Every once in a while, the media's dirty little secret gets paraded about for all to see. The latest example is ESPN's three-week suspension of Bill Simmons after the popular columnist accused NFL commissioner Roger Goodell of lying about being previously unaware of a video showing former-Baltimore Ravens running back Ray Rice knocking out Rice's now-wife in a hotel elevator.
Goodell, if he didn't know what was in that tape, he's a liar. I'm just saying it. He is lying. I think that dude is lying, if you put him up on a lie-detector test, that guy would fail. And for all these people to pretend they didn't know is such [expletive] [expletive], it really is, it's such [expletive] [expletive].
And for him to go on that press conference and pretend otherwise, I was so insulted. I really was.
In a statement announcing its decision, ESPN said it suspended Simmons because he failed to live up to the network's "journalistic standards":
Every employee must be accountable to ESPN and those engaged in our editorial operations must also operate within ESPN's journalistic standards. We have worked hard to ensure that our recent NFL coverage has met that criteria. Bill Simmons did not meet those obligations in a recent podcast, and as a result we have suspended him for three weeks.
So, here's the issue: Did ESPN suspend Simmons because of his obscenities-laced comments, or did the sports network do so because Simmons attacked the head of ESPN's most important business partner, the NFL?
This isn't ESPN's first rodeo
Allegations concerning a conflict of interest between ESPN and the NFL are nothing new. In 2012, the network teamed up with PBS's Frontline to produce an investigative piece about the league's handling of head injuries. The tenor of the resulting two-part documentary, League of Denial, was that the NFL knew more about the permanent damage done to its players' brains than it had publicly acknowledged.
Somewhere along the way, however, ESPN withdrew its support from the project, explaining that it ended the partnership because of a misunderstanding over editorial control:
Because ESPN is neither producing nor exercising editorial control over the Frontline documentaries, there will be no co-branding involving ESPN on the documentaries or their marketing materials. The use of ESPN's marks could incorrectly imply that we have editorial control. As we have in the past, we will continue to cover the concussion story through our own reporting.
Perhaps of greater significance, ESPN's statement went on to note that the decision had nothing to do with its relationship with the NFL:
The decision to remove our branding was not a result of concerns about our separate business relationship with the NFL. As we have in the past including as recently as Sunday, we will continue to cover the concussion story aggressively through our own reporting.
This denial was called into question when The New York Times reported that ESPN's withdrawal followed a meeting between the network's top executives, Goodell, and Steve Bornstein, president of NFL Network. "The meeting was combative," the article noted, "with league officials conveying their irritation with the direction of the documentary."
It's impossible to know, of course, whether ESPN was being candid about why it stopped collaborating on the documentary. But at the very least, it's certainly safe to say the proximity of the meeting with the NFL executives to ESPN's decision created an appearance of impropriety.
The engine that makes ESPN go
Taking all of this into consideration, there is little question that ESPN at least appears to have a conflict of interest between its relationship with the NFL, and any pretense that the network serves as an unbiased source of news related to sports. Underlying it is a $15.2 billion deal giving ESPN the right to broadcast Monday Night Football games through the 2021 season.
"The NFL is the engine that makes ESPN go," Forbes' sports columnist Kurt Badenhausen wrote earlier this year. And the numbers back this up.
Monday Night Football isn't just the most popular program on television each week; it's the most watched by a long shot. For the week ended Sept. 21, the game between the Philadelphia Eagles and Indianapolis Colts attracted 14.9 million viewers. In second place was Fox's Sons of Anarchy, with 4.8 million views. And in third place, with 4.1 million viewers, was the episode of ESPN's SPORTSCENTER immediately following the Monday night game.
On the back of programming like this, ESPN has built a broadcasting empire. According to an analysis by Wunderlich Securities, the company is worth $50.8 billion. That accounts for a third of its parent-company Disney's current market value of $151 billion. By contrast, Disney's ABC Network is worth a mere $3.2 billion.
Based on Wunderlich's figures, if ESPN were a stand-alone business, it would have a higher market capitalization than 408 of the components on the S&P 500, handily outpacing the likes of Fedex, Delta Air Lines, and Target. And it's worth roughly twice that of CBS Corporation, which owns dozens of cable networks and local television and radio stations throughout the nation's largest media markets.
The network's value derives from a massive cash flow, projected to reach $4.5 billion this year says Forbes' Badenhausen. Because its programing is so popular, ESPN commands an average monthly affiliate fee of $5.53 from every person who subscribes to a media package offering its content. This is four times larger than the $1.33 affiliate fee of the next highest cable channel, TNT. All told, these fees are expected to produce $6.5 billion in revenue for the sports network this year.
On top of this, the nature of ESPN's content, and Monday Night Football, in particular, makes the platform uniquely valuable to advertisers. According to an analysis by Discovery Communications, 95% of ESPN's audience watches it live, as opposed to recording it for later viewing. This suggests that commercials on ESPN are actually being watched as opposed to forwarded through. By contrast, the average live audience rate for the four major networks -- ABC, NBC, CBS, and FOX -- is only 70%.
The point is that the NFL is extremely important to ESPN. And ESPN, in turn, is extremely important to Disney. It's the single-largest piece of the House of Mouse's biggest segment, media networks. And with a purported 40% operating margin, it seems beyond dispute that ESPN is far and away Disney's most profitable franchise.
ESPN doesn't have a conflict of interest
To get back to the question that prompted this column: Did ESPN's decision to suspend Bill Simmons come about because of a conflict of interest between journalistic independence and the relationship with its most valuable partner and sponsor? On the surface, this seems clearly to be the case. However, the more you think about it, the more it becomes apparent that the answer is no.
At the end of the day, ESPN's interest isn't to win a Pulitzer Prize. It isn't to provide a neutral forum for the dissemination of unbiased news about sports. Its interest is instead to make money. And one of the ways it does so -- if not the principal way -- is by entering into multi-billion dollar partnerships with organizations like the NFL. Thus, ESPN's decision to censure Bill Simmons doesn't reflect a conflict of interests; it is in ESPN's interest.
John Maxfield has no position in any stocks mentioned. The Motley Fool recommends FedEx and Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.