(Repeats Sunday story to additional subscribers)
By Liana B. Baker
May 25 ESPN is considering selling online access to live Major League Soccer games to consumers without pay TV subscriptions, an experiment that could help the sports network find ways to generate revenue outside the traditional pay television system.
Media companies, including ESPN parent Walt Disney Co , are looking to tap the potential of the growing Internet-based business that Netflix Inc and other companies have pioneered, while at the same time preserving the relationships they have with pay TV operators.
Comcast Corp, Dish Network Corp and other pay television operators provide the majority of the No. 1 sports network's revenue through fees they pay to carry ESPN's cable channels and the Watch ESPN app.
ESPN President and Co-Chairman of Disney Media Networks, John Skipper emphasized that the network is committed to its current business model, which requires a pay TV subscription for access to the ESPN cable channels and its Watch ESPN app, but he also said there may be other ways to add revenue.
"We've just got to think about other business models," Skipper said last week at an event in Bristol, Connecticut, where ESPN is headquartered. "We're not far along on any them, but we do think about how we might capture more money direct from consumers."
Any direct-to-consumer product would have to involve new programming that is separate from what's offered through ESPN's pay TV deals, Skipper said.
ESPN's contracts with pay-TV operators bring in $6.04 per month on average per subscriber, the most expensive rate among cable channels, according to research firm SNL Kagan.
When asked what specifically the network was considering, Skipper pointed to a recent deal with Major League Soccer as an opportunity.
ESPN, Fox and Univision signed an eight-year deal with the U.S. professional soccer league earlier this month. Under the agreement, which starts next year, the networks get rights to national broadcasts. ESPN also gained rights to offer a package of 200 games outside of viewers' local markets.
The league currently sells a package of games that can be watched on television through cable and satellite operators for $79 per year, or an Internet-based package of these games that costs consumers $65 a year or a monthly charge of $16.
"You saw us buy MLS digital rights. It was a clue, but we still don't know what we will do with that. That's a direct-to-consumer package we bought. We could do it just like it's done now through multichannel distributors or we can do something different with it to go direct to consumer," he said.
When ESPN announced the MLS deal, the sports network said it could run the out of market games on ESPN3, an online network that is free to those who subscribe to a U.S. broadband or pay TV package, such as cable. But it also said it might explore alternative distribution models.
ESPN will make a decision in the next few months regarding how the network will package and distribute the soccer games, according to a source familiar with the matter.
The games could also be offered through a special section on the ESPN3 app, the source added.
ESPN currently sells only a few products directly to consumers, including ESPN The Magazine and its Insider online service, which provides in-depth analysis and statistics.
In March, Disney took a step in the direction of digital distribution, in partnership with a pay TV provider. It signed a programming deal with Dish Network that granted the satellite operator the rights to distribute some of its networks, including ESPN, over the Internet. The new Dish service may launch by the end of the year.
While ESPN is exploring a direct-to-consumer strategy, Skipper said digital advertising, through sales of ads on its websites and online properties, is likely the most promising growth opportunity for the network over the next two to three years. (Additional reporting by Lisa Richwine; editing by Frank McGurty and G Crosse)