ESPN's plan for world domination seems to be going swimmingly because the network is now reportedly valued at an astonishing $50 billion.
Badenhausen begins by reminding us that ESPN is about to include an NFL playoff game into its long list of programming, a game that comes in tandem with the $15.8 billion ESPN committed over eight years to cover the league.
Now we get to the truly enlightening part of the report:
The NFL is the engine that makes ESPN go with year-round programming dedicated to America’s favorite sport, but the self-proclaimed Worldwide Leader in Sports has built an empire on the back of valuable programming across all sports that dwarfs any other network. The result is a company worth $50.8 billion, according to Wunderlich Securities research analyst Matthew Harrigan, who did a valuation analysis last month of ESPN’s parent Walt DisneyDIS +0.42% based on discounted cash flows (the Mouse House bought ESPN as part of its purchase of Capital Cities/ABC in 1996; Disney’s current market value is $137 billion). The Disney-owned ABC Network is a footnote compared to ESPN at a valuation of $3.2 billion, according to Wunderlich.
That's right. ABC is but a fraction of ESPN's value, and we now have a nice round number to toss around when considering the network's hold on the sports landscape.
Badenhausen notes there are just two other media companies trading higher than ESPN—Time Warner Cable and Twenty-First Century Fox—as noted, however, both of which are "conglomerates with a broad array of brands and assets."
That's all well and good, but when you are trying to stave off a budding network like Fox Sports 1, you need a healthy annual operating budget. Well, it seems ESPN is fat and giggly in that respect, too, garnering an estimated "cash flow" of $4.5 billion in 2014.
The reason is quite simple and echoed by Awful Announcing's Matt Yoder: ESPN yields a substantial sum from cable fees.
ESPN’s advantage over its network and cable brethren lies in the affiliate fee and ad revenue model that generates huge sums of cash. ESPN’s average monthly affiliate fee was $5.54 in 2013, according to SNL Kagan. The next highest national cable channel was TNT at $1.33, followed by Disney Channel at $1.15 and $1.13 for the NFL Network. ESPN2 is not far behind at $0.70 with ESPNews, ESPN Classic, ESPNU and ESPN Deportes each around $0.20 a month says SNL Kagan.
By comparison, Yoder points to the relatively young FS1 network: "Fox Sports 1, viewed as the biggest long-term challenger to ESPN, charges $0.23 per subscriber per month, more than 24 times less than ESPN."
In Los Angeles, there is SportsNet LA—a network at the heart of a bitter battle between Time Warner Cable attempting to get the channel into homes and those providers standing vigilant against what they consider to be an exorbitant fee.
Reuters reported on that very thing on March 28:
Pay TV operators have been vocal opponents of the rising cost of carrying sports, which they say gets passed on to consumers.
They've resisted paying SportsNet LA's monthly fee of more than $4 a subscriber, saying it is the highest for a regional sports channel. Cable industry insiders say the fee escalates to $5 per subscriber in later years.
In the case of ESPN, it's clear that cable providers have had to just sit back and merely accept a network that has become something of a living room expectation, nearly joining the major networks on the list of channels people just assume are included in packages.
The network has become so ingrained that you don't have to be a sports fan to recognize the programming, seeing SportsCenter or other fare pop up in bars, restaurants and other places that might catch the otherwise unlikely eye.
One of the more intriguing aspects of Badenhausen's report is that the bumper years don't seem to have an end in sight:
Sports programming remains one of the best bets on TV for advertisers because it is viewed live and commercials are not skipped with the push of a button. A study on time-shifted viewing habits by Discovery Communications DISCA +0.05% found that 94% of programming on sports channels is consumed live (it is even higher for live sporting events) compared to 70% on network television.
If ever there were a network worth the high fees, it would be ESPN or the like—a network pumping out new and exciting live programming.
So the network will continue to make money as fans continue to gobble up every last ounce of its programming.
While others attempt to wiggle into the space, ESPN proves it is more than merely an established and trusted entity. It's growing—and by remarkable sums.
The ridiculous part is that this is merely a precursor to next year's report when we will again exclaim at an outrageous sum of money garnered by the biggest name in sports.
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