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.
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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.
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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.
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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. pag. Web. 27 Apr. 2014. 12 Hiestand, Michael. "Fox Sports launches direct challenge to ESPN dominance." USA Today 06 Mar 2013, n. pag. Web. 26 Apr. 2014.
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Additionally, the two networks have a variety of niche sister channels optimized to compete with the ESPN family. Their content is aggregated online at foxsports.com and is also updated in real-time. Unlike ESPN, there is a strong lack of an international presence other than the international content they provide on their American networks. The company also operates in the live online streaming market via Fox Sports Go on the web and Apps.
Other Competitors
CBS Sports
Officially launched in 2002 as niche network dedicated to college sports, CBS Sports
Network rebranded in 2011 to position itself alongside other mainstream sports networks. The network broadcasts from its headquarters in New York but operates on a much more limited basis than ESPN and Fox Sports. There are no sister channels and the network does not operate outside of Canada and the United States. Additionally, the channel is not available in HD on all cable service providers and there is no dedicated online streaming option like WatchESPN and
Fox Sports Go.
CBS Sports Network garners most of its popularity largely from its broadcast content.
Most famously, it is known for its NFL coverage, PGA Tour coverage (particularly The
Masters), and its partnership with Turner Sports to air the NCAA Men’s Basketball Tournament.
CBS leverages this partnership to air content on TNT, TBS, and TruTV.
NBC Sports
As somewhat of a hybrid between CBS Sports Network and Fox Sports 1, NBC Sports
Network (NBCSN) is slightly more developed than CBS. They provide more of a threat to ESPN than CBS but are not placed as well as Fox Sports. The network started in 1995 as the Outdoor
Life Network dedicated to niche sports like fishing and hunting. In 2012, the company rebranded
Gundersen 7 under NBCSN, owned by the NBC Sports Group, a division of NBCUniversal. The network and its sister channels operate out of its headquarters in Stamford, Connecticut except for Football
Night in America, which operates out of New York.
NBCSN operates an online streaming App called NBC Sports Live Extra that airs most of its content but is not available all of the time. Even though the dedicated channel offers some analysis and commentary, it is not as extensive as the content offered on ESPN or Fox Sports 1.
NBCSN garners most of its popularity from exclusive contracts to air the Barclays English
Premier League and the Olympics. The network reaches about 68% of homes in the United
States13. However, there is no international presence outside of the United States.
Industry Trends
The cable industry as a whole is facing somewhat precarious times. Quicker than ever, more people are moving away from pay-for-TV options and cable to services such as Netflix and
Hulu. Companies like Apple and Google now offer devices that allow them to compete with cable companies by providing streaming services to consumers at a lower price. ESPN management itself has stated worries about pay subscribers fleeing from traditional television to streaming services, hence why ESPN has pioneered apps like WatchESPN14. Fox Sports followed up with its Fox Sports Go services lest ESPN dominate that market with a first mover advantage. Additionally, ESPN also entered into negotiations with other online streaming providers to provide content15. However, there is a feeling that the cable TV industry will never
13 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. 14 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. 15 Palmeri, Christopher, and Andy Fixmer. "Disney’s ESPN Holds Preliminary Talks for Web-Based TV." Bloomberg. 21 Aug 2013: n. page. Web. 25 Mar. 2014.
Gundersen 8 die out completely. If it does, both companies are positioned to better deal with a sports watching evolution than the other players in the market like CBS Sports and NBCSN.
The general shift away from cable services is due mainly to the fact that cable service prices are rising rapidly. Even with basic cable plans, consumers are feeling the bite of higher rates due to the individual prices networks charge cable companies to provide their services to the public. As networks raise their prices, cable companies must charge higher prices to meet their own margins. Perhaps unfairly, networks can raise their prices based on the popularity of their products and the number of options they offer. Often, price per subscriber per network is a strong indicator of that network’s popularity. As the graph at the right indicates, ESPN is more than 4 times more expensive per subscriber than its closest competitor. ESPN is able to charge high prices because they can bundle their offerings into one package, forcing cable companies to raise their prices. So, even if the Cost per Cable Network consumer does not watch a network like ESPNU or ESPN Deportes, they still end up paying for it16.
The act of providing multiple channels for a single price to cable companies and consumers is called bundling. While beneficial for some, the vast majority of consumers only watch one or two of the individual channels provided in the bundle. Recently, there has been strong opposition to bundled services. In August 2013, a bill co-sponsored by Senators John
16 Bui, Quoctrung. "The Most (And Least) Expensive Basic Cable Channels, In 1 Graph." Planet Money: The Economy Explained. NPR, 27 Sep 2013. Web. 25 Mar. 2014.
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McCain and Richard Blumenthal was introduced in the Senate aimed at undoing bundles17. The bill does not directly target ESPN, as Blumenthal represents ESPN’s home state; rather, it aims to help the consumer fight rising cable costs overall. Many feel that due to ESPN’s very loyal customer base, the bill will not hurt it much. Nonetheless, the proposal indicates that the debate about rising cable costs is back and very prominent.
While cable is somewhat of a public good of sorts in the United States, it is a different story in Europe. Cable and television services are provided in most countries at reasonable rates.
However, from personal experience it appears that the popularity of premium cable channels is substantially less abroad. There have been proposals to create a cable infrastructure similar to the
United States to drum up popularity, but there seems to be a lack of understanding on how exactly connecting the continent via network providers would work18. There is substantial concern that it would generate monopolistic tendencies amongst the network providers.
Within the streaming services realm, there is also a discrepancy in streaming usage.
Perhaps this is attributed to a difference in cultures; the United States is very much a television culture while Europe is not. However, this does provide for an opportunity to seize a significant stake in the streaming services market if they can crack down on illegal streaming.
ESPN SWOT Analysis (Appendix I)
Strengths
ESPN has a variety of different strengths that allow it to maintain a monopoly on the sports broadcasting industry in the United States. For many television networks, ESPN included, brand recognition is vital to maintaining their consumer base. ESPN has very strong brand
17 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. 18 Crawford, Susan. "Cable Companies Try to Take Over Europe, Too." Bloomberg. 22 Jul 2013: n. page. Web. 22 Mar. 2014.
Gundersen 10 recognition and consumer loyalty in the United States. Abroad, the story is the same; ESPN
Worldwide may not have the same hold on the international market but everybody recognizes the logo. Even the font itself has a certain iconic value to the company. Additionally, ESPN’s parent company Walt Disney is one of the most recognizable and valuable brands in the world19. The combined advantage of the two brands and logos allows ESPN to maintain a strong presence amongst sports viewers and non-viewers alike. Any company that wants to challenge the branding power that ESPN possesses must compete with the branding power Disney wields as well.
Financial stability is important in any business and ESPN controls the ability to make bold decisions because of its financial stability. Additionally, the Walt Disney conglomerate controls a massive war chest giving ESPN significant leverage if need be. However, ESPN has been known to wield its own significant wealth when it comes to acquiring broadcasting rights, the hallmark of a good sports broadcasting network20. This ability allows ESPN to operate on its own retained earnings in the event of a financial crisis or significant challenge from a competitor, allowing it to move quickly.
Furthermore, as indicated by the obligation schedule below obtained from Disney’s most recent annual report, more than half of the company’s monetary commitments go towards sports broadcasting21. This indicates Disney’s recognition that ESPN is a strong profit driver for the company as a whole and is willing to feed that beast.
19 Badenhausen, Kurt. "The World's Most Valuable Brands.” Forbes. 06 Nov 2013: n. page. Web. 29 Apr. 2014. 20 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. 21 Walt Disney. 2013 Annual Report. The Walt Disney Company, 2013: 49. Web. 26 Apr. 2014.
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Disney’s Obligations While it goes without saying that ESPN’s general popularity is a strength, the popularity of its broadcast personalities is also vital to the network’s success. Like any prominent network,
ESPN will leverage the recognition of celebrities to promote its brand. This is true for the analysts and color commentators who work for the company after retiring from their individual sports. However, the influence of the network’s flagship SportsCenter is so strong that even the anchors and hosts have a strong following. At a national level, this popularity and recognition amongst just the anchors is unique to ESPN. It helps the network to cope with analyst and anchor turnover because they can essentially go to the “bullpen” and bring in the next player.
Personalities like Scott Van Pelt, Stuart Scott, and Robin Roberts transcend the world of sports.
Other networks do not have this strength at a national level; it may exist on a regional level or within a niche but not across the country for sports in general.
Lastly, the broadcast content that ESPN offers is strong. Due to its ability to negotiate and outbid many competitors, ESPN owns the rights to some of the most popular sports content in the United States. For example, Monday Night Football has been exclusive to ESPN and ABC since 1970. ESPN pays $1.9 billion a year to broadcast the Monday night game in comparison to a combined $3 billion a year by CBS, FOX, and NBC to broadcast the remaining games
Gundersen 12 demonstrating the value that Monday Night Football holds in the market22. Additionally, ESPN also has rights to broadcast the NBA, MLB, MLS, the PGA’s Open Championship, and exclusive rights to the FIFA World Cup in 2014 as well as many other popular sporting events.
However, the acquisition of these rights has caused ESPN to “cut staff in recent months”23. The price of programming is growing and even ESPN is not immune to the consequences of providing ubiquitous content.
Weaknesses
From a strategic management standpoint, ESPN does have a number of weaknesses.
Perhaps the most glaring weakness is the price ESPN charges to provide its services. Even though the ability to bundle channels may be a strength for the network, charging a high price just because they have a monopoly only helps the company to make a profit. However, generating profit should not be the only goal of a company and ultimately, charging cable companies high fees to carry their networks hurts ESPN’s popularity in the industry. They see
ESPN as throwing its weight around and bullying others in its supply chain to get what they want.
Additionally, ESPN’s attempt to increase its international identity by providing broadcasts in other countries has hurt its international brand image somewhat. They recently sold their United Kingdom operations and cancelled the broadcast of their ESPN America network in
Europe24. These failed largely due to an inability to break into the market and a lack of operating infrastructure abroad. Furthermore, international viewers saw ESPN trying to come into their
22 Badenhausen, Kurt. "The NFL Signs TV Deals Worth $27 Billion." Forbes. 14 Dec 2011: n. page. Web. 29 Apr. 2014. 23 Smith, Chris. "Fox Sports 1 Set To Make Debut, But Will It Really Compete With ESPN?" Forbes. 16 Aug 2013: n. page. Web. 29 Apr. 2014. 24 Szalai, Georg. "ESPN to Sell U.K., Ireland TV Channels to British Telecom Giant BT." Hollywood Reporter. 25 Feb 2013: n. page. Web.
Gundersen 13 country and push American sports like the NFL on a foreign audience that had no interest in seeing them. A sense of American bias is associated with the company abroad so viewers are hesitant to back a network expansion if ESPN cannot adapt and innovate for the market. This experience is unique for ESPN though because it can turn this into strength; it grants them the valuable knowledge of what not to do. Management has the knowledge of the pitfalls and what they’ve done in the past that did not work. In business, it’s not always about what you should do, rather it’s sometimes what you shouldn’t do.
Lastly, viewership outside of live events is still lacking for ESPN. While SportsCenter is popular amongst viewers, the show constantly re-airs with the same content and recap of the day’s events. Consumers would rather watch another channel with new content than watch repeat episodes of SportsCenter during primetime. Also, although ESPN would contradict that its sister channels are less popular, most industry experts agree that few would miss them if they were removed from the bundle. The chart below indicates how the number of “favorite channels” has grown as the number of available channels increases25:
Audience Fractionalization
25 Thompson, Derek. "This ESPN Slideshow Explains Why It's the Most Valuable Media Brand in America."Atlantic. 15 Aug 2013: n. page. Web. 29 Apr. 2014.
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ESPN argues that this chart shows that viewers do watch all of their networks; but, the chart does not indicate the relative viewership each network receives compared to another.
Because the network can bundle its networks due to the popularity of its main channels, the company can charge higher fees. But eventually, poor viewership totals in its sister channels will drag down popularity and give negotiating leverage back to cable providers.
Opportunities
Expansion of the WatchESPN App and online streaming service is a strong opportunity for the network. Improving the service to include more content and playback ability could create value for the network. With many consumers moving towards streaming content and away from pay-for-TV services, improving its streaming service would generate customer loyalty and increase satisfaction. The company has already moved to establish ESPN streaming services such as ESPN Player in countries throughout Europe26. They have the infrastructure set up to expand these mobile offerings with the addition of new content. Furthermore, the company also has significant international experience with its websites. They offer a variety of content from soccer to cricket allowing ESPN to leverage the niche markets it already has a consumer base in.
These websites are largely more popular in Asia but also offers an opportunity to expand to
Europe by integrating their websites with ESPN Player.
Additionally, ESPN has leveraged Disney Theme Parks to increase its reach among fans.
The ESPN Club and ESPN Zone allows visitors to the theme park the opportunity to jump into a sports viewer’s paradise and watch virtually anything they desire in the world of sports. They can also partake in interactive games that increase their exposure to the ESPN brand, all outside of
26 "ESPN Player Help / FAQ." ESPN Player. ESPN, 31 Mar 2014. Web. 31 Mar 2014. Gundersen 15 the context of generic television programming. Sometimes fans can even interact with ESPN personalities when there are broadcasts from Disney World. Furthermore, Disney’s most profitable segment by far is Media Networks consisting of Cable Networks and Broadcasting. They make up about 46% of total company revenue and 67% of total operating profit; plus, the segment also has a 38% operating margin. Disney Segment Breakdown Due to its high affiliate fees that aren’t usually a part of the industry, ESPN’s contribution to Disney’s overall cable network revenue is approximately 75% on the conservative side. Assuming that ESPN contributes the same percentage to operating income as revenue, it stands to reason that ESPN contributes about 43% to overall operating income.27 Thus, ESPN has significant pull when it comes to strategic management decisions made at Disney and has Income Breakdown access to significant corporate funding. Threats Until recently, ESPN has never really had to deal with the threat of a strong competitor. With Fox Sports’ entrance into the dedicated sports network market, ESPN is in new territory. They do have experience trying to challenge a market dominated by another network from failed attempts to challenge SkySports and the BT Group in Europe. These two groups, similar to 27 Sparks, Daniel. "ESPN: Disney’s Reliable, Cash Cow." The Motley Fool Blog Network. The Motley Fool, 09 Nov 2012. Web. 31 Mar. 2014. Gundersen 16 ESPN in the United States, control most of the European market. But the experience is different than what Fox Sports threatens in the United States. ESPN knows how a company may attack their market control based on what they did in the past. However, the American market reacts differently than the European market and it is unclear how the industry would react to two major players fighting for control and market share. ESPN should make this a proactive process rather than a reactive one when meeting the challenge. There is also a changing consumer base in the sports broadcasting market. As mentioned previously, there has been a strong shift from cable to streaming services like Netflix and Hulu. The perception is that what the consumer sacrifices in options, they save in price by switching. Adding to this shift is the aforementioned anti-bundling bill introduced in Congress. The bill is there to keep overall cable costs down for the consumer but if the bill passes, ESPN stands to suffer the most because their profit is driven by their ability to bundle. The anti-bundling bill contributes to the public perception that it may be time to shift to a more tailored service like streaming. Fox Sports SWOT Analysis (Appendix II) Strengths Even with ESPN dominating the market, Fox Sports has a number of strengths that can help it be competitive. Perhaps the most obvious strength is the fact that Fox Sports 1 presents the viewing public with fresh options. A change is good every now and then and ESPN has been around for years with essentially the same content and personalities. While live broadcasts are always changing and don’t stagnate, analysis and commentary shows can become boring if they don’t do something to change up the monotony every now and then. Fox Sports 1 will provide that with Fox Sports Live and Crowd Goes Wild offering the public a different spin on stories Gundersen 17 than what’s normally available on Around the Horn or Pardon the Interruption. Television shows get cancelled due to lack of popularity and the same essentially holds true for sports commentary shows. Fox Sports can generate more popularity for its channel with the new perspective it offers. Like ESPN, Fox Sports 1 is also strong with the personalities of its commentators, especially in its football broadcasts. While not necessarily on the same level of transcendence as ESPN in terms of its anchors, the color commentators, analysts, and sideline reporters on the network provide a personality that can help mobilize a fan base. Fox Sports utilizes past NFL stars like Terry Bradshaw, Jimmie Johnson, and Howie Long. Michael Strahan is also a relatively new addition that is more popular than the former three; he even shares a non-sports related daytime talk show with Kelly Ripa. Ironically, this show airs on ABC even though Strahan’s sports commentary is limited to his appearances with Fox Sports. Furthermore, Fox Sports also poached Erin Andrews, one of the industry’s most popular sideline reporters from ESPN in 2012. Fox Sports also has very strong broadcast content. As mentioned before, the network was started with their original contract with the NFL to broadcast Sunday NFC games. NASCAR is also one of the flagship sports aired on Fox Sports since 2001; the sport is one of the most popular viewing sports in the United States by size. Additionally, the network has exclusive rights to broadcast the MLB playoffs until 2021, exclusive rights to UEFA Champions League games since 2010, will start broadcasting all United Golf Association Championships in 2015, and will have exclusive rights to the FIFA World Cup in 2018 and 2022 (switching from ESPN). Gundersen 18 Weaknesses There are also some weaknesses that plague Fox Sports. Most glaringly, the network is new to the industry. While the Fox Sports Group has been around for years, the dedicated channel is a new player. They do not own a first-mover advantage that would make them strong in the market. Instead, they have to fight an uphill battle against the established ESPN. At the onset, they will be spending more money and generate lower profits. The network will need to constantly monitor and develop its integrated marketing campaign to draw in new viewers. Additionally, professional sports leagues want to attract viewers and until there is more of an established network, Fox Sports will face a tougher task when it comes to attracting leagues to choose them. While the commentators, analysts, and sideline reporters that Fox Sports brings from its NFL broadcast are strong, the new anchors it will bring in for other shows on Fox Sports 1 lack significantly. Their general anchors are virtually unknown or new to the broadcast business. They do bring in previous professional athletes like Gary Payton and Donovan McNabb, but both are years removed from professional competitive sports and new to television broadcasts. Fox Sports has also tried gimmicks when it comes to instituting new anchors on their shows like hiring Regis Philbin to host Crowd Goes Wild. Philbin has already announced his departure from the network, which can be attributed to lackluster results28. Philbin has not been in a demographic that Fox Sports 1 wants to attract for decades and gimmicky broadcasters have little value to add to the broadcast itself. 28 Yoder, Matt. "Regis Philbin is Leaving Fox Sports 1 after the Super Bowl." Awful Announcing. 28 Jan 2014: n. page. Web. 29 Apr. 2014. Gundersen 19 Opportunities Because Fox Sports 1 is new to the market, it has more opportunities that can help make it successful. Most importantly, Fox Sports has the opportunity to leverage its streaming capabilities with Fox Sports Go. Currently, most streaming content consists of the standard primetime games plus additional games that can only be categorized as boring. Utilizing Fox Sports Go similar to an additional sister channel with advertising and premium content would help Fox Sports Go to corner some of that market. For instance, offering all Champions League games on the service rather than the current one per match day setup would corner markets that are known for being boisterously loyal to their teams. Fox Sports also has the added advantage of regional popularity. Fox Sports’ dedicated networks started with regional sports networks that focused on teams from around the area. They provide commentary and analysis on local teams with further content that appeal to the markets seen below: Fox Sports Regional Networks29 29 "Choose Your Region." Fox Sports. Fox Sports Interactive Media. Web. 29 Apr 2014. Gundersen 20 A recent example of Fox Sports’ knack for tailoring their content to regional demands is their recent agreement with Major League Lacrosse30. Even though the sport is not widely popular across the United States, the network recognized a desire to see the sport in regions in the eastern half of the country. Leveraging this regional popularity can help create a strong fan base that helps the product promote itself in essence. Furthermore, Fox Sports can continue to provide regional streaming capability to help customers stay connected to their home teams when traveling. In the past, Fox has used sporting events that draw large audiences like football to promote its primetime broadcasts of non-sports television like The Simpsons, 24, and The Following to name a few. Because Fox Sports 1 shares a name with its parent company, it has the added benefit of a connection to a non-sports broadcast network. The shared name helps viewers connect the networks much quicker than someone would connect ABC, Disney, and ESPN. Name association is very valuable in the marketing world and this would allow the company to return the favor somewhat and advertise Fox Sports 1 via its primetime broadcasts. This would leverage popular shows with large fan bases to increase awareness and association. Heavy promotion at the launch helped Fox to establish its new network. Without the heavy promotion, Fox ran the risk of being marginalized by its own standard network. It differentiated itself to help the network gain traction. Additionally, expectations for the network are realistic from the network, rather than overly optimistic. The company knows that it will take a gargantuan effort to topple a behemoth like ESPN and is expecting modest growth initially at 30 MLL Communications. MLL Announces FOX Sports Regional Networks Schedule. Major League Lacrosse. N.p., 24 Apr. 2014. Web. 27 Apr. 2014. Gundersen 21 the start31. Realistic expectations help management maintain a grounded business strategy while leading the network through its initial startup phase. Threats Unfortunately, there are a few threats to Fox Sports that could greatly affect a newly minted network. As mentioned previously with ESPN, the exodus from cable to streaming services threatens the profitability of the network. Just like ESPN, Fox Sports generates most of its profit from cable services fees. At its launch, Fox charged cable and satellite providers approximately $0.80 per subscriber32,33. While this is a far cry from the more than $5.50 ESPN charges, it is still more than three times as expensive as the Speed Channel that Fox Sports 1 replaced. Higher fees will only serve to push customers away but to remain competitive Fox Sports needs to generate strong profit. Additionally, streaming piracy threatens the solvency of a subscriber accessed streaming service. Piracy is particularly rampant with international soccer. In recent years, there have been large pushes and various campaigns by big names in Europe to stop illegal piracy of broadcast events. For example, FC Barcelona recently released a campaign indicating that illegal streamers hurt their clubs when they stream soccer matches34. Fox Sports garners a lot of support because of its rights to broadcast international soccer. However, these illegal streams from international sources threaten the fledgling streaming service Fox Sports Go provides. Lastly, the NFL recently announced that it would be flexing a NFL playoff game from NBC to ESPN. Consequently, NBC will receive a NFL Divisional playoff game from either 31 Pesca, Mike, dir. "Fox Launches 24-Hour Sports Network On Saturday." Host David Greene. Sports News. National Public Radio: 16 Aug 2013. Radio. 32 Cherner, Reid. "Fox Sports 1 not the usual new kid on ESPN's block." USA Today 12 Aug 2013, n. pag. Web. 29 Apr. 2014. 33 Flint, Joe. "Fox Sports 1 will launch with DirecTV, Dish and Time Warner Cable." USA Today 14 Aug 2013, n. pag. Web. 29 Apr. 2014. 34 FC Barcelona join the LFP's anti-piracy campaign. 2014. Video. FC Barcelona, Barcelona. Web. 23 Mar 2014. Gundersen 22 FOX or CBS alternating each year35. Not only does FOX lose a valuable ratings earner, ESPN will pick up a very profitable broadcast because the NFL wants to reach as many viewers as possible. The last thing FOX needs is to lose its most popular fan base to its biggest rival every other year. Fox Sports’ Game Plan From a mental and strategic standpoint, Fox Sports must come to grips with certain realities. Success is not determined by how well a company does in relation to another; rather, it is determined by how effectively a company achieves its own goals. Fox does not have to beat ESPN to be a successful network, but it does have to readjust its intended goals. Admitting it cannot beat ESPN in coming years is not necessarily admitting defeat or compromising its goals. It is being realistic in regards to the market conditions and the way the sports broadcasting industry is set up. The industry lends itself to multiple strong players and for years there has been talk about challenging ESPN. But there has never been action until Fox Sports came around. Ultimately, inaction led to ESPN building its empire and making it nearly impossible to topple. Executives have seen the profit opportunities abound and recognize that not even ESPN can dominate every single corner of the market36. The market is so vast that multiple players can make names for themselves and leave a legacy on the industry for years to come. Ultimately, this should be Fox Sports’ goal: to leave a lasting legacy as the company bold enough to take action. Additionally, Fox Sports needs to change its current philosophy regarding ESPN. There is currently a sense that Fox Sports is directly trying to attack the behemoth and seize its market 35 Chase, Chris. "ESPN to broadcast first ever NFL playoff game in 2015." USA Today 22 Apr 2014, n. pag. Web. 29 Apr. 2014. 36 Maese, Rick. "Can Fox Sports 1 challenge ESPN? Does it need to?" Washington Post 16 Aug 2013, n. pag. Web. 27 Apr. 2014. Gundersen 23 share37. Fox needs to readjust this mentality because trying to push fans away from ESPN and pull them towards their own network won’t work. At this point, it seems that the veiled attacks at ESPN are just buzz generators that get the attention pointed towards them. However, continuing down that path risks the chance that Fox Sports will alienate a giant fan base. ESPN fans are notoriously loyal, as previously mentioned. Any indication that another network sincerely wants to pick apart their Mecca of sorts can be taken as an affront to what they value. Furthermore, while Fox Sports shouldn’t expect to beat ESPN, it can eventually expect to exist on the same level as ESPN. But that involves a shift in their time horizon. It currently seems that Fox Sports expects to work on a 10-year time horizon38. In a world where television shows can last that long alone and major sports broadcast deals can last even longer than that, this time horizon is much too short. Particularly in the male demographic, ESPN holds a substantial lead over Fox Sports in terms of favorite channels39: Men's Favorite TV Sports Brands 37 Ibid. 38 Cherner, Reid. "Fox Sports 1 not the usual new kid on ESPN's block." USA Today 12 Aug 2013, n. pag. Web. 29 Apr. 2014. 39 Thompson, Derek. "This ESPN Slideshow Explains Why It's the Most Valuable Media Brand in America.” Atlantic. 15 Aug 2013: n. page. Web. 29 Apr. 2014. Gundersen 24 The lead looks insurmountable currently but with a longer time-horizon, Fox Sports can catch up if they target a younger demographic. Additionally, ESPN already holds significant first-mover advantages in areas like 3-D sports broadcasts that will cement its place in the changing television technology landscape so expecting a network to catch up in just 10 years is highly unrealistic. Fox Sports should think longer down the road and plan for that. On a more substantive level, there are a few things Fox Sports should consider to build its way towards the mountain. The sports broadcasting industry revolves around the ability to show live sports; it is the last of non-DVR television because of the excitement surrounding it and the constant unavoidable updates. Increasing its purchasing ability, aggressively attacking new contracts with major sports leagues, and promoting confirmed deals vital for Fox Sports40. Even though they have strong content currently, the network should not be content to settle. ESPN is the only network on television that ubiquitously owns broadcast rights to all major sports (Appendix III)41. Fox Sports needs to go after new content to provide fresh material for their viewers, as they stated the goal was when creating Fox Sports 1. They have the funding right at their fingertips in the form of Rupert Murdoch and his News Corp Empire. Murdoch is known for his journalism and broadcasting prowess and he undoubtedly sees the benefit in purchasing new content for his networks. Fox Sports already owns the rights to the Champions League; they should consider improved bids for the rights to La Liga, Serie A, and La Ligue to broadcast in the United States. BeIN Sport currently owns those rights but that network is only available in sports packages generally while Fox Sports 1 is available on a tier prior to that. 40 Cherner, Reid. "Fox Sports 1 not the usual new kid on ESPN's block." USA Today 12 Aug 2013, n. pag. Web. 29 Apr. 2014. 41 Smith, Chris. "Fox Sports 1 Set To Make Debut, But Will It Really Compete With ESPN?" Forbes. 16 Aug 2013: n. page. Web. 29 Apr. 2014. Gundersen 25 Reaching more households should consistently be an annual goal for Fox Sports. Even though Fox Sports 1 reaches about 90 million homes in the United States, this lags behind ESPN’s 100 million homes as well as the 100 million homes reached by ESPN2. Expanding to more households involves increased partnership with cable providers nationally and regionally. Lowering the price charged to carry the channel would make providers more receptive to negotiations and allow Fox Sports to meet its household goals. Furthermore, cohesion and chemistry amongst its studio analysts is a must. The reason SportsCenter has been the centerpiece of ESPN’s broadcast for so long is because of the popularity of its anchors. They combine charisma and individuality with cohesion and chemistry on the set that is currently unmatched in any other network’s counterpart. Fox Sports Live can’t expect to just throw big names onto the set and hope that they work well together because ego can be a major roadblock in sports and broadcasting. ESPN works because it has a farm system of anchors that learn and develop their own personal broadcasting style. Fox Sports needs to do the same: anchor a broadcast with a strong leader that can create cohesion among the star analysts the show features. On a more tangible level, there are three ideas that Fox Sports could utilize to help build its national personality and keep it on an upward trajectory. First, the network should consider adding a subscription-only service for Fox Sports Go. Currently, users must have access to a cable provider to access the streaming service. The same is true for most of ESPN’s content on the WatchESPN app. However, Fox Sports should consider charging a small monthly fee to customers who want access to only the streaming service and don’t care about the television network. This will help them draw viewers in that maybe don’t own a television or don’t want to purchase cable but still want access to sports. With a subscription, users could have unlimited Gundersen 26 access to content on the service 24-hours a day but also have access to games Fox Sports usually does not provide on the service. Additionally, some of the content they provide could be shown for free to draw customers in. Second, partnering with a current professional athlete to promote the network would benefit Fox Sports greatly. ESPN already utilizes hot topics and professional athletes in their one off “This is SportsCenter” commercials. However, Fox Sports should consider utilizing the power of social media. For instance, the image below from my personal Facebook feed illustrates an example: Russell Wilson is arguably one of the most popular current athletes in sports due to his personality and recent Super Bowl victory. He recently topped the NFL’s list of licensed sales for the year and garners huge media attention42. When news broke of a teammate’s new contract, Wilson shared the news on Facebook, but as the image indicates, he used a link to an ESPN 42 Badenhausen, Kurt. "Russell Wilson Is The NFL's Top Player For Licensed Sales." Forbes. 28 Apr 2014: n. page. Web. 29 Apr. 2014. Gundersen 27 article. Fox Sports should propose a simple partnership where an athlete shares stories of interest to them via links to the Fox Sports website thus giving the network more reach at a relatively low cost. Lastly, leveraging the popularity of sports video games should be considered. Some of the most popular games on a variety of consoles are sports games like FIFA, Madden NFL, and MLB: The Show. The games provide a realistic sports experience for users while also offering them control. Implementing a partnership with game developers to include Fox Sports as the coverage team during gameplay furthers the influence they can have on the public. Currently, ESPN has deals in place with EA that offers the developer access to ESPN personalities43. But from personal experience, ESPN does not promote this association enough to further their own brand. Leveraging in marketing requires constant use and activation on the part of the brand owner but ESPN seems to have just thrown the brand in to work for itself. In the end, one of the most important characteristics Fox Sports can have moving forward is the ability to know when to pull the plug. When the market is as dynamic as the television viewing public, networks must be able to analyze the strength of their content very quickly. Executives must pay constant attention to ratings for anchored broadcasts and commentary shows because this will be the meat of the content offered on the network. Live broadcasts can fluctuate greatly depending on the teams playing a particular night but anchored broadcasts depend greatly on the personalities of the show. Having the wherewithal to make a quick cut when a program is suffering is an important cost-saver and image-saver. It’s hard to overcome a first impression but letting that impression last by leaving faulty shows on air creates rippling costs. 43 Rovell, Darren. "Deal allows EA access to ESPN personalities." ESPN. 18 Jan 2005: n. page. Web. 29 Apr. 2014. Gundersen 28 Appendix I: ESPN SWOT Analysis Strengths Weaknesses Brand Recognition (ESPN and Disney Popularity of sister networks Financial stability Previous international failures Current monopoly (reach) Viewership outside of live events Bundling ability Pricing Popularity of personalities, commentators, announcers Broadcast content: NFL, NBA, MLB, MLS, World Cup, PGA Website Simplicity Opportunities Threats Disney Theme Parks connection Anti-bundling bill Use of ABC Network Fox Sports market entry WatchESPN Move from cable to streaming Share of Disney profits Rising broadcast rights costs Gundersen 29 Appendix II: Fox Sports SWOT Analysis Strengths Weaknesses Fresh perspective/options Anchors are relatively new to sports or Content: NFL, Champions League, unknown NASCAR, USGA, MLB Playoffs ESPN is already established as the Personality-driven: Erin Andrews, monopoly Terry Bradshaw, other color No first-mover advantage commentators Lack of developed analysis shows Financial stability Normal Fox Network placed behind Defined channel offerings ESPN in popularity Defined goals Opportunities Threats Fox Sports Go Move from cable to streaming Connection to Fox networks Streaming piracy Rupert Murdoch/News Corp Rising broadcast rights costs connection NFL utilizing flex to move playoff Strong marketing push at onset game to ESPN Lower costs for cable companies than ESPN Regional sports networks Gundersen 30 Appendix III: Current Network Broadcast Rights44 44 Smith, Chris. 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