Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.
ESPN is a dominant part of the sports landscape, but a new venture is breathing down the network's neck.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
ESPN is synonymous with sports. The Disney (DIS +0.00%) property is the most popular cable sports network in America, and its digital audience is larger than all but that of Yahoo! Sports, according to SportsBusiness Daily. However, as competitors like Bleacher Report and SB Nation join the table, ESPN's breathing room continues to shrink. One more of them just took a seat.
120 Sports
Last month, a new name in sports was unveiled: 120 Sports. With financial backing from Time Warner (TWX +0.00%), it will collaborate with the MLB, the NHL, the NBA, and NASCAR to feature 120-second-long segments 24 hours a day that will give fans a "360-degree look across all sports," according to the company. Collegiate coverage will be offered through Campus Insiders, which is owned by Silver Chalice, one of the venture's equity investors.
Sports Illustrated is reportedly handling the initial marketing push, something Time Executive VP Todd Larsen calls "a terrific complement to [the site's] editorial coverage." Videos from 120 Sports will also appear on the websites of the MLB and the NHL. With the inclusion of SI, the site's digital audience at launch could rival that of ESPN.
| Site | Monthly Digital Audience |
|---|---|
| ESPN | 44.7 million |
| 120 Sports (est.)* | 40.4 million |
Source: SportsBusiness Daily, estimates compiled by author. *120 Sports estimate combines audiences of Sports Illustrated, MLB.com and NBC Sports, which manages NHL.com.
These figures can be debated, and it's unclear just how many visitors 120 Sports' own native website will generate. However, the simple fact remains that from the very get-go the service will have plenty of exposure, even if sports fans don't immediately recognize its brand.
Image via 120 Sports, Instagram.
How much money can it make?
The more important question concerns monetization. While 120 Sports hasn't said too much about this topic, the very nature of streaming video means that ads are likely. According to eMarketer, the average CPM, or cost per thousand impressions, is a little more than $24 for video ads. That's more than twice the rate that a typical "premium" display ad costs.
If 120 Sports is able to charge a CPM between $30 and $35 -- a reasonable assumption considering its reach -- its annual revenue should range between $14 million and $16 million given a monthly digital audience of 40 million (based on the table above). Of course, these estimates don't account for repeat views. In a scenario where the average 120 Sports user watches three clips per month, ad revenue above $40 million in the service's first year isn't out of the question. TheStreet reports that a premium service may be explored in 2015, which would result in significant upside for this figure.
ESPN's ad revenues register north of $3 billion each year, and while 120 Sports won't come close to that figure initially the service threatens to take a bite from one of the network's most prized brands: SportsCenter. ESPN offers replays of the highlight show on desktop and mobile, but Time Warner's venture promises critics an alternative. The presence of 120 Sports on an array of different sites also means a broader audience may be in play -- both are long-term negatives for ESPN.
Looking ahead
At the moment, the only major league that 120 Sports doesn't have in its pocket is the NFL, which plans to roll out a similar service, NFL Now, next season. The lack of professional football definitely limits the venture, but it won't stop it from being a pain in ESPN's neck. Don't shrug off the possibility that the NFL's streaming offering might lower SportsCenter's influence as well.
There's no way to know which, if any, of the "ESPN Killers" might eventually succeed and overtake the network's own enormous audience. However, I believe that on the whole, more competition is beneficial for sports media. For those who are fed up with ESPN's dramatic take on some stories, streaming services like 120 Sports should give anyone the ability to tune out the "entertainment" side of sports.