ESPN boss on the challenges of launching ESPN Plus and how he's putting the new streaming service into 'every deal' for sports rights now
- ESPN president Jimmy Pitaro explained, at an event hosted by the Paley Center for Media on Thursday, the challenges of launching ESPN Plus when he was one month into the job.
- "We had a lot of pressure on us to make sure that we had the breadth of content that we believe represented ESPN," he said.
- The rights negotiations proved particularly challenging because the company didn't want to eat into ESPN's core cable operations.
- ESPN is now weaving the streaming service into deals for the overall sports network, while also competing against cash-rich tech companies like Amazon for rights.
- Pitaro argued Disney's massive distribution machine will be key to win over leagues like the NFL, NBA, MLB, and NHL.
- "How many of our competitors can bring theme parks to the table?" Pitaro said.
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Jimmy Pitaro stepped into the top job at ESPN one month before Disney rolled out its first subscription-streaming bet in sports in April 2018.
One of his biggest worries, aside from whether the app would work, was whether there would be enough sports programming available on the platform to compel people to sign up and pay $4.99 per month.
Pitaro was leading Disney's consumer products and interactive media division when much of ESPN Plus was architected. But, in his new role as president of ESPN, he, along with Kevin Mayer, who was elevated Direct-to-Consumer and International chairman around the same time, would ultimately be responsible for the service's success or failure.
The standalone subscription was Disney's first big bet on the future of TV beyond linear TV. It set the stage for the forthcoming launch of Disney Plus and Disney's bid for control of Hulu.
"We had a lot of pressure on us to make sure that we had the breadth of content that we believe represented ESPN," Pitaro said in a conversation with ESPN anchor Hannah Storm at the Paley Center for Media on Thursday. "To be honest, there wasn't a ton available ... We had a lot of it already for the traditional side of our business."
Protecting ESPN's cable business was as important as getting the new streaming service off the ground.
Pitaro didn't want to cannibalize ESPN's cable channels by launching the streaming service, so those rights were off the table. The service was meant to complement the programming already airing on ESPN.
Disney's media networks, as a whole, were responsible for 42% of the company's $15.7 billion in operating income in 2018, and 46% in 2017. The company doesn't break out ESPN's financials.
But ESPN was estimated to have generated $9.9 billion in operating revenue in 2018, 3% up from the year before, by Kagan, a media research group within S&P Global Market Intelligence. Three-quarters of that operating revenue came from the fees distributors like Comcast pay to carry ESPN, which is estimated to be far and away the most expensive channel in the cable bundle.
"We want to be careful not to fix one problem and create another," Pitaro said. "We say, we have to protect the core."
ESPN Plus launched last April with a smattering of sports including collections of regular season baseball, hockey, and soccer games, as well as boxing and tennis matches, golf events, and college sports. Pitaro credits head of programming and scheduling, Burke Magnus, and the rights acquisition team with landing those deals.
ESPN is weaving the streaming service into all its rights negotiations, today.
The team is now programming for ESPN's TV networks and the subscription-video app simultaneously.
"Every deal that we're negotiating right now, we're focused on including an ESPN Plus component," Pitaro said.
Disney inked a deal last May with UFC to bring the fight sport to both ESPN's cable channels and ESPN Plus. The deal was reportedly valued at around $300 million per year for five years.
Combat sports were key for ESPN Plus, Pitaro said, because they have an obsessive, young fanbase.
"We thought, in a world where there's so much churn in general because there's so many opportunities - again, infinite choices - we have this younger, passionate, diverse audience that we can bring in to ESPN Plus," Pitaro said. "Made a ton of sense for us."
ESPN has also been using platforms like Snapchat, Instagram, and TikTok to help its on-air talent connect with younger fans, like influencers build relationships with their audiences on those platforms.
It's unclear whether ESPN Plus will live up to the legacy of ESPN.
As of June, a little over a year after ESPN Plus launched, the service had 2.4 million subscribers. Time will tell whether it can ever live up to the legacy of ESPN.
Disney's direct-to-consumer and international business posted a $553 million operating loss that period, more than three times the loss reported a year earlier. But that also included investment costs tied to the launch of Disney Plus this coming November.
Disney's distribution machine will be key to competing with Amazon and others for sports rights, Pitaro said.
Moving forward, Pitaro said Disney's massive distribution machine will be key to helping it compete for rights against cash-rich tech companies like Amazon and Facebook, who have been vying for the streaming rights to NFL, MLB, and other matchups recently, on top of sports broadcasters from CBS, Fox, NBCUniversal, and WarnerMedia's Turner.
Disney aired two broadcasts on the NFL Draft this year, for instance. One on aired on ESPN and one on ABC. "The NFL said to us, what's most important to us is expanding our audience," Pitaro said. The ESPN broadcast analyzed the player moves and ABC went for viewers' heartstrings, interviewing parents of the players and uncovering their backstories.
Disney also opened an NBA Experience at Disney Springs, part of Disney World, in August. "How many of our competitors can bring the theme parks to the table?" Pitaro said. (Comcast's NBCUniversal also operates theme parks.)
In the end, Pitaro thinks the rights negotiations will come down to Disney's relationships with the leagues, reach, and production value.
"You have to ask a lead commissioner whether they'd be willing to take less money for better production, etc.," Pitaro said. "But it also has to do with reach, scale ... I very much like our hand."
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