Monday, May 27, 2024
Apple can succeed in sports without ESPN.

Apple can succeed in sports without ESPN.

In his 2019 memoir, Walt Disney Co. CEO Bob Iger revealed that if Steve Jobs were still alive, the two companies would have seriously considered combining forces. The speculation surrounding a potential merger between the two US giants, known for their excellence, has been ongoing for nearly two decades.

The discussion was reignited this week by Wall Street analyst Dan Ives, who suggested that Apple should pursue a deal with Disney, specifically for ESPN, its sports broadcasting arm. Ives argued that such an acquisition, which could cost around $50 billion, would be a “no brainer” for Apple as it expands further into sports broadcasting. The logic behind this deal is that Apple wants sports rights, and ESPN currently holds those rights. However, as more consumers cut the cord and move away from traditional cable, owning ESPN could pose more challenges than benefits for Apple. Instead, a significant partnership that tightly integrates ESPN content with Apple’s services could be a solution for both companies.

This discussion about ESPN’s future comes at a critical moment in sports broadcasting. The shift from cable to streaming is reminiscent of the growth of cable TV in the ’70s and ’80s, when cable companies began buying sports content. Today, legacy companies like ESPN are starting to offer sports content over the internet while being careful not to hinder their existing cable and broadcast audience.

On the other hand, tech giants like Apple are purchasing their own sports rights to attract loyal subscribers. Amazon has made a significant commitment to sports with its $1 billion per year deal to show some NFL games. Apple’s most notable sports deal to date is its $250 million per season agreement with Major League Soccer.

While legacy broadcasters still have the majority of top-notch content, ESPN is a leader with rights to all four major US sports leagues. Apple would have to wait several years to obtain these rights organically as existing deals expire. The NBA is the first league with a deal up for grabs in 2025, and media companies and Silicon Valley are already vying for it.

However, it’s not just a matter of money. Apple’s attempts to acquire the rights to show Pac-12 college basketball fell through due to concerns from teams about reduced visibility for players and sponsors by moving off cable and onto Apple TV+. Overcoming the preference for linear TV among sports decision-makers is a challenge, even in a world of declining viewership.

While there are valid reasons for Apple and Disney to consider a deal for ESPN, there are also significant obstacles. Apple has historically been reluctant to pursue major multibillion-dollar acquisitions, and this kind of deal would attract antitrust regulators’ attention. Additionally, buying ESPN for $50 billion or more would still require Apple to bid for sports rights in the future. In a time of cost-cutting in Silicon Valley, an ESPN takeover would increase Apple’s headcount by approximately 3% and add real estate.

Furthermore, Apple has shown interest in owning sports rights it can scale globally and make accessible on its many active devices. ESPN, however, is primarily focused on the US market and lacks a presence in the largest European markets, which may not align with Apple’s global strategy. In negotiations with the NFL, Apple demanded global rights and digital operations, which the league did not agree to.

Disney has stated that it is not looking to sell ESPN and is considering potential strategic partnerships that allow them to retain control of the network. If a deal were to materialize between Apple and Disney, one option could be for Apple to offer a portal to ESPN content through its services, with Apple receiving a portion of subscription revenue in return.

This approach would allow Apple to bring blockbuster sports to its users without the need for a $50 billion acquisition. Apple could still bid for sports rights in the future as they become available. However, it’s important to note that this column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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About Jonty Jackson

Welcome to the exciting world of sports with Jonty Jackson, who with his passion for all things sports-related, delivers engaging and informative posts that keep his readers up-to-date on the latest news, trends, and developments in the world of games and sports. Whether you're a fan of e-gaming, a lover of outdoor adventures, or a die-hard sports enthusiast, Jonty's posts are the perfect place to find the latest updates and insights on your favorite games and sports. Follow him and join the conversation today!

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