ESPN in the cross hairs - Entertainment and Sports Programming Network, marketing strategy - Company Profile - Statistical Data Included

Brandweek, June 11, 2001 by Megan Larson

WITH SLACK RATINGS CRANKY ADVERTISERS AND A PACK OF HUNGRY RIVALS, CAN THE PREMIER SPORTS NETWORK STAY ON TOP?

It's May 14 and the news meeting for the 11 p.m. SportsCenter is half over when talk turns to "the question of the night," a sports-related query that viewers respond to via espn.go.com. After a quick debate about why the New York Mets suck, the big question becomes: What team will Chris Webber, currently a power forward for the Sacramento Kings, play for next?

"There is no way he will get the kind of money the Kings pay him," says producer Rob Guijarro, suggesting Webber might stay with the Kings.

"Michael Jordan might take him," ventures someone else, adding the Washington Wizards to the list of possibilities.

Perhaps taking a cue from the fact that the dozen or so guys--along with director Linda Willhite--in the room are batting the topic around like a bunch of beer guzzlers at a backyard barbecue, coordinating producer Ed Schimmel asks, "Shouldn't we set it up more like a barroom debate? Ask people where they would like to see him go?"

The scene is the very essence of the Bristol, Conn.-based ESPN. Here, confidence is king and testosterone tints the discourse as staffers one-up and out-stat each other, opining on the game.

"We create an inclusive environment for our viewer--a group hug of sports fans," says Lee Ann Daly, ESPN's vp of marketing and the creative force behind the irreverent SportsCenter campaign. "This network was founded by fans, and we still position ourselves as fans."

And so it has been from the day in 1979 when Bill Rasmussen decided to launch a 24-hour cable sports network just so his fellow Connecticut sports fans could watch U Conn. basketball on TV. A hefty dose of cockiness--remember, these are the guys who sued Major League Baseball for not allowing them to air games on its younger network sibling, ESPN2--has spurred ESPN's rise to its current status as the premier sports network.

The ESPN brand name is recognized worldwide--even Antarctica gets reception. Domestically, it is one of the most profitable cable networks in operation, generating $537.6 million in cash flow in 2000, according to Paul Kagan Associates. In recent years, that success has given birth to three additional networks: ESPN2, ESPNNEWS and ESPN Classics. It's also spawned a magazine, a Web site, a radio network and a popular restaurant/arcade chain.

Considering ESPN's achievements, a certain level of attitude is probably warranted. But success typically breeds rivalries. And ESPN, once a singular force in sports on cable, now has its share. Fox Sports Net, Outdoor Life and Speedvision come to mind. Then there are the likes of MSG Network and Comcast SportsNet. And if that's not enough, there are entertainment networks such as Turner Broadcasting, which covers Wimbledon and the National Basketball Association.

As ESPN approaches its 22nd birthday in September, these rivals are increasingly stealing audience and breaking down ESPN's lock on programming rights. The question now is whether ESPN can maintain its brash elan while staying ahead of the pack.

The answer, if you look at this year's performance as a barometer, is not as predictable as it once was. ESPN's ratings growth has turned south as the economy continues to sputter. And, industry sources say, the cable channel may not meet its budget this year.

Both ESPN and ESPN2 have slipped in household ratings so far in 2001. ESPN, currently in 82 million homes, has fallen 13 percent in ratings and 8 percent in delivery to a 0.52 rating (423,000 households), according to the most recent reports. The network largely lost ground with men 18-49, slipping 9 percent to a 0.48. ESPN2, in 77 million homes, also dropped 9 percent among 18-49 males, to a 0.21.

But both channels managed to grow or at least maintain ratings among young male demos, according to ESPN's analysis of Nielsen Media Research data. ESPN grew 10 percent among men 18-24, to a 0.53, and 4 percent among men 18-34, to a 0.59. ESPN2 showed a 14 percent increase among 18-24-year-old males, to a 0.16, and a 5 percent gain among males 18-34, to a 0.20.

As audience levels dip, however, ESPN remains the most expensive cable network in terms of advertising rates and carriage fees--a point not lost on media buyers or cable operators. "ESPN still reaches a fair amount of men, but does that justify their [CPM] increases? It's questionable," says Tom McGovern, director of sports marketing at OMD/USA. He notes that the History Channel, for example, delivers the same demographics as ESPN.

Even in the fiscally bleak months of January and February, ESPN was No. 1 in ad revenue among cable nets. Last year, the channel earned $1.5 billion in revenue, and Paul Kagan projects that it will take in an additional $100 million this year.

"We try to negotiate with advertisers in terms of how we can move their business rather than what CPM they're going to pay," says Ed Erhardt, president of ESPN/ABC Sports sales and marketing. He adds that 40 percent of advertising deals are multimedia packages across the ESPN/ABC Sports combined platform.