Good morning,

It was another incredible week at Puck: Matt Belloni broke the news of a $50 million NFL-Netflix collaboration; Dylan Byers detailed the woes inside ESPN; Julia Ioffe revealed what’s really going on in post-mini-coup Moscow; Tina Nguyen and Abby Livingston spilled Capitol secrets; Bill Cohan spoke to Goldman Sachs insiders about the bank’s succession speculation; and Lauren Sherman documented all the fashionworld gossip about Alessandro Michele’s next move.

Check out these stories, and others, via the links below. And stick around for the backstory on how it all came together.

WALL STREET:
Bill Cohan has the inside story on the Goldman Sachs C.E.O. succession murmurs.

MEDIA:
Dylan Byers illuminates the panic inside ESPN.

HOLLYWOOD:
Matt Belloni breaks the news on the new Netflix-NFL deal.
and…
Jonathan Handel previews Hollywood’s wet hot labor summer.

SILICON VALLEY:
Eriq Gardner details Elon Musk’s latest legal quagmire.

WASHINGTON:
Julia Ioffe reports on what the Russian elite are whispering about Putin.
and…
Tina Nguyen and Abby Livington chronicle all the recess dish coming out of Congress.

PODCASTS:
Matt picks through David Zaslav’s latest headaches on The Town.
and…
Peter Hamby and I talk about Tucker Carlson’s brave new world (and Hunter Biden’s P.R. pandemic) on The Powers That Be.

Meanwhile, I also encourage you to take advantage of our article gifting feature. You can share our work with your colleagues, friends, and family. Subscribers are entitled to 5 article gifts per month.

The approximately $50 million transaction price was the latest sign that Hollywood has become enamored with sports documentaries. Half a generation ago, the brilliant minds of Connor Schell and Bill Simmons, among others, turned ESPN’s 30 for 30 franchise into a veritable TCM for sports. Their films not only tapped into deep fandoms, but they were also relatively affordable artforms by the standard of modern four-quadrant CGI or superhero content. The format was inevitably copied and expanded and eventually gave way to a cottage industry, from O.J.: Made in America and The Last Dance and Last Chance U to, more recently, Full Swing and F1: Drive to Survive and now Break Point.

The details that caught Matt’s attention, in particular, were twofold: it wasn’t simply that the NFL, which had long done business with the networks, ESPN, HBO and Amazon, was collaborating with Netflix; instead, more notable was the matter of the price. Not only is ~$50 million a lot for a non-fiction series, but Netflix outbid ESPN for the project.

On some level, the deal itself seemed like a harbinger of a larger transition in the industry, as the streamers ascend into the sports business and ESPN, the incumbent and once the greatest cable business in history, formally begins its retreat. As Matt put it elegantly in What I’m Hearing, “Ten or even five years ago, ESPN probably would have closed the deal, especially since ESPN/Disney is already an NFL partner. But here, Netflix was apparently considered the more appealing global platform—and Netflix isn’t suffering from cratering carriage and dozens of on-air talent layoffs just this week.”

My ESPN patronage has been juxtaposed by my formative years in the magazine industry—once one of the most stable elements of the media trade until, of course, it wasn’t. I was just a rake in my progress with Harold Hayes dreams when I beheld first-hand the end of the magazine subscription bundle, the rise of new platforms, and the flight of advertising—all of which led to the emigration of talent and the dissolution of the product. That professional horror story defined the early part of my career. Meanwhile, ESPN, with its dual revenue model of carriage fees (the fancy phrase for the amount of money that cable subscribers pass through to the network for the right to watch the channel) and advertising revenue (which roared as ESPN further expanded into live sporting events), seemed like the most heavily moated media business in human history.

Investors like to deploy the term pattern recognition to describe the ability to spot a trend in one industry and apply it to another sector. My early years in the magazine industry have, in my own psyche at least, made me fully attuned to spotting problematic and inexorable weaknesses in other media businesses. And that’s another reason why I’m so infatuated with what is taking place at ESPN.

Bankruptcy, as Hemingway once wrote, happens gradually, and then suddenly. That’s also genuinely true of business transformation in the digital age—everyone knows that the consumer behaviors are changing, but no one wants to effectuate the big changes and forgo the revenue attached to the old way of doing business until it’s too late. (Clayton Christensen, of course, articulated this phenomenon a lot better than Hemmingway.) To wit: Magazine publishers still received the majority of their revenue from print advertising long after their readers moved to digital. So when the demise truly came for print, they were left with little choice but to efficiently operate humbled businesses.

ESPN’s challenges are even more complex, and yet the fundamental arithmetic remains the same. As recently as 2020, according to Kagan Research, it made around $7.5 billion in annual affiliate revenue as some 80 million cable households paid $7 or $8 to ESPN whether they watched the channel or not. (As the legendary cable executive Tom Rogers once put it in Matt’s excellent podcast, The Town, the wonder of cable was that companies made a majority of their revenue from people who never even tuned in.) That same year, ESPN made around $2 billion in advertising, largely based on the expensive live sporting events that it broadcast.

Of course, we know how the rest of the story goes: cord-cutting accelerated; as Matt noted on Sunday, the streamers are investing more and more in sports, driving up the prices; the competition got fiercer as new entrants quickly divvied up the rapidly forming wagering industry, which ESPN abdicated. And, also of course, the executives at ESPN and Disney presaged all of this. Nearly two years ago, Dylan Byers reported that the top executives at Disney were contemplating an ESPN spin-off. His report moved the stock price, and wouldn’t be confirmed by the company for more than 12 months, until Bob Iger returned to the helm of Disney and announced that the network would be enacting plans to eventually spin out as a streaming platform.

In the end, the announcement also confirmed what many in the industry suspected: the executives at Burbank and Bristol countenanced the reality that ESPN would never be able to amass the revenue in the streaming universe that it had enjoyed in linear. The business would be smaller. The question is, by how much?

On some level, the future of ESPN is the question of our media moment, and it certainly finds its way into our work here at Puck. After you read Matt’s piece, I suggest that you find a moment to dig into Dylan’s latest story, Panic Inside Bristol, which illuminates the latest fears at the network in the wake of a recent talent purge. Indeed, we’re all rooting for ESPN’s transformation because it will likely create a paradigm for other heritage brands, like CNN, working out the same challenges. (And, sheesh, if they can’t figure it out… who can?) It’s the story of our time, and especially what you should expect to learn about in Puck.

Have a great weekend,
Jon