Business September 2013

The Global Dominance of ESPN

Why hasn’t anybody figured out how to beat "The Worldwide Leader in Sports"?
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“We’re not looking for niche audiences,” Skipper told me. Instead, ESPN’s flagship channel seeks to maximize the odds that whenever a middle-American male tunes in, he’ll see either a major sport, or coverage of a major story line on one of ESPN’s rapidly multiplying talk shows. Once the network put this strategy in place, Artie Bulgrin told me, ratings “started to change rather dramatically.”

This narrowing of focus may seem obvious in retrospect, but it wasn’t without risks. Regional big-sports networks were sprouting across the country, and the biggest leagues, like the NFL and Major League Baseball, had started their own television channels. ESPN’s decision to double down on these same sports could have left it vulnerable to competitors with more-comprehensive coverage of individual teams or leagues. But the gambit worked, in large part because of the way long tails and fat heads interact. One of Elberse’s most striking points is that while the most-passionate fans are drawn to obscure subjects in their sphere of interest—whether it’s unknown bands or meticulously detailed play-by-play analysis of last week’s football games—that doesn’t stop them from listening to Top 40 songs or tuning in to mainstream coverage. In fact, studies show that these connoisseurs appreciate and seek out the popular entertainment as much as the obscure fare. In that light, the NFL Network and its ilk are best seen less as competitors than as complements to ESPN. If they can turn casual viewers into hard-core fans, ESPN could grow stronger.

One of the loudest criticisms of ESPN is that its aggressively mainstream approach creates a sycophantic celebrity culture built around the biggest stars and juiciest plots, from the agonies of the L.A. Lakers, to the scandals of Tiger Woods, to the postmodern dramedy of Tim Tebow. But according to Elberse, the company’s superstar culture is the best strategy for a fat-headed world.

“It’s not different from People realizing that there are only five celebrities who really sell [magazines], so why put anyone else on the cover?” she said. “It’s Hollywood making more movies with Marvel characters. It reduced the risk, and it works.” The company’s core strengths stem from a superstar-first approach to sports news. Essentially, ESPN is in the business of building athletes into superheroes, because, like Walt Disney Pictures, it is in the business of building blockbusters.

In the past year, sports rights have grown to surpass half of all TV programming costs. Analysts insist that this is no bubble: sports has been “the most consistent ratings performer in TV, and it’s a live audience that advertisers can count on,” says David Bank, the managing director at RBC Capital Markets and an expert in the sports-entertainment business. And the potential of expanded sports programming has become impossible for the big networks, otherwise struggling, to ignore.

At a presentation for potential advertisers this May in New York City, Skipper began with a little joke for the Best Buy Theater’s audience. “I’d like to address the elephant in the room,” he said, pausing for the crowd to acknowledge Big Al, the long-trunked mascot from the University of Alabama, who stood beside him on the stage. Sparse laughter subsided as the audience waited for him to address the less cuddly actor trying to upstage his company—a brand-new sports channel, called Fox Sports 1, which launched in August.

Fox’s portfolio of sports rights across its cable channels, its regional sports networks, and its flagship broadcast channel offer some of the most coveted games in pro football, major-league baseball, college football, and auto sports. With its ability to pool some of these rights into a new 24-hour sports channel, and its track record of personality-driven game analysis, Fox could become the most serious multiplatform challenge ever to ESPN’s dominance, David Bank told me. “Until the rise of FS1, there was no other source for aggregating, in a single place, premium sports programming.” Head-to-head: in the current environment, that’s the only matchup ESPN could really lose.

But even Randy Freer, a co-president of Fox Sports Media Group, acknowledges that taking on the reigning champion is a long-term challenge. “ESPN has a 30-year head start and an astronomical revenue stream,” he told me. “They’re clearly the most established.”

And clearly the most inescapable. “We are not a television company,” Skipper said in 2005. “We are a sports media company. We’re gonna surround consumers with media.” That claim turned out to be both half wrong and entirely right. ESPN is a television company: 91 percent of its revenue still comes from its networks. And yet, it’s impossible not to feel surrounded. On your computer, on your phone, on your magazine stand, and on the radio, the worldwide leader is everywhere. For better or worse, that’s unlikely to change anytime soon.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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