Since ESPN launched the first 24-hour sports channel three decades ago, it has owned the cable sports business, free from serious competition. ESPN generates $9 billion a year for its parent company, Walt Disney (DIS), and it’s been so profitable for so long that it’s astonishing no rival has emerged. Various media companies have tried: Time Warner (TWX) with CNNSI in 1996, and more recently Comcast (CMCSA) with the NBC Sports Network. Neither became must-visit destinations because neither had enough must-see programming. It’s as if we’ve been living in a world with Coke (KO) but no Pepsi (PEP), McDonald’s (MCD) but no Burger King (BKW), the New York Yankees with no Boston Red Sox.
David Hill, CEO, Fox SportsPhotograph by Jeremy Liebman for Bloomberg BusinessweekDavid Hill, CEO, Fox Sports
On Aug. 17, that will change. 21st Century Fox, the post-split News Corp. (NWS) entity comprising Rupert Murdoch’s film and television assets, is starting Fox Sports 1, a 24-hour network that’s the most formidable challenge yet to ESPN. Fox has spent the past four years assembling a powerful portfolio of football, basketball, baseball, soccer, and more. But to differentiate FS1, to lend it personality and create a distinct brand, Fox is going with a concept that David Hill, chief executive officer of Fox Sports, calls “jockularity.” The plan is for FS1 to be the funny, irreverent, less serious sports channel.
Among other things, that involves hiring a couple of Canadian pranksters to anchor the network’s flagship program and building another show around Regis Philbin. “What we are fighting is inertia,” says Hill. “ESPN has a 30-year head start, and they are doing a remarkable job. We are very much the underdog, and we have to convince the sports-viewing public that what we have on offer is better—or as good as—what ESPN has been offering. We have to create a personality.”
Story: Keith Olbermann's Return to ESPN Is a Smart Move
Hill, 67, is a gruff, plainspoken Australian who has spent 20 years at Fox overseeing broadcasts of big-ticket live sports, including six Super Bowls, delivered to a mass network audience. He’s also the innovator behind the on-screen Fox Box, which displays the score and time remaining in the game; Cleatus, the dancing Fox NFL Robot; and the glowing blue hockey puck formerly used during Fox’s telecasts of National Hockey League games. Along with Chase Carey, 21st Century Fox’s president and deputy chairman, Hill is trying to repeat what Roger Ailes pulled off at Fox News Channel: to create a 24-hour network of his own to vanquish an established cable competitor. (In Ailes’s case, it was CNN.) “Do you think Chase Carey and Rupert Murdoch are looking to build something that is only 10 percent of ESPN?” says Chris Bevilacqua, the founder and CEO of Bevilacqua Media, a sports media consultant and investment company. “I can assure you that is not a number they would be satisfied with.”
Attempting to slay—or even scare—a giant as ubiquitous as ESPN is a multibillion-dollar gamble for Murdoch. It’s little surprise the company has called on Hill, who spearheaded the launch of two sports networks in Europe, Sky Sports and Eurosport. “You don’t think going up against the BBC and ITV with Sky Sports is scary as s-ž-ž-?” Hill says. “Every competitor is big and hairy. ESPN is no different.”
Rupert Murdoch has always used sports as an anchor. It was Sky TV’s deal with English football’s Premier League that rescued the startup satellite service from its massive debt load and positioned it to create BSkyB, the dominant British pay-TV service. In the U.S., Fox’s $1.58 billion deal with the National Football League in 1993 made Fox Broadcasting a true competitor to the big three networks. Throughout its history, Fox has paid what were considered exorbitant fees for the rights to broadcast live sports, then reaped enormous returns. “Every time they say we are being reckless,” says Hill, “and every time we have proved them wrong. There seems to be an insatiable demand for sports.”
Story: With ESPN Calling It Quits, the Writing Is on the Wall for 3D
People want to watch sports live and in comfort, which means advertisers will pay for commercials, viewers will watch them, and—most crucially for FS1—subscribers will pay for them, in this case indirectly through their cable bills. ESPN makes $3 billion a year in advertising revenue and $6 billion from subscribers, charging cable companies $5.54 per subscriber, according to SNL Kagan. NBC Sports Network, by comparison, charges 33¢ a subscriber. According to SNL Kagan, FS1 will charge more than double that in its first year. An impressive start, but still only a fraction of what ESPN earns.
To negotiate higher rates from cable companies, you need subscribers to demand your service. For an all-sports network, that means stockpiling the rights to live sporting events that can be rebroadcast and repackaged. Disney and ESPN for years had the inside track on virtually every rights deal. By being able to offer national broadcast with ABC and national cable with various ESPN channels, along with strong Web and mobile platforms, ESPN could pay rights holders more and guarantee higher visibility. It then made more money off those games and events by delivering them to viewers through multiple platforms.
Posted By: Isaac Erazo
Thursday, April 28th 2016 at 2:04PM
You can also
click
here to view all posts by this author...
