Wednesday, February 4, 2009

Sky Sports to ESPN: Nice Try, Sucker! Or, Everything You Wanted to Know About Football Broadcasting Rights but Were Afraid to Ask.

Around these parts, we’ve been carefully following ESPN’s not-so-quiet moves to expand into the English Premier League (suck it, Barclays!). We certainly haven’t been the only ones to notice that Sportscenter has been covering more and more European football in its highlight package and on its score tickers. Then there is the prominent placement of “soccer” on the ESPN homepage, which directs you to soccernet (of course, we can debate the quality of soccernet’s news coverage, but that’s for another post). We’ve even heard rumors that ESPN planned to convert ESPN Classic into an all-football channel. Well, yesterday Sky Sports took a major step to curtail ESPN's moves into football.

After the jump, it's time for me to go into full-on sports business wonk-mode....



As far as I could tell, ESPN’s expansion strategy looked (note the past tense) like this: snag one or more of the British broadcasting packages that were coming up for bidding in order to expand into the British market, and then start incorporating more English football into the U.S. market. You see, the model that works quite well for Sky/FSC (both owned by Rupert Murdoch) and Setanta is simply to broadcast the same games in both markets using the same broadcasting team – it’s a cost-effective move, and is only possible because the U.S. and England are separated by a common language (as opposed to, say, broadcasting NBA games in China – you still need a separate broadcast team). Plus, it’s a win-win because it allows ESPN to start expanding more into Europe, where the network is newer and has a relatively poor reputation, by drawing in viewers with football.

The other piece of background you need to know is that the English Premier League divides the broadcasting rights into six packages. Essentially, by dividing up the broadcasting rights into separate packages, the Premier League increases the overall value by forcing broadcasters to bid against each other on multiple fronts. As things currently stand in the United Kingdom, Sky paid £1.3 billion for the rights to four packages through 2010. Each Sky package includes 23 games, and consists of the two Sunday games, the first-choice Saturday afternoon game and another "floating" game. Setanta owns the other two packages, which are slightly less valuable overall and include the Saturday evening game and the Monday night game. Bids for the 2010-13 British package were due last week, and the bidding on the U.S. rights (along with the rest of the world) is expected to start once the British rights are settled.

Okay, so far so good. And this brings us to yesterday, when Sky decided they’d like to keep things the way they are, thank you very much, and were indeed re-awarded their four existing packages by the Premier League. As the Financial Times reports, for the league to shut down the bidding so soon after the bids were submitted indicates that Sky must have made a “really good knockout offer.” And, the Daily Mail reports that the bid was for an amazing £1.7 billion, which is a huge chunk of money considering the global recession.

If you take nothing else away from this story, it’s that the Premier League is in great shape financially and you can expect clubs to continue to splash out lots more cash on transfers and salaries given the large guaranteed income from T.V. rights.

As for the remaining two packages that are currently owned by Setanta, the Premier League has opened up another round of bidding. The Independent surmises this can mean one of three scenarios: (1) the bids were below what the league was expecting; (2) Setanta has a major rival and the league wants to encourage a bidding war; or (3) Setanta and ESPN were bidding together in anticipation of a possible merger. In my mind, this is where things get very interesting, because no one really knows for sure what’s going on behind the scenes. But, if I’m ESPN, I’m looking at two things: First, that Saturday evening package probably makes the most the sense for U.S. broadcasting because the games air at 12:30 p.m. on the East Coast. Second, although Setanta and ESPN have denied they are in talks, a merger makes a lot of sense if ESPN is still serious about expanding in both Europe and the U.S.

At the same time, Sky has demonstrated that they aren’t afraid to spend a large sum of money to retain their British broadcasting rights because their entire network essentially revolves around football. Sky might be willing to spend even more money and essentially stranglehold its competitors out of the market.

So, this is a still-unfolding story. To me, it is one of the more fascinating things to happen on the business-side of football because it gives a window into all the machinations that occur but are rarely seen. There’s simply way too much money involved for any of these decisions to happen at anything less than a fever pitch.

Update: Just saw on, appropriately enough, Sky Sports News that the European Union prohibits one broadcaster from having a monopoly on all games. So, that changes things a bit -- Sky likely can't bid on those last two packages, meaning it's Setanta v. ESPN for the remaining games. This also helps explain why the EPL divides up the broadcasting rights in the first place. More info here. Again, stay tuned.... we'll try to stay on top of this story.

23 comments:

BurgerBrother said...

Bullet point (3) seems so far fetched but would be something I would welcome with open arms.

I'd take ESPN 'Sportscenter' commercials over Proactive, Penny Talk Calling Cards, and Taylor Twellman's kick medic any day.

Christian Miles would be out of a job, but Saturday and Sunday mornings would just feel that much more professional and "Right" instead of feeling like "boom goes the dynamite."

come on you, ESPN. Come on.

BackBergtt said...

"First, that Saturday evening package probably makes the most the sense for U.S. broadcasting because the games air at 12:30 p.m. on the East Coast."

College Football.

The Fan's Attic said...

Fear what ESPN might do to soccer, but want more coverage in the US. Talk about a damned if you do, damned if you don't situation.

Spectator said...

I should have mentioned this as well, but this probably also means that FSC is a good position to retain its current rights in the U.S. FSC likely have an exclusive deal with Sky to the same broadcasts thanks to the common Rupert ownership. So, unlikely that Setanta and/or ESPN would bid on those four Sky packages in the U.S. market because it would be cost-prohibitive to set up a broadcast team for only the U.S.

Although, I read somewhere that Setanta and FSC have a good working relationship when it comes the U.S., and I'm not positive that the EPL sells the same exact packages in both the U.K. and U.S.

The Fan's Attic said...

Is that 12:30 EST? Because the 9:30 games PST are crap. I'm sure people could be convinced to watch something else besides Northwestern playing Indiana. The problem is...ESPN is really heavily invested in college football, so this wouldn't go on ESPN2...it would have to go someplace else. ESPN Classic? I have to buy the sports tier to get that and I'm sure that would hamper ESPN as much as it hampers FSC.

The one thing ESPN has is leverage. Make them include Classic with the other ESPN channels. That happens all the time with cable channels.

BackBergtt said...

"The problem is...ESPN is really heavily invested in college football, so this wouldn't go on ESPN2...it would have to go someplace else. ESPN Classic?"

Bingo. As I pointed out in my piece over the summer, Classic's household penetration is not much better than FSC. They often come on the same package.

The Fan's Attic said...

I wonder if ESPN would be willing to purchase specific games from Setanta or broadcast them on ESPN channels in a partnership?

They could pay Setanta a premium for the big games and hold off until after the college football season.

The NY Kid said...

Heh. Georger said "penetration" and "package."

BackBergtt said...

"They could pay Setanta a premium for the big games and hold off until after the college football season."

Turn on ESPN and ESPN 2 this Saturday at noon, and almost every Saturday after New Years. College Basketball.

Spectator said...

Yeah I had forgotten about college football. The problem for ESPN is that the Monday game is definitely out, so that really does only leave the Saturday evening (i.e. 12:30 pm EST) game. This is all why ESPN really needed to snag one of those Sky packages in the UK if they hoped to make it work in the US.

Bigus Dickus said...

FSC is bad enough....Tennis commentators discusiing 'line drive reverse kick back bloopers?' I cringe at the thought.

Ian said...

I think the broadcast teams for the overseas english rights are locally based and wouldn't change depending on whoever gets the rights.

The Fan's Attic said...

Have you seen the crap games they have on Saturday on ESPN? It's worse than football. Plus, nobody cares about basketball until the tourney anyway.

BackBergtt said...

I don't know if I'd use the 'nobody cares' argument when we're talking about a sport which draws horrendous ratings in America.

I don't know what the ESPN2 game is Saturday, but I know the ESPN game is Syracuse/Nova, which is a huge game. Regardless of the matchups, the point is the same as with football, they're heavily invested in it and I don't see them pushing either off their two main networks.

Precious Roy said...

Don't think ESPN wanted to win, not prime packages on the the UK rights anyway as they probably don't want to be responsible for the production end of things (cost, lack of expertise). This was probably more of an announcement to say, "Hi, we're looking at places in the neighborhood and will eventually be moving in... just not yet."

Be more interesting to see what happens when the US rights (and other territories) come up for bid. Doubt FSC has any kind of deal with Sky. Different territories, different rights. Murdoch can't make an end-run around the EPL and make a sweetheart deal with one of his outlets just because.

Lied Center said...

All those talking about the college football issue are missing that this is for the UK rights, not the US rights. The Monday night game would be super for ESPN because it would position them to have quality football mid-day allmost all week with champions league matches. it would be a nice start.

As for the announcers, they are employed by the EPL for the matches they call, but they have a "home" network. Jon Champion, for instance, calls the Monday night game for Setanta, but most of the games we get in the U.S. have the EPL's graphics on them because IMG does the broadcast production.

Martin Tyler works for Sky as his other gig.

Either way, this is going to get interesting. La Liga comes up next year, and GolTV is losing money.

BackBergtt said...

Not really, as I was quoting the part of the article that was talking about the US rights

The Fan's Attic said...

Thing is, ESPN wants to grow and if a well developed market like college basketball is not providing the growth, I would imagine they would try to grow in some other way.

I don't see much growth potential in college basketball on ESPN2. Soccer? Well, there is far greater potential for growth there.

The point is ESPN needs new revenue streams to keep growing. They went from weird off-beat sports, to baseball, to college basketball and football to NFL to NBA, with hockey in there for a while. They developed their own niche with X-games. Then put poker on TV. Now they have NASCAR, too.

The one thing about ESPN is that they do know how to sell a product. Why wouldn't they try it? Because some people get upset when they can't see Northwestern v. Indiana football in October, or BYU play Colorado State basketball in January? I doubt those people would register much of a complaint and ESPN could say watch it on ESPNU or ESPN360.

Their current markets are saturated. Try a dryer market. Sounds good to me.

BackBergtt said...

Doesn't ESPN have massive deals with conferences to show their games though? If they don't want to show Ohio State play Ohio, ABC/ESPN won't get to show Ohio State / Michigan.

Spectator said...

@Ian and Lied Center: Thanks for the explanation on broadcast teams. Obviously, I was guessing about how the broadcast-network relationships work in the EPL.

BurgerBrother said...

re: broadcasting teams - very interesting - so in theory we wouldn't get stuck with John Harkes

The Fan's Attic said...

I'm sure those games on ESPN2 are probably part of the conference deals, but I would think the channels they were broadcast on would be at the discretion of ESPN. They shunt all sorts of games off onto ESPNU and ESPN360.

I'm sure they could come up with something. Plus, if they leveraged ESPN Classic back onto the basic cable package, they would have a lot more airtime to play with.

Unknown said...

i understand we all want soccer to flourish in the american market but for anyone to think it's going to immediately take a back seat to either college football or college basketball is thoroughly deluded and needs to remove themselves from the discussion. it's like us retorting to the no one cares about soccer crowd except those sports have a storied history, draw big ratings regionally and nationally, and is not a foreign game to most of the people watching those channels. if the espn classic thing has a thread of truth to it then here's what needs to happen:

saturday and sunday morning games on that channel, any sniff at weekday games on that channel as well. it's really that simple. espn2 is a pipedream.