The NFL Is Taking a 10% Stake in Disney’s ESPN
The media giant will take ownership of NFL Network as part of swap valued in the neighborhood of $3 billion
- The NFL will take a 10% stake in ESPN, estimated between $2.5 billion and $3 billion, in exchange for media assets like NFL Network.
- ESPN will add NFL Network to its channel lineup and distribute NFL RedZone to pay-TV operators, retaining ownership with the league.
- The deal, subject to regulatory approval, aims to strengthen the bond between the NFL and ESPN amid growing competition in sports media.
The National Football League has struck a wide-reaching deal with Disney DIS -0.86%decrease; red down pointing triangle in which it will take a 10% stake in the ESPN sports empire in return for control of key media assets including NFL Network.
Neither Disney nor the NFL would disclose the value of the ESPN stake. Analysts have estimated ESPN’s valuation at between $25 billion and $30 billion, putting the NFL’s piece in the $2.5 billion to $3 billion range.
The tie-up, between two of the biggest names in entertainment and sports, furthers the symbiotic relationship between media companies and athletic leagues that is moving beyond just traditional rights deals to televise games.
Through a content partnership with Skydance Media, the NFL will also have equity in rights holder CBS after Skydance closes its deal to acquire the network’s parent Paramount Global this week.
Under the terms of the agreement, ESPN will add NFL Network to its stable of sports channels. It will also distribute the NFL’s Red Zone channel to pay-TV operators, although ownership and digital distribution rights will remain with the league.
For ESPN, the deal strengthens the bond with its most important content provider as it prepares to launch a streaming version of its flagship network later this fall. The addition of more NFL content will likely increase interest in the service.
The NFL in turn not only gets a piece of a key Disney asset, but also ensures the future of its two channels which, although popular, will benefit from being part of a media behemoth.
The deal will need regulatory approval and, given the power of the NFL and ESPN, might face scrutiny from lawmakers. Assuming the partnership is approved and closed, Disney’s stake in ESPN will drop to 72% from 80% while minority owner Hearst will go to 18% from 20%.
ESPN and the NFL have been dancing around each other for several years.
“These conversations really have gone on for well over a decade,” said NFL commissioner Roger Goodell. “I would really say the last year even more so over the last couple of months where I think we’ve recognized the value that we both can bring to our consumers, to our fans, and that this was the right time.”
New England Patriots owner Robert Kraft, who also chairs the league’s media committee, said in an interview that the equity element is “really a commitment beyond whatever the contract is” in terms of the partnership. He added that aspects of the new deal with ESPN will help the league grow the salary cap, which in turn could solidify the league’s relationship with the players union.
The NFL cozying up with one of its biggest rights holders might become a point of concern for its other media partners, one analyst said.
“The league being a part owner in one of its distribution partners should raise the question of whether that entity is getting favorable treatment relative to other networks and streamers that air games,” said Guggenheim Securities analyst Michael Morris.
Goodell and Disney Chief Executive Bob Iger played down those concerns. Goodell said the league’s relationships with its other media partners will “continue to flourish.”
While ESPN has long been the most dominant player in sports media, it is facing increased competition not only from traditional players such as Comcast’s NBCUniversal but also deep-pocketed streaming services including Netflix and Amazon’s Prime Video.
Citing the strength of the ESPN brand, Iger said of the competition, “it’s not like we’re losing sleep over our position eroding.”
In NFL Network, ESPN will have a 24-7 news channel for the league as well as home to seven exclusive regular season games. NFL Network is currently in about 50 million homes.
As part of the deal, ESPN will need to license NFL Network’s games from the league.
Although much smaller than NFL Network, the NFL’s RedZone has a very loyal audience. The in-season Sunday-only network that carries live action from all the afternoon games is particularly popular among hardcore fans and fantasy football players. The channel is in fewer than 10 million homes, which the league hopes can increase under ESPN’s guidance.
There have been limits to how aggressively the NFL can make RedZone available, as rights holders to Sunday games have expressed concern that the network is a potential threat to their own coverage of games.
“Somebody watching RedZone is arguably not watching the live game, so there is a question as to whether that network is additive to overall viewing or cannibalistic to full-game audience,” said Guggenheim’s Morris.
ESPN will also have the ability to launch RedZone type channels for other sports as part of the deal, although Iger said there is nothing on the immediate horizon.
One potential wrinkle is that ESPN’s NFL journalists and commentators will now be covering a league that owns a stake in the company.
Iger maintained that “Nothing in this deal in any way changes ESPN’s approach when it comes to journalism.”