ESPN’s muscular profits depend on three things. First, fans watch sports live: no one wants to see Monday Night Football on Wednesday. Because viewers cannot fast-forward through the adverts, advertisers pay more for slots on ESPN.
Second, ESPN offers spectacles you cannot see elsewhere. Rights to broadcast games are often exclusive. ESPN shows more sports, including baseball, car-racing and poker, than any other network. SportsCenter features some of America’s sparkiest sports commentators, whose banter is as irreverent as an English football chant, minus the swearing. (Keith Olbermann, an over-the-top political pundit, used to be one of them.)
Third, ESPN pioneered “affiliate fees”, which cable operators pay for the right to carry each network. In 2013 ESPN will probably earn $6.6 billion from them, more than three times what it makes from ads, according to SNL Kagan, a research firm. Because it has so many exclusive sports rights, ESPN has been able to haggle its fee up to $5 per subscriber, per month: far higher than any other network’s. These fees are more predictable than ad sales, which is why investors are such fans of cable networks.
