Nascar Meets the Flip Side of the ESPN Business Model

The perils of lame duck status with the market leader in sports broadcasting.

Nascar Meets the Flip Side of the ESPN Business Model
ESPN brings splashy coverage to its deals with partners. The Disney-owned sports network's withdrawal from Nascar will sting (Photograph by Jared C. Tilton/Getty Images)
Photograph by Jared C. Tilton/Getty Images

In July, NBC snagged the rights to broadcast the latter half of the Nascar season, beginning in January 2015. The 10-year deal, for a reported $4.4 billion, will mark the end of the racing circuit’s eight-year partnership with ESPN and its smaller deal with Turner Sports. On Monday, Sports Business Journal reported that both ESPN and Turner are now in talks with Nascar to get out of their agreements a year early.

It would be rare to see a major TV network wriggle out of a major sports deal before the contract is up. ESPN and Turner’s current deal is for a combined $2.7 billion. Covering Nascar, however, is a costly, complicated enterprise. And, as SBJ point out, it will be hard to sell advertising without being able to offer multiyear packages. It doesn’t help that Nascar’s ratings have flagged in recent years. Plus, as lame-duck broadcasters both networks will have incentive to let their race coverage wither on the vine. Who wants to promote a product that will soon belong to someone else?

For ESPN, the tension between its interests as a news organization and its interests as rights holder is particularly delicate. Last week, the network took criticism for cutting ties with Frontline, the PBS documentary producer, over a joint investigation into the NFL’s handling of head trauma among its players. According to the New York Times, ESPN backed out because of pressure from the NFL, to which the network pays $1.1 billion per year (soon to be $1.9 billion) for the rights to Monday Night Football. ESPN says it pulled its name from the joint project due to a lack of “editorial control.”

“ESPN is built around its ability to cross-promote,” says Dennis Deninger, who spent 25 years as a producer at the network and is now a professor of sports management at Syracuse University and author of Sports on Televsion: The How and Why Behind What You See. The pitch to leagues, conferences, and governing bodies, says Deninger, is: “You do the rights deal with us and suddenly there is more discussion of your sport on ESPN Radio and there is promotion in ESPN the Magazine and on the six domestic networks.” The network’s ability to create its own gravity is a major advantage over other broadcasters.

The flip-side to that selling point, and a constant source of irritation among NHL fans, is that non-partners get less. There are limits, however, to how blatant ESPN can be in its game of reward and punish. In the insular world of sports media rights, reputation matters. “If you’re TNT or you’re ESPN,” says Deninger, “you do not want to have the reputation as the guys who cut corners when things get a little rough.”

Nascar fans, Deninger predicts, will not notice any drop-off in quality next year if ESPN decides to stick with it. But they will miss out, now and again, on drivers dropping in on SportsCenter and other bonus coverage. “Those kinds of little extras probably won’t happen during a lame-duck year,” he says. That small shift can have big value to sports leagues. It’s what Nascar wants to avoid.

The biggest risk for ESPN, in both the Frontline departure and in the daily process of editorial decision making, is an erosion of trust with viewers. “They’ve got a commitment to the sports fans who see ESPN as a destination network for all things sports,” says Deninger, “that it’s not going to be all things sports, parenthesis, that we have deals with.” Or all things sports, except when it might harm a partner’s brand.

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