http://www.businessweek.com/globalbiz/content/jul2009/gb20090729_275486.htm

Sports Business

ESPN's Global Soccer Ambitions


Less than two weeks remain until the new season gets under way for Europe's big soccer leagues. Global stars like Real Madrid's Cristiano Ronaldo and Liverpool's Steven Gerrard will be lacing up their cleats and taking to the field in front of hundreds of thousands of screaming stadium fans and millions of TV viewers around the world. But they're not the only ones warming up for the games: U.S.-based cable sports giant ESPN—a unit of Disney (DIS)—is making a major new play in the lucrative world of European soccer.

ESPN already beams European matches to audiences across Asia and the Americas. But in a signal of its broader global ambitions, the sportscaster recently bought the rights to show 46 English Premier League games this season to British viewers—the first time it has cracked a major domestic market in Europe.

To serve its new audience, ESPN is launching a British channel set to go live in August. In addition to this year's games, the broadcaster will show 23 matches per year from 2010 to 2013 in a deal that reportedly cost nearly $400 million. The channel will be carried on British cable and satellite providers, including market-leader BSkyB (BSY), which is 40% owned by Rupert Murdoch's News Corp. (NWS). ESPN also plans to screen games in Britain from the German, Portuguese, Russian, Dutch, and U.S. soccer leagues.

Cracking the European Market By expanding its footprint to Britain—where soccer was born—ESPN is taking a major step toward furthering its international presence. The network already counts 200 million households outside the U.S., more than twice its presence in its home market, but until now it hasn't had much success in Europe because it shows mainly American sports. Analysts figure that gaining broadcast rights to the world's favorite game should help win over more of Europe's half a billion soccer-mad fans. But it also may pit the network against News Corp., which already has a strong presence in many European countries, particularly Italy and Britain.

"In the next three to five years, we could well see a commercial battle between ESPN and News Corp. over [soccer] rights," says Simon Chadwick, director of the Center for the International Business of Sport at Coventry University in Britain. "ESPN will become more strategically aggressive as it gains experience with this new market."

The fact that Bristol (Conn.)-based ESPN has targeted soccer underscores how important the sport is to its future growth. While Major League Baseball and the NBA still draw high U.S. ratings, international viewership of American sports has remained anemic. ESPN won't comment on its specific plans, but hints that more European expansion could be in the offing. "If [more soccer] rights become available, and they make commercial sense, we will look to invest," says a company spokesman.

A Global Following It's no surprise that soccer—known outside the U.S. as football—is a massive draw. The English Premier League, for instance, is the world's most lucrative sports franchise, broadcast to more than 600 million homes in over 200 countries, according to consultants at Deloitte. FIFA, the sport's governing body, says the monthlong 2006 World Cup held in Germany pulled in an aggregated global TV audience of 26.2 billion viewers.

With its new British soccer coverage, ESPN now will be able to tap into the fanatical local and global following for clubs such as Manchester United and Arsenal. Thanks to its agreement with BSkyB, ESPN's reach will jump to nearly 10 million British households, or about one-third of the market. The deal also will give ESPN a secure revenue stream it would have had a tough time establishing on its own, says Richard Broughton, a senior analyst at media researcher Screen Digest in London. "There would be little chance of success without Sky," he says.

But while the relationship should be mutually beneficial in the short term, tensions between Disney and News Corp. could arise as they compete for future soccer rights. The biggest bone of contention is likely to be the English Premier League (EPL), which will soon start negotiating its post-2013 global broadcasting rights. BSkyB is currently the dominant rights-holder for EPL games, but with its deep pockets and expanding global presence, ESPN could mount a big challenge. If the tussle turns ugly, it could also threaten an existing joint venture between the companies in Asia called ESPNStar Sports. "Disney has the scale and expertise to compete," says Coventry University's Chadwick. "With two really big hitters targeting the market, tensions will obviously arise."

A Chance to Prove Itself To fully capitalize on global soccer mania, experts say ESPN also must master how to market itself to non-U.S. audiences. The new British TV deal will be an important proving ground. ESPN already has signed up former BBC presenter Ray Stubbs to front its coverage. Other moves, such as beefing up its own broadcasting equipment, instead of hiring gear from others, could save costs if and when ESPN expands its soccer coverage across Europe and further afield.

Says Screen Digest's Broughton: "With its backing from Disney, ESPN can focus on long-term success." That's surely the biggest goal of all.
Scott is a correspondent in Bloomberg Businessweek's London bureau.

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