued TV networks groups in the business.

When looking at the biggest picture -- about the future of broadcast and cable TV networks -- should we be thinking of more out-of-the-box and unusual partnerships to come?

Investment firms and stock exchanges for business networks?

What about grocery stores and restaurant chains for food channels?

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3 comments about "ESPN Possible New Owners: The Sports Leagues Themselves?".

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Daniel Quintanilla from DANIEL PLUS LAUREN, July 25, 2023 at 3:25 p.m.
As far as ABC goes, preferably, I'd like to see it sold as a standalone.

But DISNEY might be looking to sell ABC with other cable networks together (not ESPN with it), publications like VARIETY have said that station groups or most likely a private equity firm would be a good fit to buy ABC.

So could ABC need sold to a TV manufacture because it's relative to the TV company's mission? Or is ABC best bought out by an independent billionaire who has an interest in Broadcast TV? And could other linear TV networks be sold in similar fashion?
Reply

Ed Papazian from Media Dynamics Inc, July 25, 2023 at 4:30 p.m.

As a stand alone buy the ABC broadcast TV network would be a very risky purchase as it operates at marginal profit levels and has always been a loss leader---as has been true to some degree for CBS and NBC. The big profit makers were always the O&0 TV stations and, later, the network-owned cable channels.

NBCU and Warner/Discovery are well placed where cable channels are concerned, but the only real winner in ABC's cable portfolio is ESPN so if it isn't included fully in a sale the remaining channels are ripe for a fire sale and Iger is probably right about them not being "core" to Disney's future business prospects. If ESPN remains largely or completely in Disney's hands---as seems likely--- I think that the real objective of this exercise will be to divest Disney of its other cable channels---but not the O&O TV stations or the ABC TV Network.

Operated sensibly regarding content costs, the TV stations should remain profitable and we should also remember that the TV network ---as well as the O&Os, though to a much lesser extent----can supply lots of viewable content---already mostly paid for by linear ad dollars---to Disney's streaming libraries. Increasingly, the quality of such libraries will become an important factor in attracting subscribers and/or CTV ad revenues as the number of expensive "original" productions designed to woo streaming subscriptions diminishes due to the now obvious ROI failures of this promotional strategy.

Daniel Quintanilla from DANIEL PLUS LAUREN, July 27, 2023 at 2:31 a.m.

NAT GEO, FX NETWORKS, FREEFORM, and even LIFETIME, A&E NETWORKS and DISNEY CHANNEL all need to be purged from the TV portfolio over at THE WALT DISNEY COMPANY, this would definitely be the beginning of ABC being well positioned to stop the bloodshed of their losses.

Plus, there's talk that ABC NEWS wants to sell FiveThirtyEight, an in-house polling company they use for elections.

ESPN could benefit from DISNEY's cable channel purge that's not ESPN NETWORKS, but Bob Iger is still seeking out a strategic partner.