NFL returns, ESPN’s big streaming bet & more

Note: Transcripts are automatically generated from episode audio, and are not fully corrected for spelling, grammar, and formatting.

Andrew Marchand: Bob Iger is one of the great executives of all time. However, he also was great because he had ESPN, which at one point had a third of the Disney profits coming from ESPN and revenue, and he was able to use that to buy a lot of things. So you become a lot smarter when you have money and you could make deals and you get Pixar, and all those other deals that he made that were very smart. But the difference between sports and something like Netflix is that they own Stranger Things. In sports you don’t really own much, you lease all these things. And so that makes it a little bit more complicated because they change and you kind of have to keep paying the piper to make it work. And so far streaming has not, in sports, it’s not proven as a success.

Bob Safian: That’s Andrew Marchand, Senior Sports Media Columnist at The Athletic. We’re at a special moment in the sports calendar with the NFL kicking off this week, the finals of the US Open, and WNBA and MLB playoffs fast approaching. I wanted to talk to Andrew to unpack the biggest stories in sports business right now, from ESPN’s high stakes equity deal with the NFL, to streamers like Amazon and Netflix battling it out with traditional networks, to the impact of sports gambling. It’s a fun, fast-paced primer to ring in the start of fall game day viewing, including lessons on what business leaders outside of sports can learn from leagues and teams. So let’s get to it. I’m Bob Safian and this is Rapid Response.

[THEME MUSIC]

I’m Bob Safian. I’m here with Andrew Marchand, a Senior Sports Media Columnist at the Athletic and host of his own twice-weekly podcast at Andrewmarchand.com. Andrew, thanks for being here.

MARCHAND: Yeah, it’s my pleasure. Thanks for having me.

SAFIAN: So this time of year is busy for sports fans. You’ve got the start-up of the NFL and college football, European soccer leagues, the end of WNBA regular season, the last sprint for the Major League Baseball, US Open is underway, plus the start of the NBA and NHL seasons on the horizon. It’s like a feast. For someone who covers the business of sports, is it just as busy right now? Do you get to enjoy it as a fan or is there too much happening?

MARCHAND: Yes, it’s kind of interesting for what I do. I think the NFL and college football, when we talk about viewing, is the most watched, by far, especially the NFL. So there’s a little bit of a bigger focus on their broadcast and the actual games. Last year, Tom Brady with his $375 million contract, made his debut and then did the Superbowl. For what I do, it’s kind of interesting. The off season is a lot of times a bigger deal when a lot of the deals are made. And so this past summer we had ESPN making deal after deal with the NFL and wrestling, and then the big UFC deal with Paramount+. So it’s been busy, but I’m fortunate because I love it.

Copy LinkThe NFL’s massive $110 billion media deal

SAFIAN: We’re recording this the day before the NFL opener, the Philadelphia Eagles against the Dallas Cowboys. What defines a successful season for the NFL as a business this year? Or is that already locked in because of the deals that they’ve done?

MARCHAND: Yeah, it’s locked in. When they did their original deals where they added Amazon Prime Video on Thursday night, for Thursday Night Football, and then went with the traditional carriers from ESPN to Fox, NBC, CBS, those deals were, for 11 years, $110 billion. So every year they know they got a lot of money coming in. They can opt out of those deals at the end of the decade, and they probably will, because even though that’s a crazy amount of money, there’s probably more to be had.

There’s always something interesting and the NFL is always doing deals within their longer term contracts. Last year, we had Netflix on Christmas, the double header, and then this year the big one is going to be this upcoming Friday, YouTube, that’s going to be available to everybody with YouTube. You don’t need YouTube TV, no subscription. And what kind of number that does from Brazil. You have defending AFC Champion Kansas City Chiefs with Patrick Mahomes, Travis Kelce, who I’ve heard got engaged.

SAFIAN: Yeah, I heard that somewhere.

MARCHAND: You heard that?

SAFIAN: Yeah.

MARCHAND: So that could be a thing. I don’t know if Taylor Swift’s going to make it down to Brazil. For me, seeing any new platforms or when Big Noon kickoff, which is the pregame show for college football for Fox, going up against College Game Day, they made a deal with Barstool, which is very interesting to watch that first weekend. And so all those things pique my interest.

Copy LinkThe potential for an international NFL team

SAFIAN: You mentioned the game in Brazil. The NFL is playing, what, seven games internationally this year? Obviously they want to expand their brand, but what do they expect to get out of having these… I mean, we’re not going to see an expansion team based abroad one day. Or are we?

MARCHAND: I don’t think it’s out of the question. I mean, not in the near term. I don’t think it’s happening in the next five years, but could you see a team in London at some point? Could at some point there be a European league or a division where you play in Europe? They want to get global. We’ve talked about the numbers that I said earlier, the 110 billion, that’s just domestic market. So when you think about the opportunity globally, it’s out there.

The NFL has been a little bit behind the other sports.  Baseball’s an international sport, hockey’s international. The NBA has done a tremendous job over the decades too, really. So Europe, and you see so many players now from different countries in the NBA. So the NFL has been a little behind. And so yeah, the goal is, I know this is going to be a shocker to everyone listening with the owners, it’s about money. It’s about money. Yes.

SAFIAN: It’s about money.

MARCHAND: Yes, they’d like to make more money. I’m not as bullish about the globalization of the NFL. It’s only additive, but I don’t know if it’s going to be the number one sport in Europe at any time soon.

SAFIAN: It’s a hard sport to travel in Europe, especially with the passion they have for their version of football, for what we call soccer, right? I mean, that is the big business there.

MARCHAND: Yeah, I mean if you look at globally, who has the best avenue, globally it’s soccer, because first off, the dominant countries are not the US. So they’ve come into the US market over the last 10 years. NBC has done a tremendous job with the Premier League, and then we see Champions League on Paramount+ and CBS, and Fox has had the World Cups for years and years, now Netflix is going to get involved in a couple of years with the women. But soccer really, to me, because of the market, coming into the US market, it’s very popular already. You go to an elementary school, you have kids, you see so many soccer shirts, and kids can watch those games in the mornings on Saturdays and Sundays as opposed to a baseball game, the biggest games are, generally speaking, late at night. And so I think soccer, when you talk about globalization, really is the leader.

Copy LinkWhy ESPN gave the NFL a 10% equity stake

SAFIAN: I have to ask about the deal between the NFL and ESPN. ESPN acquiring NFL Network, Red Zone and NFL Fantasy in return for a 10% equity stake in ESPN. It seemed a surprising number to me. Did it surprise you? Why did this deal make sense?

MARCHAND: Well, number one, the reason it made sense for the NFL is because, again, they’re going to get 10% of ESPN, which is about a 25 to $30 billion company at the moment, so that’s a great equity stake. For ESPN, I think the larger issue for them is that the most dominant force in American viewing entertainment is the NFL. I mean, if you look at the history of ESPN, they were eight years old in 1987 when they first got the NFL. And that deal, they got eight games a year, regular season games, and that deal allowed them to change their relationship with the cable carriers and charge more. And they used that as a sledgehammer for years and years, and why it’s probably the greatest business model in sports media history, ESPN’s cable-slash-advertising model that has been eroded a little bit because of cord cutting and cord nevers of people not having cable anymore.

And so they’re kind of trying to repeat history with their streaming service.  They got three more games, so they have 28 games per year on their service. And then it needs to go through the regulatory process. And so that’s always in question. These days you don’t know what’s going to happen. And they want to make their app, which they just went direct to consumer for the first time, so you do not need another subscription, $30 a month, to have ESPN. They want to make it so if you’re a sports fan, you have to have it in some form, but they don’t care what form. Any form. And so that’s why it makes sense.

I had equate it to the Ukrainian Minerals deal.  I don’t know if it’s going to work, but would you like the NFL to have a 10% interest in you going forward when you’re competing against the traditional players in the YouTubes and Netflix? You probably do. Is it a perfect deal for you? Probably not. But the NFL has that type of leverage.

SAFIAN: Yeah. Yeah, right, because you have an ownership, but you’re going to do business with everybody, you’re not just going to do business with ESPN. Although I guess ESPN hopes you’ll do more business with them.

MARCHAND: In theory, it might tip the scale a little bit, but again, the $2.7 billion per year that ESPN already pays the NFL for Monday night football, and they’re going to have a Super Bowl next year, they’re get a playoff game, you’d think that would tip the scale more than anybody else pays. Now you give them another 10%. But again, I think the deal made sense for Disney and ESPN because long-term there’s no, if somehow they were ever to lose the NFL, I mean it would survive. There’d be an ESPN, it just wouldn’t be ESPN. To maintain being ESPN, the leader in sports media, you need the NFL on your side. So them taking a 10% cut might be the cost of doing business and in theory helps you.

SAFIAN: You mentioned that ESPN finally released their sort of long awaited streaming app, where you can get all their primary broadcast channels, even if you’re not a cable subscriber. A lot of folks are like, “Why did that take so long? This was inevitable.” Was it a more complicated decision than that for ESPN Chief Jimmy Pitaro and you know ESPN owner Disney? Or was it just like getting the technical pieces in place?

MARCHAND: So the biggest factor is, number one, their cable business still shoots off $1 billion a month before you even sell an ad. Now, they spend a lot in, we talked about the NFL contracts. They have billion dollar contracts all over the place, so there’s a lot of spending that goes into it. So that’s number one. Number two, those deals they had with the cable and satellite and YouTubes, YouTube TV, they didn’t allow them to do this to offer the programming. So if you notice the pricing, what ESPN takes in for cable wholesale is $15.

So that gets passed down to consumers at a price from your cable operator, Comcast, Charter, whoever. And so this is priced at $30. I don’t think it’s… I did a big story on Jimmy Pitaro and decision-making, all this, and he said it was more of an art than a science, but I point out in the story, it’s double, so it’s 30 and 15. So yeah, it might be art and science, but the reason for that is because when you have cable, for people like me, who had cable growing up and grew up on cable, but people turn off these things.

And so if you have ESPN direct-to-consumer and you’re a big SEC football fan, and they have all the SEC, so it’s a great deal for you. For 30 bucks, you get all your SEC football, that’s all you care about. But then come January, you might turn it off and then, “Hey, I’m going to go in nine months and I’ll turn it back on in September when the season starts, and I’ll only have it for four months.” You’re paying $120, which is probably less than what cable costs for a month for the whole year. And that’s a really good deal for you. So that’s churn that they have to account for.

So I think that’s the reasoning behind why it’s taken this long. And I think there’ll probably be even more of an iteration. I mean, Jim Pitaro kept saying to me, “This is the first inning.”

SAFIAN: Yeah, well, they probably figure, in the long run, they can, at least they hope, make more money on this than they were making in the old model, right?

MARCHAND: I think obviously they hope that. The old model was so good because, in 2011 they had 100 million people who subscribed to cable and then ESPN was on the basic cable, so anybody who had it, so if you don’t like sports, you were paying for it.

So can you match that business model? I mean, that was an incredible… If you look at Bob Iger is one of the great executives of all time, media executives. However, he also was great because he had ESPN, which was, at one point, a third of the Disney profits were coming from ESPN in revenue, and he was able to use that to buy a lot of things. So you become a lot smarter when you have money and you can make deals, and you get Pixar and all those other deals that he made that were very smart. But I don’t know if you can match that going forward.

Netflix obviously has proven that, but the differences between sports and something like Netflix is that they own Stranger Things. In sports, you don’t really own much. You lease all these things. And so that makes it a little bit more complicated because they change and you have to keep paying the piper to make it work. And so far, streaming has not, in sports, it’s not proven. I mean, it might be the future, but it’s not proven as a success.

SAFIAN: As a fan, like you, I’m sort of straddling. I’m not a full cord cutter. I’ve got everything. And I feel like, as a football fan, I get confused sometimes about which games are on which services. There’s YouTube and Amazon, ESPN and CBS, and Fox, whatever. Is it just going to be that way for a while and are fans just going to keep paying up for all of these different services?

MARCHAND: I think the leagues have to be careful. If you make it hard for people to find your games, eventually they might not find them. You look at, let’s say the NFL ratings. During the season, they get somewhere between 12 and 30 million people watching different games. Postseason, by the league championships, conference championships, they have 50 to 60 million. And the Super Bowl, they get 100 million.

So there are people who are kind of coming in for the bigger games. And when you lose those fringe people because you make it so difficult to watch and they don’t think it’s as important, again, it’s not going to go degrade tomorrow, but over time, I think you see that, and this is a huge thing, and I really do, and I’ve said this for years now, but is TikTok, X, Instagram. I mean, those are your competition. Your competition for your podcast is not just another podcast that’s like yours, it’s people’s time. 

SAFIAN: Absolutely.

MARCHAND: Thank you for listening, who are listening right now, but they’re choosing to spend time with you. But you’re competing with everything. And I think younger people… When I was a kid, if you want to watch Michael Jordan, you had either, he’s on NBC at one o’clock, you had to watch that game, you got to watch it. If you got to go to the bathroom, you better go quick because there’s no DVR. And you got to, if he does something great and you want to see it, you got to see that now. If you missed it, maybe you could watch your local news, they’ll give you a big highlight. You could watch SportsCenter.

Those are basically how you could watch it. Now, I could be going out, taking a hike with the dogs, not watching the game. LeBron James does something, look at my phone and it’s on 10 different ways. I didn’t have to spend the time. And I think, again, older people, maybe it doesn’t affect as much, but younger people, you get trained to that, do you really need to watch the games? That’s where they make the most money. And that’s why they’re definitely trying to expand with sports betting and other factors to alleviate that going forward.

SAFIAN: Sports is clearly big, big business. With ESPN, shelling out 2.7 billion to the NFL, plus giving up a 10% stake to the league, you can see the power of the audience engagement. And yet nothing is for certain in today’s media world. So is sports gambling really the best way to lock in live viewers? How does the WNBA stack up as a league? And is baseball struggling or strong? We’ll talk about that and more after the break. Stay with us.

[AD BREAK]

Before the break, The Athletic’s Andrew Marchand talked about the start of the NFL season and the strategy behind ESPN’s bold new plans. Now we dive into the WNBA, sports gambling, and what business leaders across all industries can learn from sports leagues today. Let’s get back to it.

Copy LinkCaitlin Clark and revenue prospects for the WNBA

Two leagues reaching their season’s crescendo, the WNBA and Major League Baseball. I wanted to start with the W, playoffs just over a week away. Massive bump in ratings last year after Caitlin Clark entered the league, but she’s been out injured much of the season. How is the W doing this year, especially given the high expectations coming in?

MARCHAND: Yeah, it’s doing well. I mean, the ratings have been good. Even without Caitlin Clark playing, I think the attention that she’s brought to the league has increased its popularity. And they have a lot of really good players in college. I mean, the advantage that they have, as opposed to the NBA now, is that a lot of the players stay for three, four years before they go to the WNBA for a bunch of reasons. One is you can make good money in college, and the WNBA, you don’t make as much money. I mean, they still do because all the endorsements still come over, but in terms of the actual salaries, they’re not great as of yet.

So those stories develop, and so people watch college and then these women come to the pros and you get to see them, and you kind of know their stories. As compared to the NBA, where even a Cooper Flag at Duke got to the final four last year, one and done, his story didn’t really develop fully. And now he’s in the NBA, and maybe he’ll be great his rookie year and it’ll be a big deal, but usually there’s a learning curve. He’s only 19, I think. So WNBA though, I think is, they’re well positioned, and especially if Caitlin Clark can come back and start hitting threes and making no look passes, because she’s just different to watch.

Copy LinkIs baseball underrated?

SAFIAN: So baseball, MLB is finalizing a media rights deal with ESPN and NBC. Are we expecting another eye-popping deal for baseball?

MARCHAND: No. This one’s a little weird because, so ESPN had an opt-out. They had a deal for the next three years where they owed $550 million a year. When they made the agreement, it was a seven-year agreement, MLB wanted an opt-out. ESPN said, “We’ll take an opt-out.” So they opted out of their agreement at the beginning of this season for the final three seasons. Most networks, this is kind of dumb by MLB because most networks don’t want three-year deals. $550 million for what ESPN had, which was Home Run Derby, the Sunday night baseball regular season games, and then eight to 12 first round playoff games every year, $550 million was a great price for MLB to have.

And so they opted out. Now it looks as if NBC will get Sunday Night Baseball in those playoff games for around $200 million, and then Netflix is going to be around $50 million. So that’s 250 million. They were getting 550, so that’s a $300 million loss over three years, almost a billion dollars less than what they were going to get.

So what they’ve turned around and done is they have a framework agreement not signed yet with ESPN for $500 million for MLB.TV, which is your out-of-market game. You’re in New York, you’re a Dodger fan, you want to watch a Dodgers game, you get MLB.TV, that will move over to ESPN for $500 million. So they’re trying to make up some of that difference. But in 2029, all their deals that, start of that season, all their deals are up. They’ll probably do very well because they’ll be able to auction off the World Series and all the playoffs.

SAFIAN: So it’s more deal-making, it’s not that there’s kind of a weakness in MLB compared to other leagues, other sports?

MARCHAND: I would say baseball’s very strong. They have not handled their media rights well. Baseball’s super popular. I think baseball gets a bad rap. People act like young kids don’t play it or don’t like it. Nope, go to most places around the country, they’re getting at the least 15 to 20,000 people, in a lot of places, 30 to 40,000 people a night for 81 home nights.

SAFIAN: For a lot of games.

MARCHAND: Yeah, 81 home nights. That’s a lot of people. There’s not that many things in our society that does that. And so baseball, I don’t know. I think they’re going to try to follow that NBA model to try to make more games national. Maybe that works. I don’t think it works as much with baseball as it does with the NBA, because the NBA is driven by stars. And so people want to watch those stars, not necessarily the teams. Baseball’s driven by teams, and it’s just a different type of game, and there’s just so many games as well.

SAFIAN: I’ve got to ask you about sports betting. I grew up as a fan in an era where gambling on sports was like a dirty side hustle, right? Now, it’s ever present, it’s in broadcasts, it’s in the live experience. We’ve seen players investigated in multiple leagues for gambling on games. We’ve also seen players taking abuse from fans because they’ve lost bets. Where is all this headed? Is it net good? Is it net bad? Is it just net changing?

MARCHAND: Yeah, I think it’s a slippery slope. Every talk show and podcast and whatever is basically sponsored by gambling these days. I don’t know where it ends up. And again, a lot of people will be able to do it responsibly, but you’re going to have more and more people losing their houses.

SAFIAN: But this genie is not going back in the bottle, right? I mean, there is no momentum for it moving the other way, particularly.

MARCHAND: There isn’t, but I will say it’s been slowed down. If you look at the valuations of the Fan Duels and the Draft Kings, they’re still huge. However, Texas, California haven’t legalized it. And so those are big states that, they want to get into those states, and the fact that it’s not legal in those states, there’s a lot of people that don’t have the option to bet legally.

Some of the states have done it smarter than others because some of them just, they look at it as a great way to raise taxes. It’s helpful, but again… And then if you make it too high, the people who, your real big bettors are just going to find their book-… The bookies are still out there. They’re going to find their bookie and just say, “I’m not going to pay big. I’m not going to pay the taxes. I’m just going to go with my guy, make my bets.” And I don’t know what’s the criminality of it, but it’s hard to see how you could get in too much trouble because it’s illegal to begin with, you’re just not going through… Obviously that’s illegal to do. I think people would like to do it on their phone, that’s a very easy way to make a bet. And I think most people probably want to do it legally, if they can. But yeah, it’s a slippery slope.

Copy LinkLessons for business leaders from the modern sports world

SAFIAN: So listeners to the show are business leaders largely outside of sports. Are there things that business leaders outside of sports can learn and should learn from how leagues and teams manage brand, talent, audience? And vice versa, are there things that you think sports executives should adopt that others are doing?

MARCHAND: I mean, I think well-run businesses and leagues are similar, but what I see in sports a lot is, I think sometimes people make decisions for the press release or how it’s going to be received. And I think my advice covering sports for three decades and covering baseball, Mets and Yankees and media is every decision you should make, you should not care what the reaction’s going to be. Just make the right decisions. Because I just think when I’ve seen people try to, “We’re going to change the narrative, we’re going to do this, we’re going to do that,” I just think long-term, that’s not a good way to make your decisions, and it just makes you have lack of discipline.

And look, there’s some really great business leaders and there some that aren’t. And generally speaking, what I’m describing are the ones who aren’t, because the people who are confident, who know what they’re doing, who have a plan, generally just they trust themselves. And if they don’t win the press release that day, or if people say, “Well, I don’t understand that move,” well, give them three to five years. Because at the end of the day, for leagues and teams, especially teams, the fans are going to like you if you win. And it’s not necessarily fair because there’s a lot of factors that sometimes are out of your control. You might be a great NFL coach, if you don’t have a quarterback, you’re not going to be an all-time coach. Bill Belichick is an all-time coach, but he did have Tom Brady.

SAFIAN: You can’t keep everybody happy. Right? I mean, when I talk to executives in the sports business, they talk about how much of a fishbowl it feels like that every decision you’re making is being judged by fans as good and bad, and mostly bad.

MARCHAND: Yeah, but the one thing I would say, I always just point this out. When I covered the Yankees, Joe Girardi would have to talk to the media before and after every game.

SAFIAN: Yes.

MARCHAND: The Exxon Valdez drops oil into the ocean, a terrible catastrophe. And I don’t know if the head of Exxon had to do a press conference, and he or she definitely didn’t have to do it every day for a 100-

SAFIAN: Day after day after day. Right.

MARCHAND: And answer question after question.

SAFIAN: Yeah.

MARCHAND: And so that’s why it’s different.

SAFIAN: Andrew, this has been great. Thanks so much for doing it.

MARCHAND: Yeah, thanks for having me. My pleasure.

SAFIAN: Andrew’s point about the daily media attention put on sports managers is well taken, but I think his larger point is that leaders across the board should be doing the right things regardless of that media attention. Don’t get distracted by the immediate gratification of winning the day, because building a winning franchise is a long-term proposition.

I want to double-click on two of Andrew’s earlier observations. Sports is often cited as an analogy for business, but we can miss the big lessons. When Andrew talks about the NFL, he emphasizes that there’s a scarcity of games. For any business, value is directly related to the specialness of your product or experience. Yes, you want to grow, but you have to know what makes you special and use that to grow.

That brings me to his second point about Major League baseball. Baseball doesn’t have the scarcity of games that the NFL does, but what it does have is huge cumulative audiences in person, over 81 games at each home stadium. Any business can get distracted by metrics that make someone else successful, but each enterprise needs to focus on the metrics that matter most in their business model.

What sports shows more than anything is that there’s so many ways to win. That if you’re creative, if you keep pushing, and if you have the resilience to go through losses and strikeouts and airballs and come back better and stronger, that that’s really what differentiates the dynasties. I’m Bob Safian. Thanks for listening.