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MUMBAI: The Walt Disney Company and News Corporation have
decided to call off their Asian sports broadcasting joint
venture ESPN Star Sports 16 years after it was formed on the
premise of exploiting opportunities together in a market that
was in its infancy.
 The
two companies have entered into a definitive agreement under
which a unit of News Corp will buy ESPN’s 50 per cent
equity interest in ESS, which operates 25 television networks
and three broadband networks covering 24 markets in Asia,
gaining full control of the sports broadcasting entity. Disney,
a powerful sports powerhouse in the US, will exit from sports
in Asia.
The
transaction will allow News Corp units to own and operate
all of the ESS businesses while providing ESPN more independence
and flexibility in future support of The Walt Disney Company’s
overall efforts in Asia, the statement said.
ESS will continue to be jointly managed by two companies till
the transaction, which is subject to customary regulatory
approvals, closes.
The
buyout will also see the exit of ESS MD Manu Sawhney, who
will be replaced by Peter Hutton, senior vice-president Sports
of Fox International Channels.
Hutton,
who has spent 20 years in the international sports television
business, will report to the ESS Board.
Sawhney,
who joined ESS in 1996, will be staying with the company until
31 August to work with Hutton on a smooth transition.
News
Corporation Deputy COO James Murdoch said the buyout of ESPN’s
stake was in line with the company's strategy of consolidating
affiliate businesses across the globe.
"News
Corporation's acquisition of the interest of ESS that we did
not already own continues the program of simplifying our operating
model, consolidating our affiliate ownership structures, and
furthers our commitment to delivering incredible sports programming
to consumers across the globe, and particularly enhancing our
position in sports programming in emerging markets," Jr
Murdoch stated.
ESPN
President of and Disney Media Networks Co-Chairman John Skipper
said the company will continue to be invested in Asia through
its digital business which includes ESPNCricinfo, ESPNFC and
ESPN Mobile.
"After
16 years jointly managing ESS, we have decided to independently
pursue future opportunities in Asia. We are extremely proud
of our role in building ESS into what it is today, and now
with the growing digital landscape in Asia, we look forward
to continuing to serve Asian sports fans through ESPN-branded
digital businesses like ESPNCricinfo, the leading digital
cricket brand in the world, ESPNFC and ESPN Mobile,"
Skipper said.
"Peter is a very talented sports media executive,
and we believe his extensive experience in sports rights and
production will serve ESS well as the business enters into
a new phase of development," News Corporation Europe & Asia COO Jan Koeppen and ESPN International EVP & MD Russell Wolff said on Hutton's appointment.
The
disbandment of JV has been on the cards as the two media conglomerates
have been competing against each other outside Asia. In UK,
ESPN is in direct competition with News Corp-owned pay TV
broadcaster BSkyB while News Corp is planning to launch a
national sports network in US to take on dominant player ESPN.
Will
ad rates go up for sports?
By
consolidating the sports broadcasting business, Star will
strive to up ad and subscription revenues to keep in line
with the high acquisition prices for cricketing properties.
The network strength will come into play as it inks deals
with media buying agencies, cable networks and DTH service
providers.
Says
Vivaki Exchange VP Sejal Shah, "The ad rates for sports
will surely rise."
Lodestar
UN CEO Shashi Sinha feels that the move augurs well for the
sports broadcasting genre.
Says
Sinha, "It will help their P&L and puts Star in a
comfortable position. It makes sense to bring everything under
one roof. Distribution revenues will improve. At the same
time, in terms of ad sales buying is done on a series to series
basis regardless of how many properties a channel has. The
key for me is whether Star has a common ad sales force or
a separate sales force that looks at the sports business."
Mindshare's
Ravi Rao says that Star could try a clever marketing ploy
by using the strength of its network. "At the same time,
there will always be a demand and supply equation. The ad
industry is growing at a regular rate and clients' budgets
are limited. They will continue to evaluate if a property
makes sense. They will see if there is a brand fit. The price
of a spot will depend on the event."
Nimbus
chairman Harish Thawani, however, feels that the Star-ESPN
deal will not change the market dynamics as it is not a consolidation
in true sense.
"It
is not a consolidation as one stakeholder in a JV has bought
out another. Consolidation happens when two rivals merge.
Then only the benefits follow. Of course, negative consolidation
can happen when a channel shuts shop like Imagine."
Platinum
Media CEO Basab Datta Chowdhury feels Star will become a much
more powerful network from a distribution standpoint. However,
it’s not going to be easy to command a premium through
consolidation as entry barrier in sports for advertisers is
high.
"The
price of advertisement, however, will go up if there is increase
in viewership," he avers.
No
matter what the media buyers may say, Star will weigh options
to make gains in ad revenues from sports broadcasting.
Also
Read:
ESPN,
Star JV waiting to end
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