Welcome back to The Varsity. I’m John Ourand. And what a week it’s
been. We now know that ESPN will launch its direct-to-consumer app two weeks from today—a milestone that sparked deals with the NFL and WWE. We’ll tackle the most important aspects of those covenants down below. I’m also going to break some news about various other rights deals that are in the market.
🚨Before we begin: Puck is partnering with our friends at MoffettNathanson on a
sports media conference in New York this fall that we’re calling “In the Arena,” on October 16. The event will feature serious hitters in the business—Adam Silver, Michael Rubin, Gerry Cardinale, Derek Chang, and many more—in extremely candid conversations
with yours truly and my Puck partners, and will be the place to find out exactly where the industry is headed.
Pod alert: Josh Pate made some news earlier this week when he teamed up with On3/Rivals and Yahoo on a college football show. Pate will address that move, plus a host of topics affecting the college sports business, on The Varsity this week. Also, make sure to listen to yesterday’s newsy episode, when WWE president Nick Khan gave a play-by-play on the WWE’s negotiations with ESPN on their new deal. |
Player of
the Week: Jen Pawol
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Kudos to Jen Pawol for breaking through MLB’s gender barrier. During this
weekend’s Marlins-Braves series, she’ll become the first woman to ump a regular season baseball game. What took so long? After all, the NBA broke this barrier 28 years ago and the NFL hired its first full-time female official 10 years ago. |
Down to the
J.V.: Jerry Caldwell
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I feel bad for MLB and Fox, who had big plans around last Saturday’s Speedway Classic baseball game
in Bristol, Tennessee, only to have the game postponed to Sunday because of rain. Look, bad weather is bad luck. But Jerry Caldwell, president of the Bristol Motor Speedway, was seemingly caught off-guard by the rain-out, and ran low on food and beverages for the crowd amid Saturday night’s delay. Caldwell told the Bristol Herald Courier that the event “didn’t come off exactly the way we wanted it,” which is a stunning admission from someone who regularly hosts NASCAR
races. |
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- NBC, Versant near USGA renewal: The USGA is close to re-upping its rights deal with NBC, several sources told me, which would keep the U.S. Open and U.S. Women’s Open on the broadcast network, USA Network, and Golf Channel. The new agreement, expected to be announced later this month, also marks Versant’s first sports rights deal. The Mark Lazarus–led company, which is comprised of former NBCUniversal cable channels, officially spins off later
this year.
Terms have been tough to nail down, but the USGA is expected to get close to the $93 million annual average that Fox paid 12 years ago. Remember, Fox signed a 12-year, $1.1 billion deal for these rights, which included all USGA championships, in 2013—around the time that it launched FS1. It needed programming for its new channel, which was one reason why it outbid its broadcast rivals for that package. In 2020, Fox decided to leave golf and allowed NBC to pick up the package
for around $40 million per year.
Notably, sources said that Netflix put forward a serious bid for the rights, which fits with the streamer’s strategy of getting more involved in sports—particularly eventized tentpoles, like a major championship. Netflix, of course, has a hit golf-focused reality series, Full Swing, and produced a one-off golf tournament, The Netflix Cup, a couple of years ago from Vegas. ESPN, CBS, and Warner Bros. Discovery also kicked
the tires on a USGA deal, but apparently none at the level of Netflix. - More “eventizing” at Netflix: Netflix is also in the middle of high-level talks to pick up Japanese rights to the World Baseball Classic next year, several sources told me. The talks are serious, though a deal announcement is not imminent. Fox Sports holds the U.S. rights. Notably, the deal would put Netflix in business with MLB, which owns the event.
It’s easy to
see why Netflix would be interested. World Baseball Classic games drew massive TV audiences in Japan in 2023, equivalent to NFL playoff games in the U.S. Japan won the event that year, with Shohei Ohtani striking out his former Angels teammate Mike Trout for the final out. Japan’s win against Italy in the quarterfinals had a TV audience of 38 million viewers.
The Japanese advertising company Dentsu, which currently holds the rights, would still have
a solid relationship with MLB if the event lands elsewhere, I’m told. News that Netflix is negotiating with MLB is significant, especially following ESPN’s decision to exercise an out in its package, which includes Sunday Night Baseball, the Home Run Derby, and wildcard playoff games—all of which could feed the streamer’s eventized fetish. - The WWE sweepstakes: The most surprising announcement of the week came Tuesday morning in the
form of ESPN’s five-year, $1.6 billion deal for WWE's Premium Live Events—WrestleMania, SummerSlam, Royal Rumble, etcetera. WWE president Nick Khan joined me on the Varsity podcast yesterday to explain how the deal went down.
The whole interview is worth a listen, but I was most interested in Khan’s discussion of WWE’s 10-year, $5 billion
Netflix deal, which kicked off earlier this year. When I asked if there was anything different about his experience with Netflix, Khan brought up the international marketplace. “Years ago, when I was an agent at CAA and helping to represent WWE, Netflix executive Brandon Riegg said Netflix wasn’t entering live. But when it does at some point, he said we should make sure that WWE’s international media rights deals are lined up, because Netflix is going to want the majority of the
international rights. … Our international ratings are up everywhere. In certain countries, we’re up, like, 1,000 percent…”
Khan went on: “What we decided years ago here at WWE was you can’t just pipe out American content internationally and expect that people are going to show up. Around 40 percent of our Premium Live Events this year took place outside of North America. And our audience, whether it’s at 3 p.m. ET or midnight, shows up. Another aspect that’s exclusive to WWE, because it
is sports entertainment and not just a sport: Our delayed viewership is significant. People want to see the storyline play out, and why that person won the match is as important as the outcome of that match. Live viewership is significant. But delayed viewership is significant, too.”
Meanwhile, don’t cry for Peacock. NBC had the right of first refusal and the opportunity to match ESPN’s $325 million-per-year offer, but decided to pass on the opportunity given that it was significantly more
than the $180 million or so per year they were paying. And its big sister has plenty of wrestling: NBC has a relationship with WWE, including Saturday Night’s Main Event and its weekly Friday show, SmackDown, which is on the Versant-owned USA Network. Keep your eyes open for WWE and NBC to expand that relationship in the coming months. - On the potential ESPN-NFL ethical dilemma…: I appeared on a bunch of radio shows and podcasts
yesterday to dissect the ESPN-NFL deal, and they all eventually asked the same question: What will happen to ESPN’s journalists and correspondents now that the NFL is taking a 10 percent ownership stake in the company? So I rang one of those journalists, the Pulitzer Prize–winning Don Van Natta Jr., and put that question directly to him. “Of course I’m concerned, but I’ve had assurances from everyone who I work with that nothing will change,” Van Natta said. “I am deep into an
investigative project about the National Football League, and I believe it will be published just as it would’ve been published before the NFL became a part owner of ours.”
Since ESPN hired Van Natta in 2012, he has written stories about plenty of subjects that angered the league office, such as sexual
harassment allegations against a Cowboys executive, Robert Kraft’s push to get into the Hall of Fame, and Roger Goodell’s desire to resume play after
Damar Hamlin collapsed. In fact, ESPN has an investigative team filled with top-notch reporters who pursue stories about all of ESPN’s business partners, like Tisha Thompson, Paula Lavigne, Seth Wickersham, the Fainaru brothers, and T.J. Quinn. “Hard-charging, tough-but-fair investigative reporting has always been greatly valued at ESPN. And I have every expectation it will continue to be,” DVN
told me. - Connolly strikes back: Justin Connolly, the well-liked, former Disney executive who sparked a legal war when YouTube poached him to be its head of media and sports, has now filed a countersuit. According to my partner Eriq Gardner, in his must-read private email What I’m
Hearing+, “Connolly is accusing Disney of stiffing him on vacation wages accrued over his 25-year tenure, an alleged violation of California law, which allows you to cash out when leaving a company.” It’s tough to discern the strategic play here, apart from what could be a decent payout. But after watching his long-term Burbank friends and allies go nuclear on his decision to leave, it appears that Connolly sees value in going on offense, even in this modest way.
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Now on to the main event… |
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There may not have been a lot of suitors for the NFL’s media assets, but
Disney found a way to get what it needed while the league preserved its optionality. |
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More than four years ago, the NFL hired Goldman Sachs to manage a sales process for the league’s
media assets—the NFL Network and its small portfolio of games, NFL RedZone, its fantasy sports platform, etcetera. And the Goldman bankers arranged for the league’s top executives—Roger Goodell, Brian Rolapp, and Hans Schroeder—to meet with just about every big media company, traditional players and streamers alike. The consensus: Everyone wanted to be in business with the NFL, especially if it conferred leverage in rights-renewal
negotiations or improved game schedules. But they all got cold feet when they performed due diligence on the media company’s underlying economic value.
The NFL Network was losing subscribers, like all cable channels. Moreover, there was concern over its package of live games. The network’s affiliate deals mandated that it had to carry at least seven NFL games or else cable and satellite operators had carte blanche to drop the channel.
In order to get comfortable with a
deal for a declining asset, some media executives hoped to extend the network’s live game package to 20 years or even longer—basically tacking on a decade extension. It may have seemed like a pretty severe mechanism for downside protection, but these companies just weren’t willing to risk billions, especially given the state of the media business. Given the nine-figure value of a single NFL game, this seemed like a long putt for the league. |
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In the end, ESPN negotiated an NFL Network game package that runs through the 2032 season.
Importantly, unlike with the NFL’s outside media partners, the league can’t opt out of the NFL Network’s package of games.
Most deals die of age, and it sure seemed like this one died many deaths before Disney C.E.O. Bob Iger announced yesterday that his company would acquire the NFL media assets in exchange for a 10 percent equity stake in ESPN. What changed during the intervening years? With this deal, Disney, which kicked the tires on NFL Media for years, saw a way to
simultaneously buttress its cable business, protect its linear viability, and assist the launch of the ESPN streaming service. The deal also represented a practical attempt to resolve a previous ambition.
When ESPN signed its most recent NFL contract in 2021, the network wanted to experiment with two Monday night games on some nights—one on ESPN and another on ABC. It also secured an exclusive game for its ESPN+ streaming service. But the plan never really took hold, and ESPN
felt (correctly) like it was cannibalizing its own audience by having two games on one night. Three years later, the league and ESPN decided to go a different route. ESPN segmented one single game to Monday Night Football with Joe Buck, Troy Aikman, and the Manning brothers.
That left three extra games from the MNF doubleheaders, which will be moved over to NFL Network. It will also move the ESPN+ game to
NFL Network and signed a new licensing deal for three additional games that will air there as well. These moves will take effect after the deal closes next year. “It just felt like there was a much better opportunity to take those games and redeploy them on the NFL Network into exclusive national windows, and then build from there,” Schroeder told me. “That was really our primary focus.”
Concerned about the effects of taking highly rated NFL programming off the broadcast schedule, Disney
increased the number of times that it can simulcast MNF games across both ESPN and ABC. Previously, ESPN’s NFL contract mandated that only three NFL regular season games could be simulcast on ABC. That figure will be increased to six after the deal closes. So ESPN gets to move some food around the plate to solve its challenges, which is becoming a hallmark for media conglomerates as they manage the streaming transition. And unlike other media companies, ESPN ostensibly likes that the
NFL Network’s media deal is locked in through 2032—it’s a great way to ride out cable while simultaneously being on a cap table with an entity that is almost single-handedly buoying linear.
As for NFL Network, its schedule will remain at seven games, and as part of that move, four games will return to the NFL, presumably for extremely lucrative redeployment elsewhere. Schroeder said that the league hasn’t made a firm decision on how it would package those games, adding that they could be
added to the Sunday afternoon window, or be part of the league’s growing international slate. “We have time to think through how we could use those games,” Schroeder said. |
On ESPN’s WWE deal: “One can’t help but notice that ESPN’s WWE deal, valued at
$325 million annually, is at a price close to the difference between ESPN’s $550 million annual spend and the $200 million annual fee they reportedly wanted MLB to accept for the final three years of the deal. Is $325 million the new price floor that Rob Manfred can sell to owners as salvaging what remains before MLB has another bite at the apple in 2028?” —A media executive
More on ESPN’s WWE deal: “Stunning move for ESPN to grab the WWE PLEs. They
essentially reallocated the MLB and F1 money for year-round marquee programming for a certain population. It still seems a bit underpriced as a year-round programming to prevent some churn.” —A Varsity subscriber
On the ESPN hiring tree: “With the hiring of Damon Phillips at FanDuel Sports Network, it appears C.E.O. David Preschlack, a former ESPN executive, has slowly built up an executive team of high-profile ESPN alumni. Phillips
joins a team that already includes chief revenue officer Eric Ratchman, president of production and programming Norby Williamson, and head of marketing Chris Brush. At a time when Main Street Sports Group’s hold on R.S.N. relationships has been stabilized, yet lacks long-term guarantees, it will be interesting to see how this company, flush with ESPN alumni, competes against ESPN, which has a desire to expand locally, starting first with
baseball.” —A media executive |
Have a great weekend. See you Monday,
John |
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Finally, a media podcast about what’s actually happening in the media—not the oversanitized,
legal-and-standards-approved version you read online. Join Dylan Byers, Puck’s veteran media reporter, as he sits down with TV personalities, moguls, pundits, and industry executives for raw, honest, sometimes salacious conversations about the business of media and its biggest egos. New episodes publish every Tuesday and Friday. |
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An essential, insider-friendly Hollywood tip sheet from Matthew Belloni, who spent 14 years in the trenches at
The Hollywood Reporter and five before that practicing entertainment law. What I’m Hearing also features veteran Hollywood journalist Kim Masters, as well as a special companion email from Eriq Gardner, focused on entertainment law, and weekly box office analysis from Scott Mendelson. |
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