FOX claims FS1 is 3rd among sports networks

[gtmoBlue]

There was another article this week detailing the subscriber losses ESPN is dealing with- like 10 million over the past five years. Not sure if that helps or hurts FS1 but it eventually has to catch up with the leagues and the rights fees being paid to them,right?

That is a good point Barley.

ESPN has pumped up bids to secure rights to several leagues - due in part to their top subscriber base and exorbitant carriage fees on Cable providers. Now with millions abandoning the good ship WWL, 2 points:

1) Cable providers will balk at continuing to pay high carriage fees as ESPN has lost substantial subscriber base. Subscribers may continue to leave the WWL, further eroding their cash flows and more importantly - reducing ESPN's ability to pay it's current bills and rights fees. Consumers can get all the other main sports players combined for less money. If either or both of the above occur - ESPN has big holes in its' revenues and cannot continue to offer "record" deals to leagues and conferences. Several articles state ESPN must pay out $6 Billion minimum to cover its' rights deals, but lost subscriber revenues now put their ability to pay these deals in jeopardy. Any additional losses could cripple their profitability and the ability to secure new rights deals. Disney, the conglomerate head - is looking for increased profitability from the WWL, not less. It appears Disney is not happy with ESPN's freewheeling style in inflating payouts in several league rights deals. We may have seen the apex in the amounts paid to various leagues?

2) 2 deals are coming due - Premier League soccer. ESPN was expected to bid heavily to regain this deal. Negotiations underway as contract expires this year. They lost out last go around to another competitor (NBC possibly). B1G 1st Tier rights coming due in 2016 (negotiations begin this year). Under ESPN-normal scenario, the WWL would prioritize and just outbid everyone else (with another record contract). Right now it is debatable whether they can meet current obligations of payouts with the continued shrinking subscriber base (add in that Disney may put a cap on additional outlays of rights fees n an effort to slow/stop profit hemorrhaging at the WWL). ESPN will probably skip the Premier League and attempt to renew their B1G deal. Bids will be lower than many in the business and many at the league level were expecting (B1G officials have been openly talking in terms of doubling their 1st Tier rights deal revenues- it was 10 years/1 Billion for the deal that expires next year). NBC, CBS, and Fox have deeper coffers and also have rebroadcast rights bucks up their sleeves. However, they may play cat n mouse and pump up bidding a bit to see if ESPN will gamble with it's corporate solvency in an attempt to remain the WWL. If ESPN defaults on rights fees payments, the networks can pick up the failed rights deals for 25-50 cents on the dollar. ESPN would also be subject to lawsuits from the league(s) if they don't meet contract specs. Leagues should have escape clauses should ESPN default on contract terms, allowing them to negotiate for a new tv network (albeit at a heavily discounted rate).

These 2 renegotiations - Premier League and B1G (1st Tier Rights) will set the tone for the coming decade. Expect lower bid offerings.

[stever20]

1 thing I did see- and can't remember where- but even though ESPN is losing some viewers, their subscriber rate has enough of a percent increase to where they are actually making more money off of subscribers than they were before.

Also another point- ESPN just redid a lot of their deals within the last year or so- that's how the SEC network got so many viewers so soon. So those deals will be going on for several years.

ESPN isn't defaulting on any contracts. That's just wishful hopeful talk quite frankly.

I'll say this- the one thing that I would be really nervous about is the ACC. I don't think there's a chance that ESPN does a network for them, nor let them take their rights to make a network. I think the ACC is in trouble big time in that regard.

[gtmoBlue]

Good points on 1 and 2 Stever. I read that article as well.

As for defaults...well that's another case, unless Disney decides to come to the WWL's rescue. The number of new deals and the fact that many of ESPN's rights deals are recently signed off creats the problem for meeting contractual payments. When flush with cash and subscriber base...money was no object. Now with a dwindling subscriber base, can ESPN continue to pay the freight? Perhaps with some shuffling of payments, instituting measures from clauses to reschedule or graduate payments upwards over the length of the contract...there are some measures which may be contractually allowed. Folks claimed the Titantic couldn't sink - in hindsight we know better. ESPN is capable of defaulting.

Conference networks appear to be Tier 2 rights. The ACC could go with another provider to launch a conference network. As noted with the B1G, PAC 12, others, conference networks are a separate package from 1st Tier TV. ESPN probably does not have access to Tier 2 rights with the ACC. If the ACC gave Tier 2 to ESPN as well - yes, they may have a problem.

[stever20]

Good points on 1 and 2 Stever. I read that article as well.

As for defaults...well that's another case, unless Disney decides to come to the WWL's rescue. The number of new deals and the fact that many of ESPN's rights deals are recently signed off creats the problem for meeting contractual payments. When flush with cash and subscriber base...money was no object. Now with a dwindling subscriber base, can ESPN continue to pay the freight? Perhaps with some shuffling of payments, instituting measures from clauses to reschedule or graduate payments upwards over the length of the contract...there are some measures which may be contractually allowed. Folks claimed the Titantic couldn't sink - in hindsight we know better. ESPN is capable of defaulting.

Conference networks appear to be Tier 2 rights. The ACC could go with another provider to launch a conference network. As noted with the B1G, PAC 12, others, conference networks are a separate package from 1st Tier TV. ESPN probably does not have access to Tier 2 rights with the ACC. If the ACC gave Tier 2 to ESPN as well - yes, they may have a problem.

The ACC gave ESPN everything.

[admin]

Title: "Disney stock plummets, and analysts are blaming ESPN"

Shares of Disney stock fell almost 9 percent at times on Wednesday, a decline CNN Money attributed to worries about ESPN.

http://www.washingtonpost.com/news/earl ... ming-espn/

[stever20]

Title: "Disney stock plummets, and analysts are blaming ESPN"

Shares of Disney stock fell almost 9 percent at times on Wednesday, a decline CNN Money attributed to worries about ESPN.

http://www.washingtonpost.com/news/earl ... ming-espn/

Just reading some stuff though- a lot of folks- are saying that this is a great buy low type of thing...

And this article is interesting.
http://www.cnbc.com/2015/08/04/walt-dis ... f-142.html
As of Tuesday afternoon, Disney's shares had gained about 30 percent year to date, boosted by news of upcoming "Frozen" and Star Wars sequels, making it the fastest-growing stock in the Dow Jones industrial average. The Dow, on the other hand, is down about 2 percent for the year.

[stever20]

Fox's stock has lost 13% now in the last 2 days as well.

Cord-cutting, if it comes about is going to impact Fox just as much if not more than Disney.