Not all of the sports stories are taking place on the field or the court this month as two of the biggest players in television sports shift their online distribution strategies.
ESPN.com, consistently the top sports site in unique visitors and other measures, ended a three-year stay as the sports content provider for Microsoft portal MSN on June 30 and went independent -- aside from its status as part of the Walt Disney Internet Group. Meanwhile, FoxSports.com took its place on MSN.
The two sports powerhouses may have similar clout on television and radio, but they match up quite differently online.
ESPN peaked at 17 million unique visits during March, thanks to March Madness, and had 13,595,000 unique visitors in May, according to comScore Media Metrix figures. When the deal with MSN started in 2001, the site topped the sports news category with nearly 6 million unique visits a month and ESPN executives at that time welcomed a way to boost traffic while enhancing content and implementing other changes. For its part, MSN, rich with traffic, needed content.
It's almost impossible for an outsider to get a good fix on how much of ESPN's increased traffic has been due to its deal with MSN. During those three years, ESPN.com's parent ESPN enhanced its reach by adding cable TV networks and other ways to build audience -- bringing enhanced exposure to the online operations. ESPN's networks use the Web site for polls, votes for the ESPY awards and promotions. The site won numerous journalism awards, including a 2003 Online News Association award for general excellence and a 2002 Sigma Delta Chi award for investigative reporting. It also won the popular-vote 2004 Webby for best sports.
By comparison, FoxSports.com says it is averaging 5 million uniques a month going into its deal with MSN; numerous sports sites fall between ESPN.com and FoxSports.com on the traffic meter. By joining forces with one of the top portals, FoxSports.com, which so far has managed to fly under the Internet radar, hopes to gain a higher online profile, more traffic and, through a partnership with MSN, more advertising revenues. MSN's home page had 52,980 million unique visitors in April, according to comScore Media Metrix.
The word "partner" is the key: ESPN did not want to shift its relationship to share advertising sales and revenues as a partner with MSN. Their executives also weren't interested in relying on MSN Video to deliver broadband video. ESPN.com is already making nearly 10 percent of its advertising revenue from ads inserted in its ESPN Motion video broadband product, according to John Skipper, executive vice president of ESPN. Controlling all of the revenues from that could make up for whatever the split from MSN costs ESPN.com in traffic.
Reviewing the site's background is like reading a history of Internet media and commerce. ESPN started life online in 1995 as ESPNET SportsZone, licensed by the network to billionaire Paul Allen for his Starwave portfolio. ESPN bought back the name in 1998 and the site became part of Buena Vista Internet Group, which later merged with Infoseek to become the Walt Disney Internet Group. Disney's ill-fated Go portal flamed out, leaving behind a domain and a strong support structure for the individual properties. Regaining the right to its own online future, ESPN struck the deal with MSN.
Skipper talked with OJR by phone from his New York office a few days before the latest iteration as he prepared for an online-free vacation in Africa.
OJR: What was your deal with MSN?
John Skipper: We had a deal that started in September 2001 and ran for two years to September 2003. We mutually agreed to extend it because we had a good working relationship and thought we might want to keep doing it. ... One thing I want to be really clear on is we had a good relationship and we're ending this as a mutual decision. We simply couldn't come to an agreement. There was an article that suggested that they decided to go a different way. I think they would tell you the preferred way was to stay with us but we couldn't come to a decision. That irritated me when it appeared. It was a complete mischaracterization, which I believe the MSN guys would confirm.
OJR: Why didn't it work for the two of you? Looking at the parameters of their deal with Fox, it's a very different kind of deal. Is that where you differed, in the way a deal would be shaped and what kind of services you would share?
JS: Remember we did a deal at a point in time where what was important to us was to really forge ahead in terms of traffic and consolidate our position as a leader. I had gotten here and what I wanted to do was establish we were a leader editorially and what we were doing was having differentiated content. If you look from spring of 2000 forward, we really began in terms both of the kind of content we did -- we went out and added lifestyle content, commentary from Bill Simmons, David Halberstam, Hunter Thompson. We forged a different path of how we were going to accept advertising and we wanted to separate ourselves from the crowd in terms of traffic. That was our most important objective. MSN had decided they weren't in the content business so they were looking for the highest quality content that they could get ...
That worked for us for a couple of years. We fast forward to a time where we're in pretty good shape in terms of traffic. I'm trying to continue to become more profitable and you are correct in looking at what they got from Fox and that will tell you what they wanted. They wanted ability to control the ad inventory that they created and we're pretty good at selling ads. We felt that we wanted to be the only people selling that inventory.
Fox, on the other hand, has not been very successful selling advertising so they've got nothing to lose.
OJR: Fox all along has had a very difficult time defining itself because of the way News Corp. ran things initially and because of a lot of different factors you haven't had to deal with.
JS: At ESPN, there is a great deal of consensus throughout the company that sports fans are on the Internet and that we're going to provide sports fans on the Internet with the best quality experience we can provide. That was very important. ... We've taken it seriously. We've had consensus from our management that it is important. We believe that if you have great content and can aggregate audience you can charge for some kinds of content, which is why we have subscription content, you can sell advertising against it and you can make money, which is what we've done. It is not speaking out of school to suggest that at News Corp. they have not been clear that the Internet is important to them. I don't know how he feels about it now but Rupert Murdoch has been quoted on a number of occasions as not being sure it's that important. I know that (Fox Sports Television Group Chairman) David Hill has never been too bullish on it so those guys haven't had much consensus from their company so they are in a different position from us. Last time I looked we had 17 million uniques and they had three (million). Having said that, this is smart for them. No reason not to do it, right? They need traffic. They're not competitive right now selling advertising; the MSN guys are pretty good at selling advertising.
OJR: What kind of changes does it mean for ESPN? You do get back some of your space. (MSN's branding and navigation covered the top and bottom of all ESPN pages.)
JS: It sure makes my creative director happy. I think it means not much change. One of the great things about the partnership with MSN was they didn't make us change. They liked our content. We didn't have to adapt anything to be part of their network other than to provide navigation and MSN branding. Other than that coming off as of July 1, it's not a lot of change for us.
OJR: Can you share any data about how much traffic flowed back in the other direction?
JS: From ESPN to MSN? Lots of people came to ESPN.com and used it to move to MSN but they had so much traffic I'm not sure it was that meaningful for them. I don't think that was a tough thing for them to give up, to tell you the truth. I think they were happy. Now, whatever we sent them they will get less.
OJR: MSN wasn't by any means ESPN's first portal experience. ESPN has had this very different track from being part of Starwave to being part of Go to MSN. Now a lot of that happened before you came on board.
JS: All the foolish moves were before I came on board and you can quote me on that. (laughing)
OJR: When you look at the beginnings of ESPN.com, what are the key factors that enabled ESPN.com to surpass other sports news organizations online?
JS: Steve Bornstein and Dick Glover made some critical decisions to start this that put us on the right path. Steve Bornstein laughs that he was the first guy who ever made money on the Internet because he got Paul Allen and Starwave to pay him money to license the name ESPN. It was called ESPNET SportsZone. It was a terrible name and he made money. What was important about that in my opinion was they got started. Like a lot of companies, they weren't that Internet savvy. Probably Steve would tell you they tell you they didn't understand what it would mean eventually but were smart enough -- and Dick should get some credit -- to say we ought to be there early and get going -- and they did a smart deal to do it with somebody else's money. Now that was critical. They made a second, very critical, smart decision, which was, however, if we ever decide we want to we can buy it back from you, if it ever becomes important and a big deal we want to own it.
It sounds funny but the GO network was kind of inconsequential to success or failure. The Go network itself was either -- because it didn't work -- was some combination of unfortunately conceived or badly executed. I don't have a comment on which combination it was of those things. It didn't affect ESPN. In fact, we still benefit from the legacy of it. We're still on the Disney servers. They do a lot of our back-end technology and that works great. It allows me to concentrate on content, marketing, ad sales, subscription, integration with ESPN. I guess you could say that was the first good decision made. Second, while it was an unfortunate sort of business it did provide us with an infrastructure that was important to us.
What is true is that they flirted with other portals at some point -- paying people like EarthLink for traffic. I would argue that the third smart decision was to deal with MSN because I did with Yusuf Mehdi, a smart guy, he had a need for content, we had a need for traffic and it worked.
OJR: You really have been in a portal or group situation since ESPN began. Has ESPN ever been completely on its own?
JS: I do not think so. ... I think at some point it was part of Buena Vista Entertainment Group, which then changed to the GO network. When that didn't work they morphed into the Disney Internet Group and ESPN was free to go out on its own to make a deal.
OJR: What are your financial arrangements with WDIG? Do you have any revenues that go to DIG?
JS: We don't disclose either ESPN or DIG as a separate line item. We're part of ESPN but we get infrastructure from WDIG.
OJR: What are you responsible for at ESPN?
JS: I'm responsible for all the non-broadcasting businesses. ... It's like being responsible for North America without the United States, Mexico and Eastern Canada. I'm responsible for British Columbia.
OJR: A number of the things you're now responsible for actually started as services on the cable side wanted to be able to offer cable operators.
JS: Some of them did. It's gotten to be so extensive that it makes sense to have it managed separately. ESPN Magazine, espn.com, consumer products, which includes home video, DVDs, apparel, ESPN golf school, ESPN racing school, ESPN wireless, ESPN broadband that we do produce for the affiliate guys, we have a partnership with Sega and video games, SportsTicker, the data service.
OJR: Which is quite a jump from Steve licensing the name for an Internet site.
JS: It is a lot of business. Dick Glover, when he started ESPN.com, ran ESPN Enterprises; most of this grew out of ESPN Enterprises, including ESPN.com. Dot com was one of the first sort of big items that moved the agenda. Think of it this way, ESPN has moved in the last year from thinking of itself as a sports media broadcaster to being a sports media content company. We're going to create content and products across media where sports fans want to get news, information, entertainment. The company sort of thinks of itself differently and dot com probably had a lot of influence on that.
OJR: You create an enormous amount of content that is online only.
JS: Fairly scary. We think we put out 1,000 pages a day.
OJR: How expensive is something like that? Can I compare to putting out how many magazines a day?
JS: In any sort of financial comparison it would be astonishingly efficient. I'm not going to tell you what it costs. So much of it is automated, scoreboards, wire stories. However we do create content equivalent of a magazine every day in terms of just words. Of course, there's much less design involved, original photography.
OJR: That was part of the decision back in 2000-2001 to really change the way that ESPN.com approached sports and approached what it wanted to be for consumers. Before that you were really a scoreboard.
JS: The general multi-sport sports sites were fairly utilitarian. You come here to get your stats, your box scores, your wire stories; there might be a little analysis. Or you got the wacky Internet ideas, Quokka, Broadband Sports, the ones that were going to revolutionize sports. We decided we were going to make it entertaining, not just utilitarian. Very quickly we decided it was going to include fair amounts of video.
OJR: You've done something with video in the last year that's almost revolutionary. Describe ESPN Motion.
JS: To me, what's most interesting about Motion is it provides an easy experience to watch video and a quality experience. You don't have to download a media player, wait for it to buffer and watch it stutter through because if you're willing allow us to push some amounts of video to your hard drive, you can watch it without buffering and with high-quality resolution. That's what's new about it. To my knowledge we're the first people to do that.
OJR: Of course, not only can we watch video in a high-quality format, you can send advertising in a high-quality format. How significant has Motion been to advertising for ESPN?
JS: I think it's been extraordinarily significant just in terms of the buzz in that people talked about it. It been the first thing we've had that the demand is greater than our supply. I think it's gotten lots of people over the hurdle of being on the Internet; it's a format they understand. It's still less than 10 percent of your overall ad revenue. However, we expect that to grow over time
OJR: But having something you just introduced in the last year be nearly 10 percent of you revenue is astonishing, I think. Am I being overly complimentary on that?
JS: The main thing that was extraordinary was so many mainstream advertisers adopted it so quickly. ... Somewhere between 30 to 40 different advertisers have been in it. I won't give you names, but it's the only time I've ever had to turn away advertising. We've had people want to get on in specific flights and times and we haven't been able to. We're working very hard. You'll see more and more video, we'll do more creative things. We're going to start doing some original programming on it probably 90 days from now because we need to get more people downloading and watching it because there's demand for it.
OJR: Is there a chance that at some point you'll be delivering personalized ESPN Motion? How much personalization can a site do and have it be valuable?
JS: We don't know. I will confess to being a little of a skeptic about too much personalization. We're doing some, we're testing it. I think it's valuable to allow the small percent of people who want to personalize things ... I'm a little bit of a believer in the old-fashioned idea of an editor, which is that while people will tell you they want to pick stuff, they really want you to pick it for them. You know that great thing they talk about with BskyB where you pick your own camera angle -- I'm never going to get hired by Murdoch, am I? -- nobody wants to pick their own camera angles. It's fun to do for a few minutes. If there's something unusual like a celebrity camera at a Lakers game, that can be fun but for the most part people want you to pick the camera angles for them because you're probably better at it than they are. I hear people say, "well, if they read more basketball we'll show them the basketball stuff on the front page every day." I'm like, "but if something really important happens in football they're going to want that on the front page."
OJR: One of the things you've done lately is the ESPN toolbar, which lets people pick what sport's headlines they want to see and use drop-down menus to find teams. It doesn't change your front page but it gives them a different access point.
JS: That's sort of consistent with ... "giving people the ability to do it is great." I think trying to serve them up too much -- to try to make assumptions about what they want --I'm not as big a fan of.
OJR: ESPN.com isn't a monolithic site any more than ESPN is one network. How many sites do you have?
JS: I have no idea. (laughs) It depends on how you characterize a site. Soccernet is in some ways a standalone site. Desportes, our Spanish site, is a bit of a standalone site; you could argue that Page 2 is ... We don't think of them as standalone sites, though. We think of them more like programs on a network. ... We're programming a network. We have some soccer, some Spanish-language, some games, some interactive community. It's not monolithic to most people who come. You know the old thing that even though you've got 250 channels, you only watch 15 of them? Even though we've got the equivalent of 250 channels, everybody comes back for whatever 15 they want and we have enough traffic that that's a lot of traffic for a lot of different places. They say people don't like to read on the Internet but we run long articles and yet 300,000-400,000 people read them.
OJR: You do not underestimate readers.
JS: No, and that's something we've consistently done is try not to make assumptions that people won't do things. It's all about the quality of the content. If you put up a really good four-part thing, people will watch four parts. If you put up really bad four-part things, they won't. We run Bill Simmons and he runs on for a couple of thousand words and because he's entertaining and provocative people will read them.
OJR: For some time, the sports news sites were hosting sites for leagues. Now leagues are competing with you for attention and advertising. How has that changed the landscape?
JS: In our case, we have a pretty good relationship with all of them. What we believe is we're the multi-sport come-get-everything-you-need mall for sports fans and they're boutique shops where people are going to come to get official NHL things. Some of the leagues do good jobs of presenting interesting and entertaining information. We have some sort of mutually beneficial relationship with all of them. We probably have the least contact day to day with the NFL because SportsLine produces their site for them.
OJR: Your negotiations for rights have gotten more inclusive.
JS: What we believe is that we're in these relationships with leagues. It used to be a simpler day, right? People watched their games or got their information from television or the newspaper. As people are going to get their information from other kinds of platforms whether it be online from ESPN.com or from a walled garden of a cable affiliate or the telephone or PDA or some sort of set-top device, we want the ability to deliver the information they want. If we're going to do these deals with you and get the rights to broadcast your games and do highlights on television we want to do some version of that on other platforms.