ESPN and Future Revenue Models

Very interesting and informative article on ESPN and how they operate. The purpose of the article is to show how ESPN is the current commanding factor in cable rights and cable sports and how that might change or stay the same is the shifting technological future. But as good as the article is - some important considerations slip through the cracks.

Early in the article they mention Aereo but only as an excuse to get in a few quotes from Barry Diller. Later in the article they mention that 898,000 consumers have fled the pay TV market but they don't explain that even with declining TV subscribers many of the big cable operators are still raking in cash because of the bonanza that is broadband. The article mentions ESPN3 but just as a throw away sentence in how "warehousing" is being handled.

What was not mentioned is how ESPN/Disney has already been way out front of competitors when it comes to broadband channels. Currently they have ABC News Broadband, Disney Connection, ESPN3, and SOAP Net. Those 4 channels can be purchased as a package for roughly $.50 per broadband subscriber but any broadband provider who wants to carry ESPN/Disney channels going forward MUST carry ESPN3 which at about $.20 per broadband subscriber is more than what ViaCom charges for Comedy Central as a standard cable channel. Think about that for a minute.

Many people look at the HBO Go product as a model going forward. HBO has insisted that HBO Go will only be available to subscribers from a traditional cable MSO or satellite provider. But what if that changes? Suddenly HBO has a product that is as attractive as Netflix or Amazon Prime or Hulu or the "cord-cutters". It could be a market that gets too rich for HBO to ignore under loyalty to the old model.

Same might be true for ESPN/Disney. Currently their broadband channels are only available through providers carrying their channel packages but what if once the dust settles with Aereo -  ESPN / Disney allows them to build ABC News Broadband, Disney Connection, ESPN3, and SOAP Net into their basic product offering for $.50 per subscriber? Small drop in the bucket when it comes to overall revenues but money is money. What if they enhanced that package by offering ESPN, ESPN2 and ESPNU for $10 per month? Suddenly we are talking different magnitudes of revenue.

The future will allow for many changes to today's TV model. The cable company may soon be just a "dumb pipe" provider and when that happens ESPN /Disney will be prepared.

They already are.

NBC Lands NASCAR

Some good details on what went into NBC landing NASCAR rights away from ESPN and Turner.

It should be noted that if ESPN did bid for the rights then according to the article NASCAR would have been looking for a 30 percent bump over the $270 million per year they are paying currently. That would have been $351 million per year or $3.5 billion over the 10-year life of the new contract. NBC will be paying $4.4 billion. What will NBC be getting for that extra $89 million per year?

Well for starters they also get the 6 races per year that Turner was carrying. You could look at it that NBC payed just $15 million per race per year for those races which isn't a bad deal but maybe more important is all the extra stuff that was included in the deal by NASCAR. NBC will be getting the following programming - most of which I expect will be broadcast on the NBC Sports Network:

- NASCAR practice and qualifying sessions
- The K and N Series
- The Whelen Modified Tour
- The Toyota (Mexico) Series
- The Hall of Fame Induction ceremony
- The end of year awards banquets

That's a lot of programming for the NBC Sports Network. When you couple that programming at night with NHL hockey games plus the Dan Patrick Show in the morning - all of a sudden the NBC Sports Network becomes a very attractive channel for the average sports fan (especially any with even cursory NASCAR or NHL interests).

This was a good deal for NBC and positions the NBC Sports Network channel very well in case a la carte programming becomes a reality.

Google Fiber, Net Neutrality and Just What Makes a Business Customer?

Some very interesting points and questions raised in this article.

I completely agree that not just businesses are running servers connected to the broadband. Just having a server is not a good way to help define business class service anymore. If you think of it even a set top box with DVR is a network server.

Even though the article doesn't mention it - even time of day parameters from the past don't work in the new Internet age. It used to be between 9-5:00 you'd have heavy business usage and then after that you'd start seeing heavy residential usage. That worked great for providers who wanted to serve both markets. But with more and more people telecommuting or working odd hours - that line is blurred beyond being useful in distinguishing types of users.

A business telecommuter doing emails, VoIP and the occasional video-conference is probably going to use less bandwidth than a home-schooled kid or a stay at home mom trading cooking recipes. New definitions are needed.