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Challenging ESPN: How Fox Sports Can Play in ESPN's Arena

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Challenging ESPN: How Fox Sports Can Play in ESPN's Arena Challenging ESPN: How Fox Sports can play in ESPN’s Arena Kristopher M. Gundersen May 1, 2014 Professor Richard Linowes – Kogod School of Business University Honors Spring 2014 Gundersen 1 Abstract The purpose of this study is to explore the relationship ESPN has with the sports broadcasting industry. The study focuses on future prospects for the industry in relation to ESPN and its most prominent rival Fox Sports. It introduces significant players in the market aside from ESPN and Fox Sports and goes on to analyze the current industry conditions in the United States and abroad. To explore the future conditions for the market, the main method used was a SWOT analysis juxtaposing ESPN and Fox Sports. Ultimately, the study found that ESPN is primed to maintain its monopoly on the market for many years to come but Fox Sports is positioned well to compete with the industry behemoth down the road. In order to position itself alongside ESPN as a sports broadcasting power, Fox Sports needs to adjust its time horizon, improve its bids for broadcast rights, focus on the personalities of its shows, and partner with current popular athletes. Additionally, because Fox Sports has such a strong regional persona and presence outside of sports, it should leverage the relationship it has with those viewers to power its national network. Gundersen 2 Introduction The world of sports is a fast-paced and exciting one that attracts fanatics from all over. They are attracted to specific sports as a whole, teams within a sport, and traditions that go along with each sport. However, sports have an added advantage that makes them even more popular: the media frenzy that surrounds them throughout the world. Teams have dedicated reporters and writers, receive different levels of coverage, and generate varying levels of profits based on their media attention. Media conglomerates all over the world have this effect on sports in general, but none more so than ESPN. For years, ESPN has had a viselike monopoly on the sports broadcasting industry in the United States. In recent years, a number of new networks have popped up like Fox Sports, CBS Sports, and NBC Sports to challenge it though1. The emergence of new competitors is slowly eating into ESPN’s popularity amongst fans and especially cable service providers who are charged higher than normal prices to provide the ESPN family2. That being said, the hallmark of the American business environment is competition. The fact that new cable networks can establish themselves and erode an existing monopoly exemplifies this. Fox Sports is a prime example of how a network can break into the market; but they need to do more to make sports broadcasting as competitive as the content the network provides. This study will include company profiles for ESPN and its largest competitor, Fox Sports, as well as a couple smaller ones. Additionally, there will be an analysis of industry trends in the United States that show how market penetration is viable for many new competitors. There will also be a SWOT analysis for both ESPN and Fox Sports showing the value that can be 1 Bercovici, Jeff. "Competition Is Good For ESPN, Or At Least For Its Viewers." Forbes. 27 Aug 2013: n. page. Web. 21 Mar. 2014. 2 Sandomir, Richard, James Andrew Miller, and Steve Eder. "To Protect Its Empire, ESPN Stays on Offense." New York Times 26 Aug 2013, n. pag. Web. 23 Mar. 2014. Gundersen 3 added from having multiple strong players in the sports broadcast industry. Lastly, there will be a recommendation for how Fox Sports can improve its positioning in the market. Company Profiles ESPN ESPN is most commonly known as a television network; it stands for Entertainment and Sports Programming Network but in popular culture is referred to only as ESPN. The network was the first to operate as a 24-hour network dedicated solely to sports coverage including its flagship show SportsCenter. In 1996, the Walt Disney Company started to integrate ESPN into its empire after it purchased previous parent Capital Cities/ABC (now just ABC)3. Since then, ESPN has been one of Disney’s fastest growing subsidiaries and its largest profit generator by far4. Even though it is technically a joint venture with the Hearst Corporation, ESPN is most often associated with Disney, which owns an 80% stake in the company. However, ESPN operates largely on its own, making the majority of its business and programming decisions separate from its parent company. It is based in Bristol, Connecticut with additional broadcast studios in New York, Los Angeles, and a couple other cities throughout the United States. While the ESPN television channel (and its many sister channels) is the most recognizable brand in the company, it also has various other operations. ESPN The Magazine is a popular sports magazine distributed bi-weekly mainly in the United States with contributions from various writers around the world. ESPN.com is the main hub for its web operations and a real-time source for its aggregated content. Recently, ESPN has released a number of other new mediums as well. To list a few examples, various mobile Apps were released in recent years; 3 Hofmeister, Sallie, and Jane Hall. "Disney to Buy Cap Cities/ABC for $19 Billion, Vault to No. 1." Los Angeles Times 01 Aug 1995, n. pag. Web. 23 Mar. 2014. 4 Sparks, Daniel. "ESPN: Disney’s Reliable, Cash Cow." The Motley Fool Blog Network. The Motley Fool, 09 Nov 2012. Web. 31 Mar. 2014. <http://beta.fool.com/danielsparks/2012/11/09/espn-disneys-reliable-cash-cow/16067/>. Gundersen 4 ESPN has been a pioneer in three-dimensional broadcasts; and they have also been one of the first movers when it comes to live online streaming of sporting events with its online broadcasts at watchespn.com. Many of these new mediums are recent developments indicating ESPN’s commitment to innovation and creating an entertainment experience for its consumers rather than just providing a traditional broadcast5. Nonetheless, despite these new and innovative approaches to media and sports coverage, the cable network continues to be the most profitable service due to the fact that the ESPN family reaches almost 86% of homes in the United States6. This reach is unprecedented for a pay-for-cable network. For years, ESPN has been widely involved in international sports. Currently, ESPN operates in India, Argentina, Hong Kong, the United Kingdom, Australia, Brazil, Singapore, and Canada. These are mainly offices and production facilities that allow them to reach viewers in over 61 countries across all seven continents7. The ESPN International division of ESPN Inc. is primarily responsible for all international activity from signing affiliate deals to gaining broadcast rights to acquiring new offices, companies, and the like. ESPN International owns (partially and wholly) and operates 24 television networks outside of the United States and is always seeking to expand with the right deal8. In fact, much of Disney’s profit growth last year was attributed to ESPN’s expansion of its networks9. This profit growth is a driving factor in ESPN’s value as a brand to the Walt Disney Company. 5 Greenfield, Karl Taro. "ESPN: Everywhere Sports Profit Network." Bloomberg BusinessWeek. 30 Aug 2012: n. page. Web. 22 Mar. 2014. 6 Seidman, Robert. "List of How Many Homes each Cable Network is in - Cable Network Coverage Estimates as of August 2013." TV by the Numbers. 23 Aug 2013: n. page. Web. 7 "ESPN International Fact Sheet." ESPN MediaZone. ESPN Inc. Web. 23 Mar 2014. <http://espnmediazone.com/us/espn-international-fact-sheet/>. 8 Holmes, Mark. "ESPN Vice President Discusses its International Growth Strategy." Satellite News 32.27 (2009) ProQuest. Web. 21 Mar. 2014. 9 Walt Disney. 2013 Annual Report. The Walt Disney Company, 2013: 32. Web. 26 Mar. 2014. <http://thewaltdisneycompany.com/sites/default/files/reports/10k-wrap-2013.pdf> Gundersen 5 Fox Sports Fox Sports has been around since 1994 as a division of the Fox Broadcasting Company based in Los Angeles, California; it was formed through their first deal with the National Football League to broadcast a portion of its games. Although it has existed for the past 20 years, they have never operated a national dedicated channel until recently. Network coverage was broadcasted on the Fox Entertainment Group’s standard channel whenever programming was required, often interrupting other primetime programming in the process. However, Fox Sports does operate a variety of regional sports networks across the United States with dedicated channels of their own. In August 2013, Fox Sports Media Group launched its first sports dedicated channels, Fox Sports 1 and Fox Sports 2. They replaced the Speed and Fuel TV networks that were also owned by Fox Sports but were limited to racing and motorsports coverage. Both networks are based in the Fox Sports headquarters in Los Angeles with other studios in New York and Charlotte, North Carolina. At its launch, Fox Sports 1 was expected to reach just over 75% of homes in the United States10. It is seen as the most legitimate competitor to ESPN’s broadcasting dynasty because of this reach, likely at the expense of other sports networks like CBS Sports Network and NBC Sports Network that have been around longer11,12. As a counterpart to ESPN’s SportsCenter, Fox Sports 1 features its flagship Fox Sports Live with daily highlights, analysis, and commentary. 10 Seidman, Robert. "List of How Many Homes each Cable Network is in - Cable Network Coverage Estimates as of August 2013." TV by the Numbers. 23 Aug 2013: n. page. Web. 11 Maese, Rick. "Can Fox Sports 1 challenge ESPN? Does it need to?" Washington Post 16 Aug 2013, n.
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