A Sports Rights Royal Rumble

0:04Sara Fischer:Congratulations! You made the Varsity, the podcast. My name is John Aranda and I am Pucks' sports correspondent and the host of this pod. And today, Sara Fischer from Axios rejoins the pod to make sense of what I think could be the most consequential two weeks for legacy sports media in quite some time. The NFL is a part owner in ESPN, Paramount, and CBS really in the mix for sports media rights. And ESPN, the poster child for the cable bundle, is on the cusp of launching a direct-to-consumer app. We certainly are entering a brave new world. But before we get to Sarah, today is Wednesday, August 13th, and this is what I'm focused on.

0:49Sara Fischer:Late Monday, the Nevada Supreme Court handed down a ruling that, I don't want to overstate this, it really could be a long-lasting problem for the NFL. The court said that John Gruden can proceed with his legal suit against the league. The NFL had sought to have it as part of an arbitration process. So it appears that the NFL's only recourse now is to appeal the verdict to the Supreme Court. And that's because John Gruden, the former ESPN commentator and Raiders coach, told ESPN a couple of years ago that he had no plans to settle. In fact, he wouldn't settle and that he planned to, quote, burn the house down.

1:32Sara Fischer:First, the backstory. Gruden was fired as a Raiders coach in 2021. Well, he actually resigned, but that came after several of Gruden's emails leaked to the Wall Street Journal and the New York Times that included racist, homophobic, and just generally misogynistic language. The emails came to light during a league investigation into the commander's owner, Dan Snyder. Most of the Gruden emails were sent to the team's general manager, Bruce Allen. Now, this is why it matters. Gruden believes that the NFL, the league office, leaked the emails. And if the case does move forward and isn't settled, remember Gruden says he has no interest in settling, an unknown number of Goodell's emails will be part of the discovery process.

2:20Sara Fischer:Not just Goodell, but his top lieutenants too. We're still a long way from seeing the end of this. The NFL likely will appeal. And if I'm Goodell, I'm trying to engage Gruden in some sort of settlement because whether Gruden wins his case or not is kind of immaterial here. Nobody would want their emails to be part of any kind of discovery, especially someone with Goodell's stature. This will probably fly under the radar for a while, but believe me, it has the potential to be a big problem for the league. Now, let's get to Sarah Fisher. Sarah Fisher, it is so great to have you back on the pod, and this is a critical week to have you on the pod because what a couple of weeks this has been.

3:05Sara Fischer:ESPN doing a deal with the NFL, where the NFL takes a 10 % stake in ESPN. ESPN takes over NFL Network, NFL Red Zone. UFC and Paramount, totally shocking deal to me. I'm rarely shocked when I see these deals come because you hear that these groups have been talking, and I did not see that one coming. WWE taking their PLEs, their WrestleManias and pay-per-view type events to ESPN. I guess my first question to you is like, before we dive into each of these deals and try to decide winners and losers and everything like that, are there any major themes that have been running around the last two weeks as you sort of step back and say like, wow, what a shift we've seen in the business?

3:49Well, I think the biggest one is that all this is occurring leading up to the kickoff of the NFL season. So it's no coincidence that all these services are launching in August and that people are scrambling to get their packages together around this time. And then I think the other major through line is you and I have talked about this, John, with the exception of like, you know, MLB's local rights coming back up in 2028. I think the NFL has an opt out in 2029. So many of these big deals have been locked up for many, many years. And so if you are a streamer that's looking to make a big play like Paramount Plus is now that it's owned by Skydance, you don't have many options.

4:30And so with what's presented to you, you may need to shoot for the moon in a way that you may not have a few years ago because it's not like you can get your hands on much else.

4:42Sara Fischer:You know what has me a little bit confused about these deals is I understand why each one of them has been made. You know, Skydance takes over Paramount. They need to make a splash. You know, so they, you know, renew South Park. They go after the UFC. ESPN, they're launching their own direct-to-consumer app. So, of course, they just want to get into bed with the NFL. They want to do this WWE deal. And so the timing for each of these deals makes sense to me. But as I step back, what I'm wondering is, is this sort of the punchback that traditional media is giving to the Netflixes and the Amazons of the world?

5:28Sara Fischer:and the YouTubes and the Apples, where it's, you know, these are all really big deals with available rights by traditional media companies that happen to have also streaming services. Yeah, I think that's part of it. I think another part of it is that these traditional media companies have long understood the live sports game in a way that the big tech firms, it's not that they don't understand it, but they're still getting their toes wet. I mean, YouTube has Sunday ticket the folks at Netflix have two NFL games and Christmas day and they're starting to invest a little bit more with things like WWE but they're not like the traditional entertainment giants which are used to live sports and so if you have a streaming service that needs to compete with those companies you can't compete on the breadth of scripted programming you can't necessarily compete with going to Sundance and buying up a ton of boutique films that you can slop into your service, where can you actually compete?

6:30You can actually vie for sports rights in part because you've got, in many cases, a broadcast network, if you are Paramount or if you are the folks over at Comcast NBC, that is still very attractive to the leagues for distribution. So I think that's also why you see a lot of these folks doubling down on sports rights. It's their one competitive advantage over the big tech firms.

6:50Sara Fischer:Yeah. And I'm so glad you mentioned the idea of Paramount and CBS and, of course, ESPN and ABC because one of the pitches, certainly that in addition to outspending and paying enough, but one of the pitches is that you can see these everywhere. So the UFC, they're going to be on streaming. So you can do it that way, or it can be on traditional broadcast television in terms of CBS. One deal that amazingly I broke, I thought was going to be a huge deal, was NBC is close to doing a deal with the USGA, the Golf Association that runs the US Open. Netflix was trying to get those rights and they ended up sticking with NBC, partly because I think they don't want the US open on a streaming service yet.

7:46Sara Fischer:Streaming still needs to build up a little bit more. But it's also because NBC said, look, we have cable, we have broadcast. Well, they have cable through Versan, but they have cable, they have broadcast, they have Peacock and streaming. So they're able to, you know, wherever you want to see it, you can see it. And I think that that's a powerful message to send. Yeah. And another big shift, John, is that when these big tech firms go to get sports rights, And we saw this with the NFL on Netflix. They often have to rely on the traditional broadcast companies and entertainment companies to produce these events because they don't have expertise in necessarily producing a big game like that.

8:25Same thing with Thursday nights on Amazon. So if you're a league, you want to take a look at not just the distribution breadth, but also who's going to actually put together a really nice program for you. In the case of NBC, obviously, they're spinning out Golf Channel as a part of Versant. But they have a lot of muscle memory in how to produce good golf content. The last thing I wanted to say on this, you take a look at where things are moving. I think I'm starting to notice that the big tech firms are really interested and eager and getting in on the lifestyle sports genre, the tennises and the golfs of the world and sort of the shoulder programming around it.

9:05That's an area where I think they think they can compete as opposed to, you know, the responsibility that comes with airing something that's going to go to millions and millions of people. The talent that you need in the broadcast booth, all that's a lot for them.

9:17Sara Fischer:Yeah, especially, do you know how difficult it is to produce a golf match? It's like, you know, a different, you have 18 different productions almost. It's not like you're able to follow with just one. And we saw when Fox tried to take it over, you know, this was like a decade, more than a decade ago. and they had trouble finding cameramen who could follow the ball in flight. I mean, it's something that people learn, you know, but it's not intuitive. All right, Sarah, let me take a quick break. Let's come back and let's just start diving into a couple of these deals. And this is going to be fun.

9:56Sara Fischer:We're going to decide who the winners and losers are. And something tells me everybody's going to be a winner.

10:08Sara Fischer:all right i'm gonna throw this open to you sarah uh what is the biggest deal over the past fortnight i mean it's definitely espn and the nfl no question in part because they're rewriting the rules of what a relationship between a league and a network could look like and espn's been sort of dabbling in this um you know they took a stake in the pll earlier this year football cross and they said that that wasn't their first minority equity deal so it's something that they've done before. I also think it really reframes for the consumer what your NFL season looks like. I mean, ESPN, of course, was always a must-have, but now this new streaming service is what's become the must-have, not necessarily just getting ESPN on cable.

10:54So that's huge. And then I think another sort of big winner in all of this is definitely USC. The deal with Paramount gets them away from that pay-per-view window, it allows them to have a much broader reach, a much broader audience. And in the era of social media with fighting, fighting has become so aligned with entertainment that in these big personalities and fighters, they grow massive followings on social media. Having a broad reach does really matter. It matters for the future of the UFC franchise. And I think that's a huge win for them. And by the way, it's a nice payout. $1.1 billion per year for seven years.

11:30Dana White wins in that scenario for sure.

11:32Sara Fischer:The biggest winner out of all of these is certainly Mark Shapiro, Ari Emanuel, Dana White and UFC, because they got the money that they said they were going to get while still holding on to the international rights. And so through IMG, they're going to be able to sell the international rights to I forget how many countries, but that's a pretty healthy check that's going to come in as well. And that ESPN WWE deal the other day, like they are on a deal blitz. So this is like they when it comes to TKO, the parent, the publicly traded parent of WWE and UFC, they've locked up most of that other than the international arts of UFC.

12:16They've locked up everything in the past few weeks. It's extraordinary. All right.

12:20Sara Fischer:I'm going back to my SPJ roots here, Sarah. For the past two weeks, a two-week window, the most powerful person in sports media sounds like it's Mark Shapiro or Dana White or somebody at TKO who I guess we have to include Nick Khan as well over at WWE who were able to push these deals through, which are really massive deals for the company. I happen to agree with you. I definitely think the folks over at Endeavor and TKO and Dana White and Nick Khan have won the week. But this has also been a pretty extraordinary week for Jimmy Patero. You know, he struck this deal with the NFL. He struck a deal with Fox One to bundle his new ESPN streaming service, both of which will launch in a few weeks.

13:11He struck this WWE deal. There's a new deal for NFL draft rights. So ESPN has been on its own little mini deal blitz over the past week. And that's going to become critical because the success of this network really comes down to what he told us at that media day earlier this spring, John, which is how many people in total continue to subscribe to ESPN in some way, shape or form, whether that's through the streaming service or the cable network. And I think all of these collective efforts are going to help ensure that those numbers, if they either stay the same as they were in the heyday of cable, or hopefully for them, they can surpass the subscriber count that they had in the heyday of cable.

13:54Sara Fischer:Yeah, well, like you said previously, the numbers for this ESPN app, which, by the way, they said they're not releasing. They're not going to release the numbers for Disney Plus either. They're following on what Netflix, the trend that Netflix started a couple of quarters ago. So, but they're going to be huge, mainly because if you're a charter subscriber or a direct TV subscriber, soon enough, if you're a Comcast subscriber or YouTube TV subscriber, you're going to be able to have free access to the app. So almost like the old days of cable, whether you're actually using the app or not, you're going to be considered a subscriber to that app if you're part of that cable bundle, so to speak.

14:40Yeah. And I think the only caveat, though, John, and we saw this with HBO. Remember when they were trying to ship people into HBO Go? I think you do have to authenticate, meaning if you're a cable subscriber, you do, I believe, need to sign into your digital account to be counted as like a digital sort of streaming subscriber. You don't just automatically get counted because there are tons of people out there who still buy a cable package and have never downloaded the streaming app in their life. All right.

15:06Sara Fischer:So I can sense here from both of us, it's hard for us to determine losers from these deals because I can understand why everybody did the deal. And for the NFL, let's stick with the ESPN and the NFL for a little bit. For the NFL, that's a really good deal. They were sitting on NFL Network, which was a declining asset, NFL Red Zone, which has a lot of buzz, but it's a digital cable channel. You want to talk about a declining asset, that's a declining asset. And the Shield hates to be associated with anything that's not seeing massive growth. So they were able to take those networks, offload them basically to ESPN, get a 10 % stake in ESPN, which props up a traditional operator that's going to be there bidding as the rights continue to come up.

16:02Sara Fischer:I think that this makes so much sense if you're the NFL. It's the best case scenario for them. And by the way, yes, they are giving up the NFL network, but the other platforms they give ESPN broad rights to, but they still retain ownership of things like Red Zone, as well as their podcast network, their websites, NFL films, their fast channel. So they're not totally getting out of the digital game, but they're investing in a new way that allows them to hedge some of the risk involved with trying to grow your own streaming services. I also think the broader distribution through ESPN matters a lot.

16:41I think ESPN, because it now owns the NFL network, gets to distribute an additional seven games. And all of those games, national games, will be available through this new ESPN streamer, which you can't deny is a better distribution opportunity for the NFL.

16:58Sara Fischer:You're in D.C. This is a little bit far afield of our beats, but what do you get the sense of the regulatory pushback to this ESPN NFL deal? Well, it's interesting because there was regulatory pushback to the venue deal, which was the joint venture between ESPN, Fox One and Warner Brothers Discovery. And that regulatory pushback came on the heels of a lawsuit from Fubo, which is its own sports streamer. In this case, it would not shock me at all. And we know that it's the case that regulators are going to look up this deal as well. But I think it's a very different type of probe because you don't have a third party that's necessarily suing to put pressure on regulators to take action here.

17:42I think DirecTV also had a lawsuit against Venue. What's notable, John, in the United States, anytime you have a deal that's over$100 million, you need to go through a regulatory approval process. What's different about this is typically with the regulatory approval process, that does not involve a probe or an investigation. That's how you know that regulators are looking into this in a more serious manner. I don't suspect that there's going to be any major issues from a sort of consumer burden perspective, but you can't discount politics in the era of Trump. You know, Trump settled with ABC, which is owned by Disney, ESPN's parent, for$15 million last year.

18:25Anything that ABC broadcasts that Donald Trump does not like could be grounds for his regulators to try to go after ESPN for any deal that it makes. So it puts the entire company of Disney on ice a little bit when you have a deal of this scope that needs approval that's getting probed and i would hope that this does not have a chilling effect over abc and its news department but you saw what happened with cbs

18:51Sara Fischer:we're in a new era yeah and then uh also from the nfl side it was noticed throughout the league uh you know that uh trump came out and wanted the commanders to change their name back to uh to to the redskins uh and you know which is something that appears to be off the table but now now who knows that now maybe that's a a lever that that that he'll want to pull let me take another quick break uh end with a couple more quick hitters uh on this and be right back

19:28Sara Fischer:one of the big trends that uh has been written about a bit is the ufc paramount deal is doing away with pay-per-views, which is, of course, the way that the WWE went when it did its Peacock deal, you know, just about four or five years ago. That's really a massive move for something that was very lucrative for UFC. But I think they have decided, as we've said already, that the idea of getting their biggest matches broadcast on CBS and still getting a lot of money, of course,$1.1 billion, my goodness. But just being able to get the biggest MMA matches on broadcast television is something that we've never seen before.

20:23Sara Fischer:And they see that almost as much of a marketing play as a media play, it would seem to me. Yes. And it's because of what I had mentioned before, which is that in the era of social media, things that were considered niche sports with niche fan bases that were hyper loyal and willing to pay, you know, a lot, you know, whatever it was, dozens of dollars for a match. There's a much broader fan base now out there for this type of content. And so you are silly to be pigeonoling yourself into a pay-per-view model when you could be expanding your audience enormously and expanding your fan base. And I think the WWE sees that.

21:04I mean, they're entertainers. I don't really call them athletes, but they're entertainers are incredibly savvy on social. I think UFC wants to get a bite of that action to expand the audience, expand the franchise. And you're limited if you do that with pay-per-view.

21:19Sara Fischer:You referenced this earlier. I'm fascinated by the idea of the Fox ESPN bundling of their direct-to-consumer services, Fox 1. And if consumers that want to buy Fox 1 and the ESPN app, I think they can save$10 per month if they buy those together. Almost seems like a recreation of the venue that we saw. All we need now is Warner Brothers Discovery to get their app involved as well. But even better, because Warner Brothers Discovery really had only value when they had the NBA rates. So now that they haven't renewed the NBA, why would you need them as part of your bundle? And if you're a consumer, if you have bunny ears, you can't get all of the content from CVS and NBC.

22:07A lot of it now has moved to streaming. You can get the biggest stuff. So if you're a consumer, this is like a no-brainer. You pay, what is it going to be,$29 or$39 to get all your Fox and all of your ESPN sports rights. You can put bunny ears on your TV and get everything from CBS and NBC for free. And then the vast majority of those people probably also pay for a D2C entertainment service like a Netflix, maybe like YouTube. And that allows them to get the last remaining drip drops of things that they would need. I think that this becomes an absolute no-brainer if you're a cord cutter and you still want sports.

22:43Smart for ESPN and Fox to do this.

22:45Sara Fischer:The key word there to me, Sarah, is when you said if you're a cord cutter, because for the longest time, Jimmy Pataro would say like, oh, we're launching this app, but we're not going after people that already are subscribed to the bundle. We're going after cord cutters and cord nevers. And I never, I never really believed it because of course you're going after people that are in the bundle, but it's priced in such a way that people in the bundle are going to stay in the bundle. Plus they're getting it for free in the bundle. So why would, why wouldn't they just kind of stay in the bundle with it?

23:15Sara Fischer:So I, I do believe that these apps are going after those cord numbers and cord cutters that you referenced. Yeah, absolutely. But I also want to get back to the original point that I made, which is, you know, you have the ESPN app, you have Fox One, you have Paramount Plus, Peacock is, you know, we've barely mentioned, but they really are deep into sports and are using sports to drive Peacock. What we are seeing right now is traditional media trying to, they're not trying to create a new Netflix, but they are just trying, this is the way that they're pushing back. This is the way they're fighting back against these deep-pocketed Apples, Amazons, Netflixes of the world.