ESPN is the rich Uncle Pennybags of sports broadcasting, that dapper old swell from Monopoly who functions as the benign face of rapacious capitalism.
Crisp C-notes bursting from the pockets of its tuxedo jacket, the sports giant snatches up every sports property on which it alights, running the gamut from lowly Baltic Avenue (The Bassmasters) to Boardwalk (Monday Night Football) before the competition so much as passes “Go.”
Perhaps nothing illustrates ESPN’s rapacity quite like the college football bowl season. After blowing Fox Sports out of the water with a $500 million bid, ESPN won the rights for the Bowl Championship Series through 2014. In so doing, it now plays host to 33 of the 35 bowl games, including the Oregon-Auburn title match on Jan. 10. And here’s the corker: Despite the towering expenses associated with hosting the BCS games, ESPN could air the championship event commercial-free and still walk away fat and happy.
Advertising? Gravy. The real meat is in the brand hegemony, the way in which ESPN’s ownership of college football justifies its carriage fee. Here’s how the math works: In exchange for its broadcast feed and hi-def simulcast, Bristol charges cable and satellite operators an average of $4.40 a month per subscriber, according to SNL Kagan data. Multiply that by 99.8 million subscribers, over 12 months, and ESPN’s annual affiliate revenue haul works out to be $5.27 billion. To throw that into greater relief, note that ESPN’s subscriber revenue is roughly 43 percent of CBS Corp.’s market cap ($12.8 billion, as of Dec. 17).
Not that ESPN’s advertising revenue is small beer. Kagan projects ESPN’s 2010 net ad sales dollars will add up to some $1.48 billion, up 8 percent from the year-ago number. With automotive humming along and financial services dollars pouring in, the network could take in as much as $1.57 billion in ad sales next year.
Last year, ABC commanded as much as $975,000 for a 30-second spot in the Alabama-Texas BCS capper, which drew 30.8 million viewers. While media buyers don’t anticipate this year’s showdown will perform as well on cable, the turnout should be well worth the investment. “We’re hoping it will break the cable record, but even if that’s not the case, you don’t cherrypick ESPN,” said one national TV buyer. “In for a penny, in for a pound. It’s a year-round commitment.”
To some extent, ESPN’s pigskin takeover is a hedge on future negotiations with carriers. “Content always wins the war and major sporting events are the most powerful weapons,” said RBC Capital Markets analyst David Bank. “They can point to these investments and say, ‘Why not cut an early deal and avoid all the drama…and we won’t hit you with as big of an increase.’”
Ed Erhardt, ESPN’s president of customer sales and marketing, said that as much as 75 percent of his college football inventory is sold in season-long packages. In turn, a significant portion of avails are claimed by the 14 official BCS sponsors, which include Allstate, Anheuser-Busch InBev, Ford, General Motors and Taco Bell.
Spreading the field has taken a lot of the anxiety out of Selection Sunday. “There was a time where if you didn’t get such a great matchup in the championship game, you’d be concerned,” Erhardt said. “The way we sell it now, the matchup is just not a defining factor.”
ESPN has had no trouble meeting its guarantees this season, averaging 2.97 million viewers over 75 broadcasts, marking its strongest campaign since 1994. And while even a one-spot walk-on wouldn’t be granted a guarantee for the title game, buyers said they expect the Oregon-Auburn game will deliver as many as 10 million viewers 18-49.
“You’re buying a full season of ratings points, the full college football experience,” Erhardt said. “This isn’t just about a few nights in January.”
