ESPN Plays Up the Web

Sports Network Adding Features to Expand Distribution, Viewers

In a high-profile push to make money from online video, sports broadcaster ESPN is putting new muscle into a Web site that shows live events for paying subscribers.
ESPN, a unit of Walt Disney Co., is planning a new marketing campaign and new interactive features for its ESPN360.com site, which it plans to rename ESPN3.com in early April. The launch coincides with the start of the baseball season, with the Yankees-Red Sox opener to be streamed live on the site.
In an effort to broaden the site’s audience, ESPN has also been in talks with television distributors and Internet providers to make it available to more customers. A person familiar with the matter said ESPN has had preliminary conversations with technology companies about making the service available on devices such as Web-enabled TVs or gaming consoles.

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ESPN360.com drew 91,000 viewers during a Sept. USC game.

ESPN360 is a subscription Web site offering live video of a wide array of sports. It doesn’t require a separate fee; rather, it comes bundled with the Internet service from a participating provider, such as Verizon Communication’s Inc. Distributors pay ESPN for it based on their number of subscribers, similar to the way they pay to carry ad-supported cable-TV networks.
Available in about 50 million homes, it draws a small but growing audience. One night, at the outset of college football season in September, ESPN360 averaged about 91,000 concurrent viewers over multiple games, the company says. That’s still well under the millions who watch regular events on ESPN itself, though.
Increasing ESPN360’s popularity is “critical to our future,” said Sean Bratches, ESPN’s head of sales and marketing. “We don’t say, ‘This is on the Internet,’ or, ‘This is on television.’ We look at it as a network.”
ESPN’s Web service, which has existed in its current form since 2007, is one of several major efforts to tie subscription fees to online video, as cable operators and media firms worry Web video could lead viewers to cut cable-TV subscriptions.
Comcast Corp., Time Warner Cable Inc. and Verizon are each working on Web services that would make cable-network shows available online, but only to paying TV subscribers. But executives at several media companies believe they should be paid extra to include their content, with some pointing to ESPN360 as a model.
ESPN has taken an unusual approach in trying to expand ESPN360: It has been willing to pull back one of its traditional cable channels. In talks with distributors, it has proposed reducing the number of homes receiving ESPN Classic, a smaller cable channel, in return for carrying some combination of ESPN360 and newer college sports network ESPNU and Spanish language network ESPN Deportes.
ESPN Classic is now in 58 million homes, down from 64 million in September, according to ESPN. Meanwhile, ESPN360 penetration has doubled in the last year.

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The marketing push for the new ESPN3 name will include advertising both on and off the company’s cable networks. The site’s new features will include real-time statistics and fantasy games tied to some events.
“We want to take the best of the Web and take it to a TV-like environment,” said Damon Phillips, vice president of ESPN360.
One of the biggest holdouts among potential distributors is Time Warner Cable, the second largest cable operator in the U.S., by subscribers. “The content certainly has an appeal to sports fans,” said Maureen Huff, a Time Warner Cable spokeswoman. But she added that “Our customers ought to be able to access the Internet without being forced to pay for programming that they might never watch.”
ESPN, in response, said the site’s business model allows it to show events that “would not otherwise be seen.”
About 17.5% of content on ESPN and ESPN2 is simulcast on ESPN360 but the percentage of sports events is higher. All World Cup soccer matches on ESPN and ESPN2 this summer will be available on the site.
Mr. Bratches played down the danger that viewers would ditch their cable TV, from which ESPN reaped an estimated $5.8 billion in 2009 fees, according to market researcher SNL Kagan.
“We look at it as being additive,” Mr. Bratches said, noting that ESPN360 is popular when people are at work. “The consumer is going to use the best available screen.”
Write to Sam Schechner at sam.schechner@wsj.com

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