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 A new streaming channel planned by ESPN, which sources
familiar with the plans said would be widened to include other
sports, is an early step that could upend the traditional cable
and satellite companies if it leads to more consumers cancelling
their pay TV service.
Cable and satellite providers pay Disney and Time Warner richly
for their sports-heavy content. ESPN executives insist they are
committed to the current pay TV system, and that any programming
sold directly to consumers will complement rather than compete
with the content available through pay TV packages.
But others said the streaming channel could have the same kind
of transformative effect on sports programming that Netflix Inc
has had on dramas and sitcoms.
"This is the first crack in the structure of the television
business that has been in place for decades," said Forrester
analyst Jim Nail.
Under the new deal, ESPN will make a limited number of regular
season NBA games available on the streaming channel, the sources
said. The offerings will be expanded to include other sports,
they said. The sources could not speak on the record because
terms of the deal were not public.
ESPN said in May that it was considering selling online access
to live Major League Soccer games to consumers without pay TV
subscriptions.
The network said in a statement on Monday it has a framework in
place with the NBA for the streaming service, and that the
league would have an equity interest in the product.
ESPN offered the equity interest to the NBA as an incentive for
the league to choose the streaming service - rather than a new
programming partner such as Fox - for certain games, the sources
said. The games being made available are those not already being
shown on television ESPN and Turner as part of the rights
renewal package, they said.
NBA DEAL
Disney and Time Warner Inc's Turner Broadcasting System will
more than double their annual payments to the NBA under the new
nine-year deal, people familiar with the matter said.
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Starting in the 2016-17 season, the two networks will pay more than
$2.5 billion, an increase from $960 million per year in the past
agreement. Over nine years, the deal could be worth upwards of $22.5
billion.
ESPN paid a bigger share than Turner because its deal includes
international and radio rights, as well as WNBA games, according to
people familiar with the matter.
"It is really good economically for the company," Time Warner Chief
Executive Jeff Bewkes said at a conference hosted by Hollywood
website The Wrap.
"As I watched the market today, I think they got it wrong," Bewkes
said. Time Warner shares fell 1.2 percent on Monday to close at
$73.82.
The agreement comes just days after satellite provider DirecTV
agreed to pay $1.5 billion a year to extend its exclusive contract
to sell its "Sunday Ticket" package of National Football League
games.
Both deals are a reminder of the unique allure of sports programming
for TV networks, whose non-sports lineups have been losing viewers
to streaming services such as Netflix or are being watched on
digital video recorders that allow users to skip commercials.
ABC and ESPN, both owned by Disney, will televise 100 regular-season
games per year, and TNT, which is owned by Turner Broadcasting, will
televise 64, the NBA said.
ESPN said it will increase its NBA-focused programming with 750 new
hours of content.
The NBA's current eight-year deals with ABC/ESPN and TNT expire at
the end of the 2015-16 season.
(Additional reporting by Jennifer Saba and Sai Sachin R; Editing by
Sriraj Kalluvila, Dan Grebler, Bernard Orr and Ken Wills)
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