ESPN

Of course, professional and collegiate sports are hugely important in America. Defining of American culture, sports at all levels — recreational, competitive, collegiate, amateur, professional — have been engrained into our nation’s culture, media, and everyday lives. So it’s no surprise that next year, the sports industry revenue will reach $67.7 billion. And counting. By 2019, the sports market will be worth $73.5 billion.

How did this sports culture and “Americanism” turn into a monstrous and lucrative industry?

A closer look at ESPN, the largest sports media company, will help answer this question and understand the monetization of sports news and the sports industry in America

Originally known as ESP, the Entertainment and Sports Programming Network, was founded in 1978 by Bill Rasmussen, his son Scott Rasmussen, and Ed Eagan. Bill Rasmussen was fired by the New England Whalers, a professional ice hockey team, from his position as communications manager in 1978. Bitter, Rasmussen and friend Ed Egan began discussing ideas to create a cable television network that would cover sports teams in Connecticut. Though the trio faced doubt and skepticism from cable operators and representatives, the Rasmussens and Egan incorporated ESP July of that year and began researching ways to broadcast their new network. During this time, satellite communication technology was new in the United States after use in Europe, and the group were directed to the Radio Corporation of America. At RCA, they were informed that their network could be broadcast across the whole country and were advised to purchase a continuous 24-hour satellite feed. With this in mind, the Rasmussens decided to reach a wider audience through broadcasting of all types of sports across the country, not just in Connecticut. ESP took on financial investors and partnered with Stuart Evey from Getty Oil. Strategically, Bill organized a meeting with the NCAA to negotiate rights to their sporting events, as college basketball was hot at the time. In March of 1979, ESP and the NCAA signed a contract for the network to broadcast 18 different sports and championship games for two years.

The Rasmussen brothers

NCAA basketball put ESP on the map and landed the company its first advertising contract with Anheuser-Busch, a beer company, one of the largest in cable television history. Hiring a new president from NBC Sports, Evey pushed out Bill Rasmussen from the company. With an added “N” to its name, ESPN debuted September 7 in 1979. At 7pm, ESPN launched its first SportsCenter telecast, which quickly became the bread and butter for ESPN, covering sports game highlights, scores, and players.

“If you love sports…if you really love sports, you’ll think you’ve died and gone to sports heaven” — Lee Leonard, SportsCenter anchor

In its early days of success, ESPN faced major competition against the larger established networks like ABC, NBC, and CBS, and did not have deep pockets like such networks. In the early 1980’s ESPN was rapidly growing and landing advertisement contracts, yet this cash flow was not enough to build and buy rights to broadcast more sports. The network was eating up dollars and the company was paying some cable companies to carry their channel from early day deals. ESPN just simply could not beat out the Big Letter guys with the ad revenue alone. At risk of liquidation, a desperate ESPN brought on two consultants from McKinsey. A major turning point was McKinsey’s Roger Werner — plan was to mirror premium movie channel HBO and charge subscriber fees. ESPN went to regional cable companies and began asking for small pre-subscriber fees, and even charged a cable company to have ESPN in their channel guide. Now ESPN had ad revenue and subscriber fees coming in, and though it wasn’t much, it turned things around for them. ESPN knew they had struck gold by turning this American obsession with sports into an opportunity. Because people needed sports they could put a premium on watching events live and getting the latest news in the sports world. ESPN filled a hole in the media and news world for an America that eats and breathes sports. This strategy set a new tone and aggressive mindset for ESPN — they would enjoy a steady cash flow from loyal viewers paying, allowing them to dominate the sports entertainment, and more broadly the television world. In 1984, ABC acquired ESPN and sold 20% share to Nabisco (who later sold it to Hearst Corporation). This deal would set a precedent for ESPN as Walt Disney acquired ABC for $19 billion in 1996, taking the majority ownership of ESPN. Today, ESPN is Disney’s moneymaker, enjoying revenues higher than its competitors sports channels combined. Go figure.


A pivotal decision for ESPN, and obviously the right one, ESPN was able to expand their sports coverage to professional sports landing contracts with the NBA, MLB, USFL (pre NFL days), and the NHL. Rights to broadcast professional sporting events gave ESPN an even bigger push to the top, making it impossible for viewers to not pay a premium for both collegiate and professional sports coverage. In 1987, ESPN struck a deal for partial rights with the National Football League and launched ESPN Sunday Night Football. Broadcasting professional football games in the markets of the participating teams, Sunday Night Football has dominated since its first airing. What is now a ritual in American culture, Sunday Football is like a religion in the sports world. ESPN used the NFL as a platform to provide seriously in-depth coverage of all things Football — the draft, players’ performance, team match ups, highlights, the list goes on. This program has now become ESPN Monday Night Football and its legacy still lasts today — ESPN spent $15.2 billion for rights from the NFL to maintain Monday Night Football’s prowess.

ESPN was able to take the draft, the pregame and highlight shows, and other NFL programming to a new level” — Paul Tagliabue, former NFL commissioner

1994

As ESPN Sunday Night Football became their “it” factor, Roger Werner had other plans in mind. In addition to broadcasting popular and mainstream sports, Werner thought they could win over the hearts of everyone by covering niche sports. NASCAR, bowling, and ski jumping were added to ESPN’s menu, gathering all sports fanatics and passionaries. Again, ESPN put a premium on coverage and diehard fans would be willing to pay. At the time, this decision was not of near gravity to Werner’s first plan to charge subscriber fees. ESPN was enjoying high ratings from their Sunday Night Football, unwavering subscriber fee revenues, and signing advertising contracts left and right. Looking back, through ESPN’s wild success and the depth of its audience, this decision was yet again a pivotal one for the sports news company. Engulfing the entire sports industry, ESPN was unstoppable. Catering to all segments of the market brought them a legitimacy that would last.


Through immense coverage of professional and collegiate sports and the top reporters within each sport, ESPN set itself far above the competition, like NBC Sports and Fox Sports. In 1992, the company launched ESPN Radio, a weekend radio broadcast covering the latest sports news and features. ESPN Radio was wildly successful and expanded from weekends to weekdays, and weekdays to a 24-hour service. In 1995 and subsequently 1997, ESPN earned rights to the NBA and MLB. The mid to late 1990’s saw even more growth, adding ESPN2, ESPNews, and ESPNU, a channel focused solely on collegiate athletics. ESPN was buying more and more rights to broadcast live events and needed more channels to fit them all. The list goes on and on — and we could talk about ESPN’s successes and total domination forever. But what is important is the measures and decisions that the leadership aggressively chose in order to ensure ESPN be the cream of the crop for sports news and media. Their revenue strategy, and of course with help from Disney’s deep pockets, ESPN battled it out with competitors like FOX sports for rights to live coverage of sports, covering half of all live events in 2012. ESPN served a large population — most of America — and turned out to be a moneymaking machine (Ha! to all the early doubters). Constantly adapting and moving with the news/media industry and also their audience, ESPN has captured a loyal following adamant to have live coverage of sports at home.

Looking forward, the future for ESPN will include the dominance on the Internet, social media, and their mobile application WatchESPN, reaching their audience in a new way. ESPN has dominated the more traditional news media outlets — television, radio, and print — but ESPN is not done yet.

ESPN “runs two research laboratories that develop graphics, mine data, create equipment and package highlights and audio to feed the voracious appetite of fans who cannot get enough of sports information from TV”

Focusing heavily and technology and research, ESPN creates content and sports news that their audiences want and need to see, feeding it to them through many outlets, nonstop. ESPN, in order to maintain their top tier position, must continue to innovate and change the industry as it had in the beginning. ESPN faces fierce competition of mainstream news sources like CBS Sports Network and Fox Sports, but also social media and internet sources like Bleacher Report. New technologies will soon be able to deliver virtual cables services on the Internet, another technological advancement ESPN will have to battle. And not only that, but is live television and cable dying out? With streaming services available, millenials and the new generations are not paying for television they way people were in the early days of ESPN’s success. These questions will challenge ESPN to continue reinventing to stay on top. But what brought ESPN to the top and build up the sports market net worth to its peak today is the lucrative contracts with professional and collegiate sports. As always, ESPN will continue to focus on delivering thousands of live games, sports news and highlights to loyal sports fanatics — two variables that have been withstood everything.

Sources

Bennett, Dashiell. “The Revolutionary Strategy That Made ESPN An $8 Billion Company”, Business Insider, 24 May 2014. Web. http://www.businessinsider.com/espn-an-8-billion-company-2011-5

Gaines, Cork. “More than 60% of ESPN’s revenue comes from their dwindling subscriber base”, Business Insider, 30 November 2015. Web. http://www.businessinsider.com/espn-revenue-subscriber-fees-2015-11 (chart)

Heitner, Darren. “Sports Industry To Reach $73.5 Billion By 2019”, Forbes, 19 October 2015. Web http://www.forbes.com/sites/darrenheitner/2015/10/19/sports-industry-to-reach-73-5-billion-by-2019/#6594e3b31585

Sandomir, et al. “To Protect Its Empire, ESPN Stays On Offensive”, The New York Times, 26 August 2013, Web. http://www.nytimes.com/2013/08/27/sports/ncaafootball/to-defend-its-empire-espn-stays-on-offensive.html?pagewanted=all&_r=0

“History of ESPN”, Wikipedia, 15 November 2016. Web. https://en.wikipedia.org/wiki/History_of_ESPN

“ESPN Sunday Night NFL”, GameFaqs. Web. http://www.gamefaqs.com/snes/588312-espn-sunday-night-nfl/images/140196 (image)

“Photo Gallery”, ESPN Founder, Web. http://www.espnfounder.com/photo_gallery.htm (image)