Disney has been courting professional sports leagues as minority investors who would play a part as a strategic partner for ESPN, according to a report from CNBC.
What’s Happening:
- Chief Executive Officer Bob Iger and ESPN head Jimmy Pitaro have reportedly held early talks about bringing professional sports leagues on as minority investors to ESPN as a strategic partner.
- Iger said last week in an interview that the company is looking for a strategic partner for ESPN as it prepares to transition the sports network to streaming. No specific details were given at the time, only saying a partner could bring additional value with distribution or content.
- In that same interview, Iger acknowledged selling a stake in the business was possible. Disney owns 80% of ESPN. Hearst owns the other 20%.
- According to reports, the National Football League, National Basketball Association and Major League Baseball were approached, and the network held preliminary discussions about a variety of new partnerships and investment structures.
- Reports indicate that the discussion with the NFL also involved the league’s desire for a company to take a stake in their own media assets, including the NFL Network, NFL.com and RedZone.
- The NBA discussions with Disney are a bit more complicated, though they have been working with different possible structures around a renewal of media rights. This is because both Disney and Warner Bros. Discovery, under current contracts, have exclusive negotiating rights with the NBA until next year.
- Acquiring a league as a partner for Disney is a smart move according to insiders, as the company is reportedly trying to move past a traditional linear model for cable networks, and it will help find a solution as cable subscribers decline.
- That said, traditionally, the NBA, NFL and MLB sign lucrative media rights deals with many media partners that fuel team revenue and player salaries with a range of media companies. These leagues (and others) could potentially face conflicts of interest if they take a minority stake in ESPN.
- That stake, in turn, may cause issues with other media companies that currently work with the leagues, including Comcast’s NBCUniversal, Fox, Amazon, Paramount Global and Apple, who each help make the leagues billions of dollars by participating in bidding wars for sports rights.
- There would also be hurdles for Disney, as ESPN also employs hundreds of journalists that cover the major sports leagues and an ownership could cloud the perception of objectivity for ESPN’s reporting apparatus. Yes, ESPN could do what it can to ensure reporters continue to cover the leagues while minimizing conflicts, but it adds another layer of complexity to any deal that could be made.
- The whole endeavor is not a simple one, but Disney appears to be pushing the envelope on its thinking to prepare for a streaming-dominated world that includes its full portfolio of sports rights.
What They’re Saying:
- Bob Iger: “Our position in sports is very unique and we want to stay in that business,” Iger said to Faber. “We’re going to be open minded about looking for strategic partners that could either help us with distribution or content. I’m not going to get too detailed about it, but we’re bullish about sports as a media property.”
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