Key Points
- Disney has offered YouTube TV terms for ESPN and other channels that are comparable to deals with other providers, like Spectrum TV, Fubo and DIRECTV.
- YouTube TV is holding out for a lower price for ESPN, according to a report.
- Lowering the price of ESPN for YouTube TV might trigger demands by other companies along the same lines.
How much is ESPN worth these days? It depends on who you ask.
If you pose that question to the casual sports fan, their answer might be rooted in whether they’ve recently been aggrieved by the loss of ESPN and other Disney-owned networks on Google’s streaming platform YouTube TV, which was forced to pull the channels after its distribution contract with Disney ended early Halloween morning.
If you ask Disney executives, they won’t put a hard dollar price on the channel, opting instead to say their ongoing conversations with Google and YouTube toward a new agreement are based on “fair” pricing.
And if you ask Google and YouTube, they’re unlikely to say anything at all.
Behind the scenes, both sides are reportedly at an impasse over how much Google should pay for ESPN, and whether Disney might have to offer lower rates to other providers, according to a recent story by sports business journalist John Ourand.
Writing in Puck News, Ourand said both sides are still far apart on how much Google and YouTube should fork over for the privilege of distributing Disney’s channels in their pay TV packages, and what those packages might look like in the near future.
Disney has reportedly offered Google and YouTube the same distribution terms and fees that others have received in recent years, including Charter’s Spectrum TV, DIRECTV, Fubo and Comcast — all of whom have since launched lower-priced, sports-filled packages that include some or all of ESPN’s linear cable networks.
But Google and YouTube are holding out for a better deal: They want a lower, per-subscriber price for ESPN’s multiplex, and they believe they have the scale and market power to extract better fees.
For Disney, the problem is this: If they offer Google and YouTube better rates for ESPN, they have to do the same with other providers, almost immediately. Distribution contracts between pay TV providers, like YouTube TV and Comcast, and broadcasters like ESPN typically contain “most-favored nation” clauses, which guarantee a distributor is receiving a channel at the best possible rate.
If a broadcaster makes an agreement with another distributor that offers the channel at a better rate, other distributors can invoke their most-favored nation clauses to immediately renegotiate the amount they pay for that channel — and Disney sees where this is going.
ESPN is typically the most-expensive network for a cable, satellite or streaming platform to offer, with the company charging between $10 and $15 per subscriber, based on various estimates.
There is a case to be made that ESPN is worth less than what TV distributors are paying: The network recently lost the rights to Ultimate Fighting Championship (UFC) and Formula 1 to Paramount Plus and Apple TV, respectively, and it could lose professional baseball and football rights to other platforms if Major League Baseball and the National Football League make progress in renegotiating their TV rights packages.
ESPN is also in the process of acquiring NFL Media, which will give it ownership or distribution rights to NFL Films, NFL RedZone and NFL Network — which means it has even less cash to potentially execute on sports rights deals in the near future, and could lose even more linear sports content to rivals as certain deals come up.
Which circles back to the original question — if ESPN is offering less live sports, can it still justify charging a premium amount to offer the network on cable, satellite and streaming? Google and YouTube think the answer is no — and, until ESPN caves on price, it appears unwilling to forge an agreement that will bring the channels back to the platform.
Consumers will vote with their wallets.
