No company has more money tied into the fate of this upcoming college football season than the Walt Disney Co.
The dominant corporate force in college sports, Disney’s ESPN owns two conference networks, has broadcast deals with nearly all of college football’s top division, and televises every major bowl. It also owns—literally—a large chunk of the smaller postseason games, and controls commercial rights like sponsorships and naming rights to the biggest.
Last year ESPN’s family of networks televised 282 games and sold $792.5 million in ads, according to Standard Media Index. To put that in perspective, ESPN’s NFL package only generated $314.8 million. Those numbers don’t include the college games televised by ESPN’s ACC Network and SEC Network, nor the plethora of other matchups streamed on ESPN+, its digital service, which costs $5 per month and is popular among football fans.
The sheer scale of the company’s college football business will create a lot of headaches, and lost revenue, if the season is further disrupted. The Big Ten and Pac-12 have already nixed early-season games and some smaller conferences, like the Ivy League (an ESPN+ partner), have cancelled fall sports altogether. The NCAA’s board of governors meets Friday and could vote to cancel all NCAA-sponsored fall sports.
Should college football’s doomsday scenario comes true, ESPN will have to negotiate make-goods for ad buyers, and sort hundreds of millions in rights payments it owes to schools, conference and bowl properties. Unwinding that billion-dollar web of payments will be a Herculean task.
“ESPN’s business in college sports, and primarily college football, is an actual ecosystem,” said Dan Cohen, who leads Octagon’s media rights consulting division. “And a lot of their business is organic, as opposed to inorganic. Buying rights to Major League Baseball, then selling ads and securing affiliate deals off that content is inorganic, it’s a transactional piece of business. When you own bowl games, and when you own networks, that becomes a business unit in and of itself.”
While ESPN may have to scramble to figure out how to make up for tens of millions of lost impressions, deep-pocketed partners like Allstate, Dr Pepper and the other 12 College Football Playoff sponsors aren’t going to come looking for cash rebates in the event of a shutdown thanks to the long-term nature of their deals. Smaller advertisers may ask for their money back, but they’d risk of having to pay a considerable premium to buy their way back into the action once play resumes. Unless the walls are coming down around you, that’s a terribly short-sighted strategy, especially if football goes back online the following semester. (The same could be argued for ESPN’s rights payments to conferences).
Also working in ESPN’s favor are its affiliate fees. Each month, the network receives $9.06 for every household that subscribes to its linear TV feed, a premium rate—the industry average is around 40¢ per sub per month—that this year will pump some $8.8 billion into ESPN’s coffers. That’s just for keeping its signal turned on, and the loss of marquee programming won’t put ESPN in default with the operators.
“The cable guys may be justified in not wanting to pay those fees [if there’s no football],” said one veteran sports-media consultant. “But they don’t have much recourse one way or the other. The force majeure language in most affiliate contracts says the programmer has up to a year to deliver the goods.”
It’s hard to overstate how connected ESPN is to college football. In addition to owning and operating the ACC Network and the SEC Network, it has separate media rights deals with every Power Five conference, plus four of the other five FBS Leagues. Of the 44 bowl games set for this upcoming season, ESPN is scheduled to televise all but five. It’s the broadcast partner for the College Football Playoff, which typical produces the most-watched cable broadcast of the year, and also has the entire second-tier postseason, plus the Longhorn Network and a bulk of the early-season kickoff games.
ESPN’s events business also owns and operates 20 kickoff classics and bowl games, including the Las Vegas Bowl and the Armed Forces Bowl. It’s a deeper involvement than many college football fans realize. The company’s 12-year, $7.3 billion deal with the College Football Playoff also encompasses a lot more than just TV rights—ESPN controls and sells many of the sponsorships to those seven games, including the lucrative naming deals with brands like Chick-fil-A and Capital One.
“Chick-fil-A has to make a multi-million TV buy to get the rights to then negotiate with us for the entitlement, tickets, hospitality, local sponsorship rights,” said Gary Stokan, CEO of the Peach Bowl, which operates three kickoff games and a New Year’s bowl, all televised by ESPN.
Postseason bowls fill an especially important role for ESPN. They occur at a slow time in the sports calendar, and at a critical time for advertisers, when people are home, inside and thinking about holiday gifts. That means mid-day, mid-week bowl games that draw 1 million viewers are actually strong business propositions for the company.
Ads during non-New Year’s bowl games averaged about $30,000 per 30-second unit last season, according to Standard Media Index. Those fees rose to more than $560,000 for the two semifinals, and over $1 million per unit for the national title. This year’s championship, between LSU and Clemson, drew a total of 27.3 million viewers, making it the most-watched telecast thus far in 2020 and TV’s 13th biggest draw since the year began.
It’s unclear exactly how far along ESPN is in selling ads for this upcoming season. The company declined to comment for this story. ESPN usually sets its schedule and sells 85-90% of its entire college football inventory months before the season starts, but that entire process has been upended this year due to COVID-19. In addition, many of those ads sold as part of multi-year deals.
Unraveling all this will depend first and foremost on how many of those games actually take place. ESPN’s already lost some games, but the bulk remain on schedule, at least for now. Then there’s the same considerations that have occupied ESPN executives for months as other sports partners had their seasons interrupted or delayed. Should that be necessary, the company’s college sports scale may be both an asset and a liability.
“From an economic perspective, you take a bigger hit because you have a bigger piece of the pie, but it also might be easier to manage because you have more control and more flexibility,” Cohen said. “Let’s say it’s a bowl game that ESPN owns. If they need to create new sponsorship assets that are digital or virtual in nature, they don’t need to work with another entity to figure that out. If they want to re-price or discount ad rates or entitlements, they can make that decision themselves; they don’t need to work with another broadcaster or property owner.”
(This story has been update to reflect Disney’s ownership of the ACC and SEC networks.)