New York Post: What ESPN really wants from a new partner — and who the favorites are

Story from New York Post:

The strategic partner for ESPN is expected to come from the tech world — with companies such as Apple, Amazon, Google, Microsoft, Verizon and T-Mobile all on the radar, The Post has learned.

While those companies are all possibilities, the list does not end there. There is some level of interest from most of the major tech world.

The tech platforms are the clear direction Disney/ESPN is looking for as it seeks a minority investment, which Disney CEO Bob Iger first discussed publicly earlier this month in an interview with CNBC.

ESPN/Disney’s main motive is to improve distribution when it takes the full ESPN product direct-to-consumer, which sources reiterated likely will occur in 2025, but is expected to happen no later than 2026.

When it does occur, ESPN the mothership will remain available on cable television and cord-cutters will be able to stream it directly.

What one of the big tech or mobile companies could offer is improved distribution, which historically is how dominance in media is won, dating back to the first days of the printing press.

ESPN became the most powerful sports network in the world by combining its dual revenue streams of cable fees through national distribution and advertising. With the acceleration of cord cutting, ESPN is now in around 72 million homes.

With each household paying in the neighborhood of $10 per month, the company is still earning three quarters of a billion dollars per month in cable fees. That is still an insane amount of dough, but ESPN was once in more than 100 million homes.

That is why the idea of being pre-loaded onto iPhones or other devices to lead in the next frontier of distribution is appealing to ESPN. Apple is known to be very finickity in its negotiations, but if anyone could close a deal with Apple, it may be Iger, who was on their board.

Apple’s plan in sports is to have global distribution through subscriptions. The company began a 10-year, $2.5 billion deal with MLS this season.

In theory, this objective makes a lot of sense, but acquiring the rights to events — such as the NFL, NBA, MLB and college football — could take decades and there are no guarantees it will even happen.

ESPN already has the most rights deals of any company, which could, in practice, speed up Apple’s timeline. And ESPN would be able to handle the live-event and studio production, a division Apple does not currently have.

Though Apple makes a lot of sense as a partner for ESPN, they are not alone. As CNBC previously reported, ESPN has spoken to major sports leagues including the NFL, NBA and MLB.

Maybe those leagues become an option, but distribution with a small equity stake in ESPN is likely where this will end up.

With Disney probably valuing ESPN in the $40 billion-$50 billion range, it would mean a company would need a $4 billion or $5 billion buy-in for a 10 percent stake in ESPN.

The tech companies are the ones with the keys to distribution and the vaults to pay the entry fee. ESPN has rights to the most major sports programming and the workforce to produce them.

No deal is close, but the tech companies should be considered the favorites.

Last week, we reported in this space that ESPN hoped to put “The Pat McAfee Show” on radio. Sources said that is not happening, at least not when McAfee begins in the fall. ESPN could revisit the plan a year from now. … We need to study Joey Votto more, but this week he showed more evidence that he could be a TV analyst when he stops playing. Votto received a lot of publicity for his Mad Dog-like rant on Chris Russo’s “High Heat.” Ultimately, the question may be if Votto wants to be involved in broadcasting after he retires. He doesn’t have to. He already has career earnings that exceed a quarter-billion dollars, according to Baseball Reference.

… Good Karma Brands will sell the advertising for ESPN Radio and the network’s podcasts. The two companies have developed a deep relationship through local radio, and now will expand that nationally. “It is very much the model that we have in New York and LA,” Good Karma founder and CEO Craig Karmazin said. … In April, in this newsletter, we said to “watch Colorado” potentially leaving the Pac-12 for the Big 12. That came to fruition next week.

My podcast partner, John Ourand, and his colleague Alex Silverman reported that Apple TV+ and MLS were approaching 1 million Season Pass subscribers prior to Lionel Messi’s debut. A source with knowledge of the number pegged it at around 800,000.

Without seeing all the data, it is hard to totally figure out if that is a good or bad number for the early stages of the 10-year deal.

MLS declined to confirm the numbers, but a spokesperson did go on the record about the amount of Apple TV+ MLS subs that are from season-ticket accounts. The spokesperson said that approximately 135,000 season ticket accounts get the free subs. Most estimates, including ours, have been more than double that, as the previous understanding was it was for each season ticket. But a family of four with four season tickets would just count as one account. There is also a promotion through T-Mobile, which is giving away an unknown number of one-year subscriptions.

Regardless of where the subscription numbers stand now, they figure to go up with Messi on board and receiving a cut. He posted an ad for the subscription service to his nearly half a billion followers on Instagram.

If just one percent of his 481,000,000 followers signed up for the service, that would increase the amount of subs by more than five times.

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