The dust has settled from the formal announcement of the blockbuster deal between ESPN and the NFL, with the league swapping NFL Network, linear rights to RedZone, NFL Fantasy and other content assets to ESPN for a 10% equity stake in the network.
This isn’t a traditional sports “trade,” in which teams exchange star talents or draft picks, but it evoked that feel: two powerhouse franchises trying to improve through strategic additions and divestitures.
With the caveat that the agreements could be a year from formal approval, let’s do what we normally would around any big trade and offer an evaluation through trade grades:
ESPN: A
As longtime Moffett Nathanson media analyst Robert Fishman simply put it, this is a “major win for ESPN.” The network is now fused at the hip with the most valuable league in sports, which is a heck of a hedge against the NFL ever even considering a split. That surety — along with NFL Network being added to its portfolio — turns into new leverage when ESPN negotiates distribution fees with cable companies or bundled streamers.
Most importantly, as ESPN launches its new direct-to-consumer service, it will have the tonnage of NFL Network content (on top of ESPN’s existing NFL coverage, which wasn’t exactly skimpy); the carrot of RedZone; access to NFL Fantasy’s huge database of super-fans and an “anchor tenant” of the most popular programming in sports.
(Remember, while the new ESPN DTC service is most valuable to fans who don’t have cable or a bundled streaming service, ESPN will be thrilled to have every fan with a cable or YouTube TV account consume their content directly through the network’s own app, at no additional cost.)
NFL: A
There are few deals in its long history in which the league doesn’t end up a big winner.
In this case, the NFL offloads media assets it has been trying to shed for years (NFL Network and the lease on the real estate that houses it), while retaining ownership of key elements like NFL+ and digital distribution rights for RedZone. It has a new partnership with a company highly motivated to give NFL Network even more prominence. It retained flexibility to continue to sell additional live-game packages (see below).
Last but certainly not least: The 10% equity could turn into a meaningful exit opportunity if and when Disney spins off ESPN into its own entity.
NFL Network: B+
It goes from a bit unloved within the league P&L to a new jewel in ESPN’s empire.
As The Athletic’s Andrew Marchand’s wrote last week: “NFL Network was plagued by cutbacks for years, even though the league is a multibillion-dollar juggernaut. ESPN is expected to invest in improving NFL Network programming, according to sources briefed on its plans. In the ESPN family of networks, NFL Network could be looked upon similarly to the SEC Network. The SEC offers programming 24/7 about the league, while ESPN, the main channel, dedicates significant airtime to it as well. The same sort of setup, with on-air personalities being used across brands, is very possible.”
As with any consolidation of two production companies, it remains to be seen how full staffing would be divided between ESPN and NFL Network, and how on-air talent at NFL Network will overlap with ESPN NFL talent.
Cable companies: B-
Already under some serious subscription pressure from cord-cutters and consumers who never bothered to sign up for cable, providers now have to navigate an empowered ESPN, which will include NFL Network as part of the bundle of channels it will require cable companies to pay for. Also, ESPN is now the distribution partner for RedZone, a popular cable up-sell.
One potential benefit: Because cable subscribers will get access to ESPN’s app and service without paying the $30 monthly DTC fee, those consumers might figure it’s worth it just to stick with cable, rather than cut the cord and have to cobble together a slew of individual subscriptions, all of which might roll up to more than what they’re paying for a cable or streaming bundle.
CBS, Fox and NBC: Incomplete
It remains to be seen if the NFL will exercise a “change-of-control” opt-out with CBS related to Skydance buying the network’s parent company, Paramount. Making things even more interesting, the NFL owns a piece of Skydance and has been a decades-long partner with CBS. (Yes, that’s now two partner networks in which the NFL has an ownership stake.)
Either way, all of the rights packages are up for renegotiation near the end of the decade. The three traditional broadcast partners have the inside track (and every incentive) to retain their NFL deals, and while they may keep their existentially relevant games, the price will undoubtedly go up with little in the way of a “hometown discount” beyond a track record of being good partners.
Netflix, YouTube, Amazon, Apple: A
Tucked away in the fine print of ESPN’s deal announcements was a subtle shift of game inventory that will leave the league with a small — but extremely valuable — cache of games that can be packaged for license to deep-pocketed streaming services. The league already has the Thursday night deal with Amazon, the Christmas deal with Netflix and, coming in a few weeks, its first game airing exclusively on YouTube. Apple has shown an appetite to spend on sports rights. If new games — probably international, but never underestimate the league’s creativity to create new TV real estate — are available, the streamers will want in. It would come at a premium price, for sure, but one they can all easily afford.
RedZone: A-
Scott Hanson fans, rejoice! The league will continue to own and operate RedZone. It’s a little awkward that ESPN got the “linear” (cable) rights to RedZone while the league held on to digital distribution and owner-operator status, but that just speaks to how beloved it is as a franchise.
If you purchase RedZone through your cable provider or a bundled streaming service like YouTube TV, that process shouldn’t change. If you don’t have cable or a YouTube TV-like streaming service, you will pay $30 for access to the ESPN service, then add NFL+ Premium, which will give you access to RedZone.
As a bonus, ESPN has the rights to the “RedZone” brand and, down the road, could creatively launch “the RedZone of …” anything.
NFL Draftniks: A-
In a side deal also announced Wednesday, ESPN’s role as a lead distributor of the NFL Draft — which in 1980 helped put ESPN on the map as a home for sports obsessives — has been extended through 2030 (which will be ESPN’s 50th anniversary of airing the draft), including daily TV coverage running from the end of the Super Bowl through draft weekend. If you hear “latest mock!” and it sounds like nails on a chalkboard, you can always open a different section of the app.
Fans: A-
The ESPN press release went heavy on consumer choice and convenience — which could be helpful if and when any government regulatory approval is sought. But the reality is that fans without cable or a bundled streaming service having access to ESPN’s NFL games, NFL Network’s games or any other programming is a good thing, so long as those fans want to pay the monthly $30 fee. (Keep in mind that if you are an existing cable or bundled streaming subscriber, you will eventually get access to the ESPN app’s live games without additional fees.)
If you aren’t a huge NFL fan, ESPN doubling down on an already-massive commitment to the NFL might not be your preference, but ESPN is hardly alone in its priorities. Could the NFL owning 10% of ESPN impact the quality of the network’s award-winning NFL journalism? Its newsroom has been navigating significant (even existential) corporate financial realities related to the league for decades; the new conditions are unlikely to meaningfully impact the way the network covers the league.
(Photo: Mike Carlson / Getty Images)
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