Fox takes aim at ESPN with national sports TV channel
(Reuters) - News Corp introduced a long-rumored national cable television sports channel, Fox Sports 1, on Tuesday, aiming to compete with leader ESPN in an increasingly crowded TV sports marketplace.
Fox will launch the channel on August 17 in 90 million homes, executives of the network said at an event in New York City. Fox's entry into the 24-hour sports network fray means that all four major broadcast networks will have a cable channel devoted entirely to sports.
Fox Sports 1 will carry college basketball games from conferences such as the Big 12 and Pac 12, college football games including a Notre Dame versus Stanford matchup, and Major League Baseball games starting in 2014. NASCAR, Ultimate Fighting Championship (UFC) matches and soccer will also appear on the new network.
The rationale behind the new sports networks is simple: sports programming, essentially the last bastion of TV programming that viewers watch live instead of time-shifted via DVR, can be used to grab a slice of the lucrative market dominated by sports juggernaut ESPN, whose ownership by Walt Disney Co gives Disney's ABC network a sports channel.
CBS and NBC have their own sports channels.
"We believe we've amassed enough live events ... where we can be a major player in the market," said Fox Sports Media Group's co-president and chief operating officer, Randy Freer.
Media companies from NBC to Al Jazeera are chasing the advertising dollars that flow to live sports programming, as well as the monthly subscription fees paid by cable operators that are far higher than those for other channels.
At Fox's unveiling of its new network on Tuesday, executives were flanked by on-air talent including Terry Bradshaw and Michael Strahan plus Erin Andrews, one of the reporters Fox poached from ESPN. Former daytime talk show host Regis Philbin talked about his new afternoon show on Fox Sports 1, called "Rush Hour."
Following the network's official unveiling, Fox held a splashy presentation for advertisers and analysts at New York's Broadway Theater -- known in TV industry parlance as an upfront -- where News Corp Chairman Rupert Murdoch's voice was heard on a video telling a Fox Sports executive not to mess things up.
Soccer player Hope Solo looked on as a video showed footage of ESPN's flagship show "SportsCenter" fading out due to a bad signal and being replaced by the Fox Sports 1 logo. The network's nightly show meant to take on "SportsCenter" will be called "Fox Sports Live."
While Fox may be convinced it can take on ESPN, media buyers were skeptical.
"The live sports will do well but they didn't show much of the studio programming," said Steven Guendjoian of Initiative, echoing the sentiments of other media buyers in the crowd. "I want to see more of that because that's what will make the difference."
The launch of Fox Sports 1 dovetails with News Corp's plans to split into two companies by the end of the year, with one division incorporating its broadcast and cable networks, film studio and other assets, and the other housing its newspapers, including The Wall Street Journal and New York Post.
News Corp built its reputation on being a feisty underdog that took direct aim at supposedly unassailable incumbents and won.
In a nod to its past, Fox played clips comparing the launch of Fox Sports 1 to the creation of Fox's broadcast and cable news channels, featuring a voiceover saying, "Fox is ready to change the television landscape again."
"Fox is looking for an area to grow. They entered the news business with two competitors and they really did it in a different way," said Needham & Co analyst Laura Martin. "In Fox News, they built it to the number one news network in 15 years.
"They are going to try to hope to do the same thing in sports. It will depend on execution, but they have come into crowded fields before and done well. They are going to try to do that in sports now."
Initially, about 15-17 percent of the new channel's programming will be live sports, Freer said. A mobile app called Fox Sports Go will let viewers watch more than 1,000 live games and events on tablets, phones and other mobile devices.
About 23 percent of ESPN'S 2012 programming was live events, ESPN said, and it offers mobile access to games through its Watch ESPN app.
News Corp shares gained 2.4 percent to close at $30.19 on Nasdaq.
As well as ABC's ESPN, Fox's entry will compete against the NBC Sports Network and the CBS Sports Network.
Analysts said they expected ESPN to remain the leader, though Fox could chip away at its dominance over time with its strong brand and a willingness to spend big on popular sports.
"You've got ESPN lapping everybody, and Fox a distant No. 2," said Wunderlich Securities analyst Matthew Harrigan. "I think NBC and CBS will be after that."
An NBC Sports spokesman said the channel was "properly positioned in the sports media marketplace" with rights for live events that include the Olympics and England's Premier League soccer. A CBS spokeswoman declined to comment.
Fox has long been rumored to be launching the channel, which News Corp Chief Operating Officer Chase Carey called the "world's worst-kept secret" a month ago.
The glut of sports channels seeking higher subscriber fees is certain to inflame tensions with cable operators, which complain about the already-high payments they are required to charge customers who do not watch sports. DirecTV, Dish Network Corp and Time Warner Cable Inc are just some of the operators to complain about rising sports fees.
The Fox channel is likely to lose money in the early years, analysts said, which would mirror the company's money-losing launches over the years of its Fox News and Fox Business channels. The Fox Business Channel, started in 2007, is expected to become profitable this year, Carey said in an earnings call on February 6.
Fox is not done spending to secure more live programming, Freer said.
"There's some more rights out there that we will pick up as well," he said. "It's pretty competitive as it is today, and I don't see the competition or the value of sports going down in the near future."
Offering national sports will allow Fox to charge more to the cable and satellite operators that carry its channels and expand its distribution to more homes to sell higher-priced ads.
RBC analyst David Bank estimates that the new channel could generate more than $1 billion in annual revenue if it gets distributed to roughly 90 million homes, receives a fee of $1.00 per subscriber per month, and makes $460 million in ad revenue.
Fox Sports 1 will replace Speed Channel, which currently gets 22 cents a month for each subscriber, according to media consulting firm SNL Kagan.
By contrast, ESPN gets $5.15 a month and is seen in well over 101 million homes, according to the National Cable & Telecommunications Association.
"We like our position," an ESPN spokesman said in a statement. "We have always had vigorous competition, so there is really nothing substantially new here."
Fox executives recognize the battle ahead to become a viable alternative to ESPN, said David Hill, News Corp's senior executive vice president.
"It's going to take us a while, and we're aware of this fact," he said.
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