Thursday, January 29, 2009
ESPN's Surprising Move Just Days Before Daytona
It was August of 2008 when ESPN Executive Vice President John Skipper, pictured above, told the media of the new deal between the network and the Southeastern Conference (SEC). It was an eye-opener.
ESPN had dipped into the seemingly endless pile of money available to the company and agreed to pay the SEC $150 million a year for 15 years. In return for the $2.25 billion, ESPN will carry a slew of SEC athletics on the various ESPN networks.
In early December, ESPN released details of the new West Coast Studio and production facilities the company was building in downtown Los Angeles. The five-story building in the L.A. Live entertainment complex was estimated to cost ESPN around $100 million when it was all done in early 2009.
Now, it is January and ESPN is just days away from beginning ten months of NASCAR coverage. The popular NASCAR Now program begins on Monday, while the Nationwide Series coverage starts at Daytona and will run all season long.
In July, ESPN picks-up the Sprint Cup coverage and airs all the races through the end of the year. ABC handles the "Chase for the Championship," which is the key to the NASCAR season. ESPN is NASCAR's biggest TV partner.
ESPN and ABC Sports President George Bodenheimer just released some new information about what the network will be doing in February, but it was not about NASCAR. It was not about the SEC or the new West Coast studios. As a matter of fact, it was not really about sports at all.
In a live computer videocast to employees, Bodenheimer announced that he was cancelling all executive bonuses, instituting an immediate hiring freeze and eliminating approximately 200 jobs. The world had finally arrived at ESPN's door.
"The economy is worsening," Bodenheimer said, "and ESPN and our business partners -- especially some of our major advertisers -- are feeling the impact more acutely than at any point in our lifetime."
Bodenheimer would not rule out additional layoffs and said the company is now reviewing operations to figure out ways to save money. ESPN's parent company is the Disney Corporation. One year ago, that stock was about ten points higher than it is right now.
NASCAR fans have been reading about the loss of major sponsorships for the various race teams as companies pull back due to the financial crunch. ESPN is supported by two significant streams of revenue in the US. One is the fees that cable companies pay to carry ESPN on their systems. These costs are passed along completely to the cable TV customers.
The second is the advertising that the prime sports products on ESPN bring in from companies around the world. ESPN is a unique advertising destination and it was this revenue stream that Bodenheimer addressed directly in his remarks about the economy.
Just last month, ESPN made the announcement that once again the network would travel the Infield Pit Studio, the Tech Center and all four on-air talent who work in those locations to the NASCAR races all season long.
The ESPN Sprint Cup Series coverage does not start until late July with the Brickyard 400. Speculation was that perhaps ESPN would drop the Infield Studio and the Tech Center for the Nationwide races until the July Cup coverage began.
None of that came to pass and at this moment ESPN is heading into the 2009 NASCAR season with all the bells and whistles intact. That is, until the Wednesday announcement by Bodenheimer that the company is actively reviewing ways to save money.
It will be worth watching to see how ESPN approaches another attempt at cost-savings in one of the most financially intensive sports carried by the network. That sport is NASCAR.
Ten months of race coverage across the nation of two different series is a monster from both a logistical and engineering standpoint. Add to that a daily show that travels reporters, analysts and guests to Connecticut on a regular basis for forty weeks and the NASCAR slice of the ESPN financial pie is a big one.
This is turning-out to be a NASCAR season like no other in my lifetime and we still have yet to turn one wheel at Daytona. While we wait to see exactly which teams and drivers show-up to race, it may turn-out that watching exactly who shows-up to broadcast those races may be just as interesting.
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