ESPN's Baseball Deal: A Home Run for Disney, a Foul Ball for Your Cable Bill
Disney's (DIS) ubiquitous sports network and Major League Baseball announced a blockbuster deal on Tuesday. The eight-year deal will have ESPN shelling out $5.6 billion for expanded baseball coverage including TV, radio, and digital rights.
For baseball fans, the deal means that ESPN will be televising as many as 90 games during the regular season, two wild-card playoff bouts, and broader rights for recap and highlight shows. We're talking about 850 hours of additional programming.
This matters, even if you don't know a splitter from a designated hitter.
Out at the Plate
An SNL Kagan study cited by The Wall Street Journal points out that roughly 100 million cable and satellite subscribers are already paying more than $5 a month for ESPN.
Which way do you think that price tag will be headed after this deal kicks in?
The current deal between ESPN and Major League Baseball averages around $350 million a year. The new deal works out to an average of $700 million a year.
ESPN's existing deals with all of the major sporting leagues make it hard for cable companies to turn down the network's requests. Despite efforts by others to compete against ESPN nationally, no one has the scale that Disney's iconic network has achieved.
ESPN won't be paying $700 million a year right away. These contracts usually go up in steps during the life of the deal. However, the cable industry is coming to a tipping point. Consumers are truly tired of paying for cable channels they don't watch.
How many of the country's 100 million subscribers would be open to nixing ESPN in exchange for lighter bills? We don't know, because the cable and satellite television providers have made it a point to wedge as many channels as possible into their basic plans.
Even many sporting enthusiasts may argue that baseball isn't worth it. The games don't draw the same kind of audiences that football and basketball do, especially when the playoffs arrive.
The slow pace of the sport and the disparity between the competitiveness of the teams, given the varying payrolls, make the self-proclaimed "national pastime" an acquired taste. However, baseball also has the luxury of playing out its season during the summer, when traditional primetime programming on the major networks is on hiatus.
It's important to ESPN, and it will be important to you over the next few years if you're still cutting checks to your cable or satellite television company.
Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article, except for Walt Disney. The Motley Fool owns shares of Walt Disney. Motley Fool newsletter services have recommended buying shares of Walt Disney.