
ESPN is exploring new business models amid challenges from cord-cutting, including becoming a 'clearinghouse' for sports rights. The network's future remains uncertain as it adapts to changes in viewer habits and distribution negotiations.
Photo by Phil Ellsworth / ESPN Images
The future of ESPNâs business model is firmly up in the air as the company continues to fight the headwinds of cord-cutting.
In recent years, weâve seen the network become more selective in its bidding on sports rights, undergo layoffs, and drive hard bargains during distribution negotiations, all in an effort to elongate the viability of the current model, which relies heavily on the pay-TV bundle. ESPN has also recently launched its direct-to-consumer service, ESPN Unlimited, in hopes of capturing consumers who remain outside the bundle and leveragingthe service in future distribution negotiations by placing exclusive content on its platform.
Even with all of those moves, ESPN is fighting an uphill battle. Most believe the economics of the cable bundle will never be replicated, at least to the level that made ESPN and its peers the envy of quarterly media earnings calls up until the mid 2010s, when cord-cutting began in earnest. That reality has led many to speculate ESPN could be ripe for a spinoff from Disney as the parent company looks to focus on growth properties like parks and cruises. While a spinoff isnât in the cards at this very moment, questions about ESPNâs future remain as pertinent as ever.
And one veteran sportswriter believes thereâs an avenue ESPN could explore to reform its business model for a future in which streaming giants encroach on sports rights.
Steven Godfrey, a veteran college football columnist, floated the idea on a recent episode of Yahooâs College Football Enquirer podcast that ESPN could become a âclearinghouseâ of sorts, sublicensing content to other platforms.
âOne of the ways ESPN and/or Disney, if Disney does not spin off and sell ESPN, creates a new profit stream as cable dies out is by sublicensing content and becoming, basically, its own clearinghouse,â Godfrey posited.
âIt becomes the middleman,â his colleague Andy Staples said.
âYes. Imagine other content providers, services, streamers, whatever you want to call it, rather than dealing directly with the actual source, ESPN essentially becomes a kind of waystation, or a middleman, as Andy has said,â Godfrey agreed.
Itâs an interesting theory, and one thatâs worthy of consideration. ESPN has a long-established history with almost every league and entity in sports that sells media rights. One of the networkâs core competencies is negotiating media rights deals. Thereâs reason to believe ESPN is more adept in this department than newcomers to the space.
Further, streamers have, at least for the most part, not been interested in buying sports rights wholesale. Netflix enjoys having a Christmas Day NFL doubleheader, but it doesnât want to produce six or seven games on a Sunday afternoon, as Fox and CBS do. Similarly, Amazon has been quite selective about what sports it puts on Prime Video. The NFL in the United States, the English Premier League, the NHL in Canada, and cricket in Australia. Most recently, it agreed to a three-game package of Duke menâs basketball games.
Streamers want the best of the best, not your run-of-the-mill regular-season game.
Thatâs where ESPN, as an arms dealer of sorts, comes in. ESPN can buy packages wholesale, then sublicense some of the best games to other platforms at a premium. It has already done a similar deal for the College Football Playoff, sublicensing games to TNT Sports.
The idea of ESPN sublicensing some of its live sports inventory is nothing new, but it often involves less desirable inventory, like third-tier ACC football and basketball games, which it offloads to The CW. This is different. This is about offering premium inventory and a level of flexibility to high-paying streamers that isnât possible in a standard media rights contract.
Now, there are plenty of reasons to be skeptical of this possibility. For one, itâs possible that deep-pocketed streamers will eventually be interested in broader sports-rights packages, pushing ESPN out of the wholesale market. And two, the market for sublicensing games might not be all that large, limiting potential earnings.
That said, thereâs no reason ESPN canât dabble in this world, especially as margins continue to slim. Whether it could ever become a meaningful part of the networkâs overall business, however, remains to be seen.
The post Steven Godfrey: ESPN could become âclearinghouseâ that sublets sports rights to streamers appeared first on Awful Announcing.
ESPN is struggling with declining cable subscriptions and is becoming more selective in bidding for sports rights.
While speculation exists about a potential spinoff, it is not currently planned as Disney focuses on other growth properties.
ESPN Unlimited is a direct-to-consumer service launched to attract viewers outside the traditional pay-TV bundle and leverage exclusive content in negotiations.
ESPN has been driving harder bargains and undergoing layoffs to adapt to the changing media landscape and economic pressures.

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