Since ESPN launched the first 24-hour sports channel three decades ago, it has owned the cable sports business, free from serious competition. ESPN generates $9 billion a year for its parent company, Walt Disney (DIS), and it’s been so profitable for so long that it’s astonishing no rival has emerged. Various media companies have tried: Time Warner (TWX) with CNNSI in 1996, and more recently Comcast (CMCSA) with the NBC Sports Network. Neither became must-visit destinations because neither had enough must-see programming. It’s as if we’ve been living in a world with Coke (KO) but no Pepsi (PEP), McDonald’s (MCD) but no Burger King (BKW), the New York Yankees with no Boston Red Sox.
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On Aug. 17, that will change. 21st Century Fox, the post-split News Corp. (NWS) entity comprising Rupert Murdoch’s film and television assets, is starting Fox Sports 1, a 24-hour network that’s the most formidable challenge yet to ESPN. Fox has spent the past four years assembling a powerful portfolio of football, basketball, baseball, soccer, and more. But to differentiate FS1, to lend it personality and create a distinct brand, Fox is going with a concept that David Hill, chief executive officer of Fox Sports, calls “jockularity.” The plan is for FS1 to be the funny, irreverent, less serious sports channel.
Among other things, that involves hiring a couple of Canadian pranksters to anchor the network’s flagship program and building another show around Regis Philbin. “What we are fighting is inertia,” says Hill. “ESPN has a 30-year head start, and they are doing a remarkable job. We are very much the underdog, and we have to convince the sports-viewing public that what we have on offer is better—or as good as—what ESPN has been offering. We have to create a personality.”
Hill, 67, is a gruff, plainspoken Australian who has spent 20 years at Fox overseeing broadcasts of big-ticket live sports, including six Super Bowls, delivered to a mass network audience. He’s also the innovator behind the on-screen Fox Box, which displays the score and time remaining in the game; Cleatus, the dancing Fox NFL Robot; and the glowing blue hockey puck formerly used during Fox’s telecasts of National Hockey League games. Along with Chase Carey, 21st Century Fox’s president and deputy chairman, Hill is trying to repeat what Roger Ailes pulled off at Fox News Channel: to create a 24-hour network of his own to vanquish an established cable competitor. (In Ailes’s case, it was CNN.) “Do you think Chase Carey and Rupert Murdoch are looking to build something that is only 10 percent of ESPN?” says Chris Bevilacqua, the founder and CEO of Bevilacqua Media, a sports media consultant and investment company. “I can assure you that is not a number they would be satisfied with.”
Attempting to slay—or even scare—a giant as ubiquitous as ESPN is a multibillion-dollar gamble for Murdoch. It’s little surprise the company has called on Hill, who spearheaded the launch of two sports networks in Europe, Sky Sports and Eurosport. “You don’t think going up against the BBC and ITV with Sky Sports is scary as s---?” Hill says. “Every competitor is big and hairy. ESPN is no different.”
Rupert Murdoch has always used sports as an anchor. It was Sky TV’s deal with English football’s Premier League that rescued the startup satellite service from its massive debt load and positioned it to create BSkyB, the dominant British pay-TV service. In the U.S., Fox’s $1.58 billion deal with the National Football League in 1993 made Fox Broadcasting a true competitor to the big three networks. Throughout its history, Fox has paid what were considered exorbitant fees for the rights to broadcast live sports, then reaped enormous returns. “Every time they say we are being reckless,” says Hill, “and every time we have proved them wrong. There seems to be an insatiable demand for sports.”
People want to watch sports live and in comfort, which means advertisers will pay for commercials, viewers will watch them, and—most crucially for FS1—subscribers will pay for them, in this case indirectly through their cable bills. ESPN makes $3 billion a year in advertising revenue and $6 billion from subscribers, charging cable companies $5.54 per subscriber, according to SNL Kagan. NBC Sports Network, by comparison, charges 33¢ a subscriber. According to SNL Kagan, FS1 will charge more than double that in its first year. An impressive start, but still only a fraction of what ESPN earns.
To negotiate higher rates from cable companies, you need subscribers to demand your service. For an all-sports network, that means stockpiling the rights to live sporting events that can be rebroadcast and repackaged. Disney and ESPN for years had the inside track on virtually every rights deal. By being able to offer national broadcast with ABC and national cable with various ESPN channels, along with strong Web and mobile platforms, ESPN could pay rights holders more and guarantee higher visibility. It then made more money off those games and events by delivering them to viewers through multiple platforms.
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For all its resources, Murdoch’s News Corp. had few comparable assets when it came to sports. The lack of a national cable channel meant, for example, that Fox Sports had to relegate some college football games to Fox-owned FX Networks. The issue came to a head in 2010 during Fox’s negotiations with the Pac-12 Conference. As the cost of the rights to Pac-12 games soared past $2 billion, Fox realized it had no way to monetize some of the programming, even if it did secure the rights. “We looked at us vs. the competition, and we had a big hole on the buy side,” says Randy Freer, co-president and co-chief operating officer of Fox Sports. “And if this continued, we were reaching a point where we couldn’t make deals.”
In the end, Fox agreed to share rights to Pac-12 games with the conference’s own cable network and another partner: ESPN. Fox executives cite that compromise as the turning point; from that moment they were determined to give birth to FS1. “It was a moment of television Zen,” says Hill. When Eric Shanks, co-president and co-COO of Fox Sports, approached Murdoch’s son James to see if they had the chairman’s green light, James responded, “I was once asked what goes into greenlighting a movie, and the answer is, we never actually greenlight a movie. We just don’t hit a red light long enough to stop it.”
Since 2010 the company has committed nearly $9 billion to secure the rights to the Big 12 Conference, the Big Ten Football Championship, UEFA Champions League, Nascar, the FIFA World Cup, the FIFA Women’s World Cup, Major League Baseball, and the Ultimate Fighting Championship. It played a leading role in reconstituting the Big East Conference in a play to pick up more college basketball. That’s in addition to the NFL and MLB games Fox will continue to broadcast on the Fox Network, deals that will allow FS1 to build shoulder programming around big events like the 2014 Super Bowl. (Expect FS1 to take Super Bowl week hype to new levels next January.) All this inventory had to be acquired before Fox could even consider launching a cable network. The money started flowing out before the platform to earn it back was even built. “These are bets that go out for a long, long time,” says Freer.
Fox’s aggressive bidding on almost every significant property has dramatically increased the price tags for sports media rights packages. ESPN has noticed. “We’ve always had competition,” says John Skipper, the president of ESPN. “But most of that competition has been segmented competition—network television is competing against our network television, Yahoo! Sports (YHOO) is competing against us in digital, Sports Illustrated competing in magazines. We have always been the one entity that had cross-platform assets. But Fox is a different animal than we’ve dealt with in the past.” Not least because of the man in charge.
In his office on the Fox studio lot in Century City, Calif., David Hill is seated at a wooden table in front of some framed sheet music—the theme song for the NFL on Fox—and a 12-foot-long surfboard. During the ’70s, Hill was a TV presenter in Australia, hosting the Australian Today show, before moving on to produce World of Sport, a Sunday sports show much like ABC’s Wide World of Sports in the U.S. Among the highlights of his TV career: a Boxing Day broadcast when he turned up for work still a little drunk from the night before and had to fill in for the anchorman, doing the show with an open bottle of champagne next to him.
Hill joined up with Rupert Murdoch in Britain, where he launched Sky Sports and Eurosport, before moving to the U.S. in 1993 to create Fox Sports and begin televising NFL games. Hill, who’s married to a native Nebraskan, considers himself a Denver Broncos and Nebraska Cornhuskers fan, though he refuses to return to Nebraska late in the football season. “We used to go back there for Thanksgiving,” he says. “No, never again. To go there to sit in a drafty farmhouse and look out and all you see is snow-covered flatness and these little pathetic dead stumps of corn. Oh, God. The family can come out here.”
Hill loves producing TV shows—perhaps his proudest creation is Fox NFL Sunday, the first hour-long pregame show, which has since become the model for all network football telecasts. In 2012 he was dispatched to run the American Idol and X Factor franchises. Although he evinces no particular love of sports, there was never any doubt at Fox who would preside over the FS1 launch. “Chase Carey is the architect,” says Hill of his immediate boss, “and I’m the master builder.”
That means overseeing the construction of a 14,000-square-foot soundstage on the Fox lot. Contractors are laying floor, erecting scaffolding, and constructing the anchor stations for the elaborate set of Fox Sports Live, the nightly, 90-minute news and highlights show that will go head to head with ESPN’s flagship SportsCenter. The half-acre set features polished walnut desks, an array of vast, active touchscreens, yellow-and-blue banners heralding the new network, and various camera platforms and podiums that seem to be in constant motion.
At the moment there are only about 60 employees, compared with ESPN’s 6,600, and many of those are programmers and designers working on the look and feel of the network: the crawls that will run at the bottom of the screen, the “wing” on the side of the screen, the ticker wing, or “twing,” that will replace the crawl, and the “double box,” which will continue to broadcast live footage during commercials. Everywhere in the FS1 offices, there are tearaway pads counting down the days to launch.
To develop a product that will entice viewers from ESPN’s SportsCenter, Fox executives and producers have been studying how to reinvent the format. Fox has done extensive focus group research, interviewing thousands of sports fans and asking them which existing media group could develop a potential competitor to ESPN. The sessions showed that sports fans had high regard for Fox, largely because of its NFL coverage. They were growing tired of ESPN’s stat-happy approach and wanted a funnier, more irreverent take—hence “jockularity.” “If you look at a show like SportsCenter, there’s a seriousness to it that is reminiscent of old pregame shows. We feel like we can come in and give you the same information, but do it in a way that is so much more entertaining and fun,” says Robert Gottlieb, senior vice president of marketing and on-air promotion.
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To staff Fox Sports Live, Fox swiped a few ESPN on-camera talents, including Jason Whitlock, Bill Raftery, and Charissa Thompson, and hired requisite ex-jocks such as Andy Roddick, Donovan McNabb, and Gary Payton. Anchoring the show will be two relatively unknown Canadians, Jay Onrait and Dan O’Toole. The pair, who currently host Canada’s SportsCentre on the Sports Network (which is partially owned by ESPN), pack their highlights with gags, bloopers, costumes, and props. (Fox executives discovered Jay and Dan through an article in the News Corp.-owned Wall Street Journal.)
The structure of Fox Sports Live, which will feature the usual highlight packages along with guests and analyses, depends heavily on Onrait and O’Toole’s schtick. “Our humor is going to take some time,” says O’Toole. “We’re not going to come in there and stuff it down people’s throats, but Jay Onrait is very unpredictable. He may drop his pants.”
Around the FS1 offices, the words “fun” and “irreverent” are thrown around to describe everything. Scott Ackerson, one of the producers who created Fox NFL Sunday, says ESPN does a great job “teaching about sports, educating. Most of their shows deal with X’s and O’s. We’re not going to do the traditional, everything-is-a-game story. … We are going to have football players talking about baseball, Andy Roddick talking about basketball. This is going to be elite athletes having fun.”
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It also means placing a higher value on surprise, which explains why 81-year-old Philbin will host Crowd Goes Wild, an hour-long talk and interview show airing daily at 5 p.m. Fox is building a set at the Chelsea Piers sports facility, on Manhattan’s West Side, from which Philbin, a passionate Yankee and Notre Dame fan, can opine on the issues of the day and interview athletes and entertainment figures. “Gelman never knew too much about sports, so I was kind of trapped back then,” says Philbin, referring to Michael Gelman, the producer of Philbin’s old morning show. “But we’re going to have fun with it. I’d like to get the same sort of people I had on my old talk shows. This is sports. We can’t take it too seriously.”
“If you are going to compete, you have to have points of difference,” says ESPN’s Skipper. “There is no value coming into the market and doing the same thing.” It would be difficult to out-geek ESPN when it comes to sports. But do viewers really want their sports coverage to be funny? That’s an open question, and one that Hill admits may require some reconsideration. He points to the debut of Fox News as an example of that learning curve. When the news network began in 1996, it lacked the sharp, conservative attitude that is now its signature. Only the emergence of personalities like Bill O’Reilly and Sean Hannity propelled it to its unique voice and position. “We’ve done a lot of startups,” says Carey. “I think we know that part of it is going to be a learning exercise.”
FS1 has some advantages even Fox News never had, starting with a lineup of live sporting events that on any given night might be every bit as compelling as ESPN’s offerings. “Ultimately, most viewing decisions are made based on who has the better game that night,” says Bill Wanger, executive vice president of programming and research at Fox. “We’re not trying to emulate ESPN, and we don’t think sports fans will stop watching ESPN on Aug. 17, but we just need fans to sample us as they flick around to see what’s on tonight.”
The channel is on track to launch in 90 million homes. (ESPN is in roughly 100 million.) The first day will feature a UFC fight card, immediately appealing to viewers largely ignored by ESPN. The real lure will be college football matchups from the Big 12 and Pac-12 every Thursday night and Saturday, and college basketball and MLB games starting next year. Add to that considerable helpings of top-tier soccer and the 2018 and 2022 World Cups, and the likelihood increases that even casual sports fans spend some time at FS1.
According to SNL Kagan, FS1 in 2014 will earn about 80¢ per subscriber. But the investment is unlikely to be viewed as successful until it crosses the $1-per-subscriber threshold. Considering that Fox News generates $1.25, it’s a plausible goal, but getting there may require an even larger investment in rights fees. The holy grail would be to broaden its deal with the NFL; Fox executives are already seeking to slice off part of the Thursday night package currently on the NFL Network. “If you go back 20 years, it was Fox getting the NFL that really made Fox Sports possible,” says Freer. “The logical step for us is taking the Fox Sports brand and creating an entire ecosystem.”
At this point, it’s premature to call FS1 a competitor to ESPN. At the very least, though, ESPN is glancing over its shoulder. On July 17 the network announced it’s rehiring Keith Olbermann, who rose to fame as a SportsCenter anchor before bolting ESPN in 1997, to host a new talk show on ESPN2. “The Fox guys are very skilled,” says Skipper, “but they have a high degree of difficulty coming. They have to get a network on the air, they have to figure out how to build apps for Android devices, how to get mobile alerts on the air, how to work with Twitter and Facebook (FB). It’s tricky stuff.”
Back in his office in Century City, David Hill is aware of the scale of the task ahead—and brimming with confidence that Fox Sports 1 will succeed. “We like to think we can create something unique from Day One, but it’s an art, not a science. … We’ll sit there and say, ‘F---, why don’t we try this or try that?’ No one can tell. All we have to do is get on the air and see what’s right and what’s wrong.”