Hard In The Paint left with me more questions than answers and even fewer words. I write Hard In The Paint before this section, so I’m cooked. What I do want to convey:

Tommy Fleetwood (cooked too)

UFC (now on Paramount?)

Baseball (still not September)

ESPN is a fascinating business mostly because its been an omnipresent influence for my entire life. Of all the products that have left an imprint on me (iPhone, Nikes, In-N-Out, etc…) few have been around or as present as ESPN. Doesn’t mean I love it. Means I’ve directly or indirectly consumed it as much as anything. I can’t call myself a Big Book Guy, but even I read James Miller’s bible on ESPN’s founding.

Two weeks ago, the NFL officially acquired 10% of ESPN in exchange for NFL Redzone and NFL Network. Leagues and distribution partners have interesting relationships, and this does qualify as the first time a league acquired a major equity stake in a broadcast partner. While the news cycle focused on gambling implications, league to league competition, and Redzone for College Football, a few other pieces stand out:

The NFL is religiously flush with Cash.

ESPN surely wasn’t the only bidder for the NFL’s properties. Netflix, Amazon, and Peacock all have rich deals with the NFL. More than anything, Roger Goodell is an expert at creating bidding wars for his content. For him to ignore presumed cash payments from all the other streaming companies in favor of an equity stake in ESPN means the NFL simply doesn’t have a need or outlet for $2-4 billion dollars (same).

ESPN is embarrassingly cash Poor (same)

I’m going to get through this post without unpacking Cord Cutting, but it’s threatened ESPN’s business like any other television channel. As such, ESPN’s more or less bet the house on a streaming service debuting August 21st. In one ESPN app, you’ll have access to all ESPN content (for $29.99/month). In the last few years, ESPN ramped up cost cutting measures to reinvest in the tech and media rights powering it’s streaming service. It’s let on-air talent leave, divested Sunday Night Baseball, cancelled shows (Around the Horn), and largely pinched pennies to cover cost and development overruns piecing together its new app. In a final effort to GET MORE FOOTBALL, it sold 10% of its business to the NFL, but, doesn’t have to fork any money out of its pocket.

ESPN owns Monday Night Football, a couple Wild Card Weekend playoff games, and now Redzone. Altogether, particularly before Redzone, that’s not the most competitive package. Netflix owns Football Christmas. Amazon owns Thursday Night. NBC, Fox, and CBS own both the depth of coverage, the Super Bowls, the meaningful playoff games, and the bulk of the best regular season matchups. ESPN had to get competitive (Redzone) even if they didn’t have the dollars to do so. Why devote an insane amount of weekly content to the NFL if you aren’t showing enough games.

Pause

I’ve struggled writing this because it’s hard to piece together ESPN and the NFL’s media strategies from a single transaction. That said, Roger Goodell was quoted saying that he considers his competition to be Apple and Amazon (not the NBA or MLB). He’s using Apple and Amazon as examples, but it’s an interesting insight. Goodell’s cut deals with Netflix, Amazon, and Google (Youtube owns Sunday Ticket). Each partner is considerably larger than ESPN. If there’s any nugget I’m continuing to follow, it’s this:

Does Roger want to own ESPN?

That would be about a $35b investment, but Roger’s in the room with execs at multi-hundred billion dollar companies. He sees his peers chasing trillion dollar market caps. Could adding ESPN to his stable be his end game? I don’t know how far off that world is. ESPN’s ownership now breaks down as follow:

- 70% Disney

- 20% Hearst

- 10% NFL

Hearst has been around since day one but is a silent, non-strategic partner at this point. Is Roger eyeing their shares? If he can get to 51% ownership, what would that mean for future leverage when rights deals come up with Fox, NBC, etc…?

Before you call your friend at McKinsey, let me keep chewing on these developments. There could be something I’m missing! Until the next billionaire conference in Sun Valley, let’s just enjoy the pre-season and hope for a relaunch of sports bars named ESPN REDZone.