Reference no: EM133230569

Case: John Skipper, president and CEO of ESPN since 2012, sat at his desk and intently reviewed comments by Bob Iger, Disney CEO, and his direct boss, during last night's earnings call: "I'd like to address an issue that has been receiving a fair amount of interest and attention these days and that's the rapidly changing media landscape especially as it relates to ESPN. We are realists about the business and about the impact technology has had on how product is distrib[1]uted, marketed, and consumed. We are also quite mindful of potential trends among younger audiences, in particular many of whom consume television in very diferent ways than the gen[1]erations before them . . . ESPN is the number one brand in sports media and one of the most valuable brands in all sports and among the most popular, respected and valuable brands in media, by consumers, advertisers, and distributors. This is supported by the fact that in the first calendar quarter of this year alone, 83% of all multichannel households turn to ESPN at some point."1 As Skipper looked up, his eyes focused on ESPN's newest building at the sprawling 200- plus acre Bristol, Connecticut campus, DC-2. DC-2 was ESPN's 18th building and featured the state of the art in television broadcasting, with 194,000 square feet, 114 television screens and monitors, 1,100 miles of copper wire, the ability to broadcast SportsCenter in 4K, 8K, 3-D, and even a floating "CableCam" that treated visitors to an NFL playing field experience.2 He reflected on the vast size of ESPN's current campus, remembering that ESPN originated from temporary trailers on less than on single acre in 1979.3 Skipper's mind raced forward, wondering if and how this new investment would pay off in a world with almost overwhelming technological risk to media companies. When sports news traveled instantaneously over Twitter and social media, and with the rise of free video stream[1]ing, Skipper wondered about ESPN's relevance, competitive advantage, and revenue stream. Was ESPN ready for the next wave of disruption? How could ESPN maintain and grow its domi[1]nant position in sports programming?

The idea that gave birth to ESPN hatched over two days, May 30-31, 1978. Bill Rasmussen, an ex-collegiate baseball player and sports nut, had just been fired as the communications director for the New England (Hartford) Whalers hockey club. As Bill and his son Scott sat around the house the night of May 30, Bill discussed a vague set of ideas about using the new technology of cable TV to broadcast New England sports.

The new dream proved exciting, but Rasmussen lacked three critical resources: access to the satellite technology to provide a cable feed, programming content to fill the airwaves, and money to make the whole project work. Cable TV was a nascent industry mostly limited to rural viewers, and RCA Corporation had launched a communications satellite three years earlier in hopes of selling transponder time to buyers hoping to reach the cable market. By mid-1978, RCA was desperate to find buyers. Rasmussen approached RCA about buying transponder time for five hours per night. The price? $1,250 per night. Al Parinello, the RCA salesman, told Rasmussen that he could lease another transponder, one that would provide the buyer with 24/7 transmission capability, for $35,000 per month. Rasmussen's network could broadcast all day and night for less than it could for five hours per day. The new network would be Rasmussen's (and other fans') dream: all sports, all the time. Realizing that 24/7 programming would outstrip every event in Connecticut, Rasmussen worked his relationship with John Toner, the University of Connecticut's athletic director. Toner put Rasmussen in touch with Walt Byers, the powerful head of the NCAA. Rasmussen's proposal to the NCAA outlined the network's, now named Entertainment and Sports Programming TV (ESP-TV), early strategy: ESP-TV intends to complement rather than compete with current NCAA television contractual agreements. We propose to extend football's national television coverage to more schools and to add many other sports, including every championship, to our nationwide network . . . [ESP-TV will] provide national exposure to more institutions and student athletes than ever before possible. . . . ESP-TV proposes to work very closely with the NCAA to develop schedules in all sports that will maximize our mutually stated goals.

Question: Of the challenges facing ESPN in 2015, which one do you think is the most significant? The biggest opportunity? Biggest threat?