Iger Suggests Olympics Could Boost ESPN Sub Fee

Operators may face price hike if Disney lands Games

While it fell shy of an official endorsement, Bob Iger’s musings on a possible ESPN bid for the 2014 and 2016 Olympic Games gave rise to a wealth of speculation Wednesday.

Speaking to investors during Walt Disney Co.’s Q2 earnings call, the chief executive officer was less than committal re: the Olympics, saying only that “ESPN certainly intends to take a look at the Olympics seriously.”

In the same breath, Iger practically negated the assertion, adding that the sports network has demonstrated “a great ability to walk away from opportunities that they don’t believe make sense from a bottom line perspective.”

Inasmuch as Iger seemed to court speculation, the Disney chief did touch on at least one significant factor that might lead ESPN to submit a competitive bid to the IOC in June. Despite already boasting cable’s most taxing carriage fee ($4.40 per sub per month), an Olympics package “would definitely generate incremental subscription revenue,” Iger said. “It would be wrong to assume that the purchase of an Olympics should only be looked at as a possible generator of incremental advertising revenue.”

Iger revealed that ESPN has “a number of rather large negotiations with distributors to engage in” before the Olympic rights will be awarded. As such, he added, “There are definitely opportunities for ESPN to address its subscription revenue based on the general programming it has.”

ESPN’s programming lineup includes flagship properties such as Monday Night Football and SportsCenter, as well as recent acquisitions like the $3 billion joint deal with Fox Sports for the TV rights to all Pac-12 football and basketball games. Valued at $250 million per year through the 2022-23 NCAA season, the Pac-12 pact is significant in that it pitted a tandem ESPN/Fox battery against Comcast/NBCUniversal.

It’s worth noting that these three players are almost certain to be the most serious bidders for the 2014 and 2016 Olympics package. And it’s not outside the realm of possibility to suggest that the newly cozy relationship between ESPN and Fox could well force Comcast/NBCU to submit an inflated bid.

In 2003, NBC outbid ESPN and Fox for the rights to the 2010 Vancouver Winter Games and the 2012 London Summer Olympics. NBC paid $2 billion in rights fees—$820 million for Vancouver and $1.18 billion for London—and parent company GE kicked in another $200 million in global sponsorship support, bringing the total to $2.2 billion.

In comparison, Fox bid $1.3 billion for the same package during those negotiations while ABC/Disney offered the IOC a revenue-sharing deal. At the time, both network groups expressed fears of putting up so much cash during a boom—a prescient assessment, given the subsequent global economic meltdown.

Despite outdelivering ratings guarantees, NBCU lost some $223 million on the 2010 Games. Given the price tag, it is almost certain to take a hit on the London Games.

Sealed bids are to be submitted to IOC officials in Lausanne, Switzerland, on June 6 and 7. Along with the three perennials, CBS and Turner Sports have also expressed interest in the Sochi and Rio package, which is expected to top $2 billion. 

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