Fox to Create New Network It Sees as Rival for ESPN (New York Times)
Fox to Create New Network It Sees as Rival for ESPN
By RICHARD SANDOMIR and AMY CHOZICK
For Rupert Murdoch, creating a national cable sports network in the United States to compete with ESPN has been his white whale — a tantalizing television opportunity but one of the few fields that his media empire has not conquered.
But two decades after shaking up the sports broadcasting world for the first time by acquiring N.F.L. rights, Murdoch has plans to challenge ESPN head on and claim some of the lucrative revenue that the sports media giant has had largely to itself for more than three decades.
On Tuesday, Fox will announce its intention to start Fox Sports 1, an all-sports network, in August.
The channel will carry Nascar races, Major League Baseball games, college basketball and football, soccer and U.F.C. fights. It will also broadcast studio shows, including one that is to be hosted by Regis Philbin, a celebrated Notre Dame fan.
Murdoch’s effort is a long shot to topple ESPN, or at least take a huge bite out of it.
ESPN brings in more than $6 billion annually from its industry-high subscriber fees. It owns the rights to televise Major League Baseball, the N.F.L., the N.B.A., Nascar, tennis, myriad collegiate conferences, the Bowl Championship Series and its new playoffs, and a raft of other sports. Both ESPN and ESPN2 have 98.5 million subscribers.
It is a true empire, with eight domestic cable channels; the ESPN3 broadband network; the Web sites ESPN.com and Grantland.com; a radio network; digital properties like ESPNw, which focuses on women’s sports; a magazine; the WatchESPN app, which enables viewing of ESPN on computers, smartphones and tablets; and ownership of the Global X Games, college basketball tournaments and seven bowl games.
Fox Sports 1 will join a market that is far more crowded than it was when Murdoch first contemplated squaring off against ESPN. Not only will Fox face the dominance of ESPN, but NBC and CBS have their own sports channels, which are struggling for viewers and identities. The Big Ten and Pacific-12 Conferences have created their own networks, and the Southeastern Conference is planning one. And in the past decade, Major League Baseball, the N.F.L., the N.B.A. and the N.H.L. have started their own channels.
Still, Fox and its parent, News Corporation, have a companywide faith in sports as a DVR-proof way to attract viewers — especially young men — and a belief that their new sports channel will differentiate itself from the competition, as the Fox News channel has demonstrated in its successful challenge to CNN and then MSNBC. To ensure that Fox Sports 1 has some of the style and attitude that Fox Sports has had since it began in the mid-1990s, Murdoch and Chase Carey, News Corporation’s president and chief operating officer, brought back one of their favorite executives, David Hill, for its creation and launch. Hill, the former head of the Fox Sports Media Group, left the division last year for another job within News Corporation.
“We think sports is a huge arena that has room in it to build a really attractive businesses,” Carey told analysts on an earnings call last month. He said that the company recognizes the escalating costs of sports rights but “in a world of increasing fragmentation, we think sports continues to be a more and more important and unique part of that overall landscape.”
The channel’s success might not have to come as a result of beating ESPN at its game.
David Bank, managing director of global media and Internet research at RBC Capital Markets, said that Fox Sports 1 would be a success “from Day 1” and could, in future years, bid against ESPN for N.B.A. rights and any cable package of N.F.L. games that might come to market.
“Do I expect them to be ESPN? No,” he said. “Mega-success will be hard to determine for five years.”
But, he said, “Rupert and Chase have had a pretty decent run at building long-term value.”
Michael Nathanson, an analyst at Nomura Securities, wrote in a recent report that Fox Sports 1 would be a “good start” for News Corporation but was “unlikely to make a material dent to ESPN’s business for the investable time horizon.”
One way to measure Fox Sports 1’s future success will be how many subscribers it gets and the subscriber fees it can accumulate. Fox has spent months working to convert Speed, a motorsports-centric network with 81 million subscribers, to Fox Sports 1. A companion service, Fox Sports 2, will replace another niche channel, Fuel.
Fox is seeking substantially more for Fox Sports 1 than the 31-cent monthly subscriber fee that Speed gets, according to the media research firm SNL Kagan.
Bank estimated that Fox Sports 1 will probably charge cable, satellite and telephone companies 75 cents to $1 a subscriber. “At $1 a sub, it’s a massive home run,” he said.
By comparison, ESPN charges $5.15 a month and additional fees for its other channels.
“We view Fox as a formidable competitor,” said John Skipper, ESPN’s president. “They’ve got the resources of News Corp., and the willingness that Fox has shown in the past to take big bets and to create a difference.”
He added: “We like our hand. We just have to play it well.”
Fox is certainly asset-rich. It plans to use existing long-term deals to fill Fox Sports 1 with M.L.B. games, including some from the league division series, beginning in 2014; Nascar Sprint Cup and truck races; U.F.C. matches; future World Cup soccer matches; and Big 12 and Pac-12 football and basketball games, as well as those from a basketball conference that is being formed by the seven Catholic universities that are leaving the Big East. The new network is also expected to buy some Big East games from ESPN.
Fox also has 22 regional sports networks to plumb for talent and some of its baseball programming. Two of those regional channels, each in Los Angeles, recently lost the rights to carry the Lakers and the Dodgers — each to networks created by Time Warner Cable. But last November, News Corporation made a major foray into the New York sports market by paying about $2 billion for a 49 percent stake in the YES Network, the profitable channel of the Yankees, with an option to buy up to 80 percent in three years.
Still, the possibility of starting a national sports network constitutes unfinished business at Fox.
In the late 1990s, Fox tied a package of M.L.B. games and a news operation with Keith Olbermann as the star anchor on its regional sports channels. It failed. Recalling that time, a former Fox executive said, “It was Chase’s vision that we’d use the regional sports networks to transition into a national sports network.”
Then, in 2004, Murdoch tried to create a national channel in partnership with the N.F.L. and cable operators. At the time, Murdoch said, “We want to consider the capacity of pay television subscribers to pay for two ESPNs.”
But that effort never got off the ground, and he has waited nine years to make his next move.
Sports will become even more integral by this summer, when News Corporation splits into two publicly traded companies. The company’s newspapers, including The Wall Street Journal and The New York Post, will join a publishing-based company that will retain the name News Corporation. The 20th Century Fox studio, Fox Broadcasting, Fox Sports, the cable channels FX and Fox News and the regional sports networks will form the Fox Group.
News Corporation has recently grown its sports business in the United States and abroad, making live sports programming central to the Fox Group, executives have said.
In the past year, News Corporation paid $335 million to complete its acquisition of Singapore-based ESPN Star Sports, previously a joint venture with the Walt Disney Company, and $757.6 million to broadcast Indian Premier League cricket through March 2018 on its Star TV channel.
“Across the whole sports portfolio, it’s about making choices about where you want to invest and where to prioritize,” James Murdoch, the deputy chief operating officer of News Corporation, said on the earnings call last month.
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Fox to Create New Network It Sees as Rival for ESPN (New York Times)
