“We’re no longer in the TV business,” he said. “But a multimedia sports and entertainment company.”
The ESPN business model is frequently cited as the gold standard inside parent Disney. Mr. Bodenheimer acknowledged that the recent restructuring of its executive team, to focus on platform-agnostic media possibilities, was “in keeping with [Walt Disney Co. CEO] Bob Iger’s lead.”
The three keys to building ESPN’s business model have been to aggressively seek multimedia rights in its contract negotiations with sports leagues; build up an arsenal of compelling branded content; and harness technology that has enabled ESPN to enter, among other areas, the cellphone space.
Mr. Bodenheimer emphasized the importance of ESPN Mobile, the company’s recent move into being a mobile virtual network operator (MVNO). The ESPN mobile service delivers ESPN-branded sports content, including news and video highlights, over space leased on Sprint's cellular network using its own phones. He held up his black ESPN-branded Sanyo handset, which he has been using for the last three weeks, and called ESPN Mobile the “best invention in the history of the world. Ever.”
Super Bowl launch
“Mobile is a big part of our future,” he said, thanks in large part because it allows ESPN to have a direct relationship with consumers. The service is set for a Super Bowl launch with “one of our most ambitious marketing endeavors to date,” he said.
Additionally, Mr. Bodenheimer stressed the importance of aggressively seeking broad, multimedia rights in its content deals with sports leagues, “not only for the businesses we’re in, like mobile and broadband, but media we might be in in the future.” For example, he said, ESPN wants rights to a league’s library to feed ESPN Classic, another cable channel, as well as fantasy game rights, which he said will be a priority within the company this year. He said ESPN’s recent eight-year contract with Major League Baseball included “the most wide-ranging set of rights ever acquired from a major sports league.”
Earlier this year ESPN revamped its sales structure, creating one central sales staff that sold all of the network’s media properties, including ESPN Radio, ESPN the Magazine and broadband service ESPN 360. The fruits of that deal were reaped during the upfront, Mr. Bodenheimer said. Of the network’s 150 upfront TV deals, collectively worth $2 billion, 50% included media other than TV.
Defending current cable model
And while ESPN has clearly expanded its reach beyond its core cable business, when Mr. Bodenheimer was asked about one of the industry’s hot topics -- a la carte distribution -- he was quick to defend the current business model. “We don’t think the consumer is served by an a la carte model,” he said, citing two government studies, one from the General Accounting Office and another from the Federal Communications Commission. He cited hardware and marketing costs required to make it work as financially prohibitive.
Earlier in the day, in an interview with UBS cable, satellite and entertainment analyst Aryeh Bourkoff, Time Warner Cable CEO Glenn Britt echoed the sentiment, using ESPN as an example.
If you’re George Bodenheimer at ESPN, Mr. Britt said, under a la carte pricing you’d have to guess how many people would buy ESPN. He noted that if ESPN, which normally charges cable operators more than $2 a subscriber, guesses 10% would buy the network a la carte, it would have to charge $20 a subscriber to underwrite the same quality of programming.
“It will lead to higher cable bills and paying the same for less,” Mr. Britt said.