ESPN held talks with NBA, NFL in search for strategic partner, sources say
LeBron James of the Los Angeles Lakers at a game against the LA Clippers at ESPN Wide World Of Sports Complex on July 30, 2020 in Lake Buena Vista, Florida.
Mike Ehrmann | Getty Images
As Disney considers a strategic partner for ESPN, Chief Executive Officer Bob Iger and ESPN head Jimmy Pitaro have held early talks about bringing professional sports leagues on as minority investors, including the National Football League and the National Basketball Association, according to people familiar with the matter.
ESPN has held preliminary discussions with both the NFL and NBA about a variety of new partnerships and investment structures, the people said. In a statement, an NBA spokesperson said, “We have a longstanding relationship with Disney and look forward to continuing the discussions around the future of our partnership.”
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Spokespeople for ESPN and the NFL declined to comment.
Talks with the NFL have occurred in conjunction with the league’s own desire for a company to take a stake in its media assets, including the NFL Network, NFL.com and RedZone, said the people, who asked not to be named because the talks have been private.
The NBA and Disney have broached many potential structures around a renewal of media rights, the people said. Disney and Warner Bros. Discovery have exclusive negotiating rights with the NBA until next year.
Iger said last week in an interview with CNBC’s David Faber that Disney is looking for a strategic partner for ESPN as it prepares to transition the sports network to streaming. He didn’t elaborate on what exactly that meant beyond saying a partner could bring additional value with distribution or content. He acknowledged selling a stake in the business was possible.
Disney owns 80% of ESPN. Hearst owns the other 20%.
“Our position in sports is very unique and we want to stay in that business,” Iger said to Faber. “We’re going to be open minded about looking for strategic partners that could either help us with distribution or content. I’m not going to get too detailed about it, but we’re bullish about sports as a media property.”
Theoretically, a jointly owned subscription streaming service among multiple leagues could eventually give consumers new packages of games and other innovative ways to take in content.
The move would be a logical one for Disney as it tries to move past the traditional cable subscriber model and underscores how badly the company wants to find a solution for the sports network as its audience declines. There’s no better partner for sports content than the leagues, themselves.
Superficially, it may make less sense for the NBA and NFL, which sign lucrative media rights deals with many media partners that fuel team revenue and player salaries with a range of media companies.
Professional sports leagues could face conflicts of interest if they take a minority stake in ESPN. Owning a stake in ESPN may irritate Disney’s competitors, such as Comcast‘s NBCUniversal, Fox, Amazon, Paramount Global and Apple, who help make the leagues billions of dollars by participating in bidding wars for sports rights. Taking an ownership stake in ESPN could give leagues the incentive to boost the value of that entity rather than striking deals with competitors.
Major League Baseball and the National Hockey League may also want to get involved in any deal that involves the NBA and NFL, one of the people said. Involving multiple leagues in a strategic investment would be complicated and unprecedented. The MLB and NHL did not immediately respond to requests for comment.
There would also be hurdles for Disney. ESPN also employs hundreds of journalists that cover the major sports leagues. Selling an ownership stake to the leagues could cloud the perception of objectivity for ESPN’s reporting apparatus.
Still, the leagues are already business partners with ESPN. It’s possible ESPN could put measures in place to ensure reporters can continue to cover the leagues while minimizing conflicts, but it adds another layer of complexity to any deal.
A streaming-first ESPN
ESPN is trying to forge a new path as a digital-first, streaming entity. Disney realizes ESPN won’t be able to make money like it previously has in a traditional TV model.
Selling a minority stake in ESPN to the leagues could mitigate future rights payments, allowing Disney to better compete with the big balance sheets of Apple, Google and Amazon. It would also guarantee ESPN a steady flow of premium content from the leagues.
Until last quarter, Disney’s bundle of linear TV networks still had revenue growth because affiliate fee increases to pay-TV providers — largely driven by ESPN — made up for the millions of Americans who cancel cable each year. That trend finally ended last quarter, according to people familiar with the matter. Accelerating cancellations have now overwhelmed fee increases, and linear TV revenue outside of advertising has begun to decline.
“A lot has been said about renting [sports right] versus owning,” Iger said last week in his CNBC interview. “If you can rent it and continue to be profitable from renting, which we have been and we believe we will continue to be, then there’s value in staying in it. We have great relationships with Major League Baseball, and the National Hockey League, and various college conferences, and of course the NFL and the NBA. It’s not just about the live sports coverage of those leagues, those teams, it’s also about all of the shoulder programming it throws off on ESPN and what you can do with it in a streaming world.”
ESPN would like to morph itself into a streaming hub for all live sports. Management would like to launch a feature allowing ESPN.com or the ESPN app to funnel users to games no matter where they stream, CNBC reported earlier this year.
While striking a deal with professional sports leagues wouldn’t be easy, Disney appears to be pushing the envelope on its thinking to prepare for a streaming-dominated world that includes its full portfolio of sports rights.
“If [a partner] comes to the table with value, whether it’s content value, distribution value, whether it’s capital, whether it just helps derisk the business — that wouldn’t be the primary driver — but if they come to the table with value that enables ESPN to make a transition to a direct-to-consumer offering, we’re going to be very open minded about that,” Iger said.
WATCH: Disney CEO Bob Iger talks to CNBC’s David Faber about ESPN and its future
Dado Ruvic | Reuters
Elon Musk’s SpaceX, is initiating a secondary share sale that would give the company a valuation of up to $800 billion, The Wall Street Journal reported Friday.
SpaceX is also telling some investors it will consider going public possibly around the end of next year, the report said.
At the elevated price, Musk’s aerospace and defense contractor would be valued above ChatGPT maker OpenAI, which wrapped up a share sale at a $500 billion valuation in October.
SpaceX has been investing heavily in reusable rockets, launch facilities and satellites, while competing for government contracts with newer space players, including Jeff Bezos‘ Blue Origin. SpaceX is far ahead, and operates the world’s largest network of satellites in low earth orbit through Starlink, which powers satellite internet services under the same brand name.
A SpaceX IPO would include its Starlink business, which the company previously considered spinning out.
Musk recently discussed whether SpaceX would go public during Tesla‘s annual shareholders meeting last month. Musk, who is the CEO of both companies, said he doesn’t love running publicly traded businesses, in part because they draw “spurious lawsuits,” and can “make it very difficult to operate effectively.”
However, Musk said during the meeting that he wanted to “try to figure out some way for Tesla shareholders to participate in SpaceX,” adding, “maybe at some point, SpaceX should become a public company despite all the downsides.”
WATCH: What retail investors should know about OpenAI and SpaceX
The logo for Google LLC is seen at the Google Store Chelsea in Manhattan, New York City, U.S., November 17, 2021.
Andrew Kelly | Reuters
A U.S. judge on Friday finalized his decision for the consequences Google will face for its search monopoly ruling, adding new details to the decided remedies.
Last year, Google was found to hold an illegal monopoly in its core market of internet search, and in September, U.S. District Judge Amit Mehta ruled against the most severe consequences that were proposed by the Department of Justice.
That included the proposal of a forced sale of Google’s Chrome browser, which provides data that helps the company’s advertising business deliver targeted ads. Alphabet shares popped 8% in extended trading as investors celebrated what they viewed as minimal consequences from a historic defeat last year in the landmark antitrust case.
Investors largely shrugged off the ruling as non-impactful to Google. However some told CNBC it’s still a bite that could “sting.”
Mehta on Friday issued additional details for his ruling in new filings.
“The age-old saying ‘the devil is in the details’ may not have been devised with the drafting of an antitrust remedies judgment in mind, but it sure does fit,” Mehta wrote in one of the Friday filings.
Google did not immediately respond to a request for comment. The company has previously said it will appeal the remedies.
In August 2024, Mehta ruled that Google violated Section 2 of the Sherman Act and held a monopoly in search and related advertising. The antitrust trial started in September 2023.
In his September decision, Mehta said the company would be able to make payments to preload products, but it could not have exclusive contracts that condition payments or licensing. Google was also ordered to loosen its hold on search data. Mehta in September also ruled that Google would have to make available certain search index data and user interaction data, though “not ads data.”
The DOJ had asked Google to stop the practice of “compelled syndication,” which refers to the practice of making certain deals with companies to ensure its search engine remains the default choice in browsers and smartphones.
The judge’s September ruling didn’t end the practice entirely — Mehta ruled out that Google couldn’t enter into exclusive deals, which was a win for the company. Google pays Apple billions of dollars per year to be the default search engine on iPhones. It’s lucrative for Apple and a valuable way for Google to get more search volume and users.
Mehta’s new details
In the Friday filings, Mehta wrote that Google cannot enter into any deal like the one it’s had with Apple “unless the agreement terminates no more than one year after the date it is entered.”
This includes deals involving generative artificial intelligence products, including any “application, software, service, feature, tool, functionality, or product” that involve or use genAI or large-language models, Mehta wrote.
GenAI “plays a significant role in these remedies,” Mehta wrote.
The judge also reiterated the web index data it will require Google to share with certain competitors.
Google has to share some of the raw search interaction data it uses to train its ranking and AI systems, but it does not have to share the actual algorithms — just the data that feeds them.” In September, Mehta said those data sets represent a “small fraction” of Google’s overall traffic, but argued the company’s models are trained on data that contributed to Google’s edge over competitors.
The company must make this data available to qualified competitors at least twice, one of the Friday filing states. Google must share that data in a “syndication license” model whose term will be five years from the date the license is signed, the filing states.
Mehta on Friday also included requirements on the makeup of a technical committee that will determine the firms Google must share its data with.
Committee “members shall be experts in some combination of software engineering, information retrieval, artificial intelligence, economics, behavioral science, and data privacy and data security,” the filing states.
The judge went on to say that no committee member can have a conflict of interest, such as having worked for Google or any of its competitors in the six months prior to or one year after serving in the role.
Google is also required to appoint an internal compliance officer that will be responsible “for administering Google’s antitrust compliance program and helping to ensure compliance with this Final Judgment,” per one of the filings. The company must also appoint a senior business executive “whom Google shall make available to update the Court on Google’s compliance at regular status conferences or as otherwise ordered.”
This is breaking news. Check back for updates.
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