ESPN’s future is back in play

Good morning — have you or someone you know been talking nonstop about their “bracket”? Do you suddenly find yourself agonising over a “second-half turnover by a fifth-year senior”? You or your loved one may be afflicted with the annual condition known as March Madness.

That’s right, it’s the annual US collegiate basketball tournament which unifies the American public around a dizzying two-and-a-half week schedule of single-elimination basketball games between dozens of schools around the nation. It’s a near-billion-dollar juggernaut at the centre of the university sport system, and this year’s tournament may be its strangest yet, with the overall top seed Alabama Crimson Tide reckoning with an alleged murder case.

One of the many appeals of March Madness is that it tends to be a showcase of the top basketball talent expected to enter the National Basketball Association draft. While that remains the case for dozens of players, the widely expected No. 1 pick this year is half a world away in France. Our colleague, FT Paris bureau chief Leila Abboud, has a dispatch on “Wembymania” this week — stay tuned for much more on 7’3” wunderkind Victor Wembanyama.

Meanwhile, we provide the dish on the future of ESPN, and explain how Fifa is hoping to meet its lofty revenue target for 2026. Do read on — Sara Germano, US sports business correspondent

Does ESPN still fit inside the Disney castle?

When Bob Iger returned to Disney as chief executive in November, the sense of relief was palpable across Hollywood. The world’s largest media company is losing billions of dollars a year on its push into online streaming, and the well-respected Iger was brought back from retirement to steer Disney through a messy transition away from traditional television.

One of the biggest decisions Iger faces is what to do about ESPN. For many years ESPN, the dominant US sports TV channel, has been a cash cow for Disney, sucking money into the business as Americans paid hefty bills for cable television. The riches trickled down to major sports leagues, who have been able to fetch ever-higher fees from media companies to air their games — helping underpin soaring valuations across the sports business.

But those halcyon days are over, and Iger and his peers in media face a painful dilemma: how to navigate the ill-winds facing the once-lucrative sports television business, while waiting for streaming to become profitable.

ESPN continues to generate annual revenue of more than $10bn for Disney, but the subscriber base is shrinking as people cancel their cable TV packages. The channel’s cable subscribers have dwindled from 98mn in 2013 to less than 74mn last year, according to estimates from S&P Global Market Intelligence. The ESPN Plus streaming service, which launched alongside Disney Plus in 2019, has reached 25mn subscribers. But they pay a fraction of what ESPN earns from cable TV subscribers. And many media executives don’t think streaming will ever be as profitable as cable was.

Some former colleagues and friends have recently advised Iger to spin out ESPN, narrowing Disney’s focus as it tries to turn its fortunes around, according to people familiar with the matter.

The notion of splitting ESPN from Disney was also floated during the tenure of Bob Chapek, Iger’s predecessor, who was ousted last year. Towards the end of 2021, Disney executives met Michael Rubin, chair of sports company Fanatics, to discuss options for ESPN, including a potential investment or sale, according to several people familiar with the matter. While the talks did not advance beyond the meeting, they speak to the uncertainty surrounding the sports network’s future within the wider Disney empire.

Iger has recently poured cold water on speculation about ESPN being put up for sale. “[ESPN] is going through some obviously challenging times,” he said last month. “We just have to figure out how to monetise it in a disrupting world . . . we’re not engaged in any conversations right now or considering a spin-off of ESPN.” 

Chapek had also been leaning towards holding on to ESPN, according to a person close to him. “But ESPN is a declining asset, and Disney has a tough balance sheet”, the person cautioned. The network’s long-term place inside Disney is far from secure.

Fifa makes calendar land grab with jumbo World Cup

There are many power battles going on within global football. Most of them involve money, but some are over something more precious: time.

This week Fifa’s top brass gathered in the Rwandan capital of Kigale, where a few important things happened. Divisive Fifa president Gianni Infantino got another four-year term, Visit Saudi was dropped as a sponsor of the Women’s World Cup, and Morocco joined the Spain/Portugal bid for 2030.

Fifa also agreed to a new format for the 2026 World Cup. It was already due to be the first plus-sized tournament, with 48 teams competing — up from 32 previously. After a brief flirtation with a first round involving three-team groups, Fifa confirmed that instead the competition spread over Mexico, Canada and the US will have the usual four-team groups, meaning the overall number of games in 2026 will reach 104, compared to 64 in Qatar.

The extra games will help Fifa hit its target of $11bn revenues from the next World Cup cycle, up from $7.5bn in the most recent four-year period. Most of the venues in 2026 will be bigger than those in Qatar so ticket revenue should surge, while extra content means higher broadcast fees.

The monster World Cup coincides with Fifa’s push into the club game too, with the relaunch of the Club World Cup in 2025. That tournament is still a work in progress, but details have gradually been filtering through.

Fifa’s land-grab on the calendar is proving deeply unpopular in some quarters. The European Leagues said it was “concerned” about the changes, and complained that Fifa was acting “in a unilateral way and without any consultation process with many of the football stakeholders”. Players groups have also been airing concerns about an already overcongested fixture list.

However, some elite clubs sense an opportunity. After all, time is money. Talks have yet to conclude on a new Fifa Club Benefits Programme — essentially the compensation fee paid to clubs in return for providing their players to Fifa tournaments. The figure was set at $209mn in Qatar, but will surely have to rise to reflect the bigger tournament and higher expected income.

Plus, the new look Club World Cup will bring in extra revenue for 12 elite European teams — coincidentally the same number that wanted to launch a European Super League. Real Madrid, the chief architect of the breakaway project, has already booked its slot.

Highlights

• Football superagent Rafaela Pimenta is running One Sports Business Strategy without business partner Mino Raiola after his death last year. She tells Simon Kuper about the sharks who tried to poach players as soon as Raiola died, planning transfers, and the reason Margaret Thatcher would’ve faced opposition if she’d wanted to be a football agent.

• Rugby governing bodies are squaring up against a growing list of amateur players involved in a class-action lawsuit over neurological impairments. Another 55 amateur players joined the legal battle, taking the total to 250, Reuters reported.

• In further sign of tumult in sports media, Diamond Sports Group, the largest holder of US regional sports networks, filed for Chapter 11 bankruptcy this week. The subsidiary of Sinclair Broadcast Group owns 19 local sports channels, under the banner Bally Sports, with agreements to air dozens of NBA, Major League Baseball, and National Hockey League games. Those fixtures are expected to continue to air as DSG negotiates with its creditors and restructures its debt.

• US Soccer said an independent investigation into alleged misconduct on its men’s national team had concluded, freeing team coach Gregg Berhalter to remain in consideration for the top gig. Parents of a USMNT player, Gio Reyna, aired complaints about Berhalter following the 2022 World Cup, though an independent firm concluded there “is no legal impediment to employing him”.

• Burnley, the football club controlled by US investment firm ALK Capital, were barred from signing players because of a delay in filing financial accounts. Having been relegated from the Premier League last year, the club is top of the Championship and on course to return immediately. Huddersfield Town also received a ban for the same reason.

Transfer Market

• Tim Lewis, who as a Clifford Chance partner advised Stan Kroenke on his acquisition of Arsenal, has taken on the role of executive vice-chair. The move increases his influence at the Premier League side, which had made him a non-executive director in July 2020, following the coronavirus pandemic. Josh Kroenke, Stan’s son, has been elevated to co-chair.

Final buzzer

im sure Virginia’s point guard has been trapped like this a thousand times in his life and gotten out of it just fine, but because it’s MARCH MADNESS he completely forgets how to play basketball, just says f it and heaves it. You gotta love the tourney.pic.twitter.com/zhOPB9XYND

— Jeff McDevitt (@JeffMcDev) March 16, 2023

To conclude where we started, the NCAA national basketball tournament kicked into full effect this week and there were no shortage of last-minute upsets to keep the tournament interesting. Chief among them is this play in the final seconds of a first-round match between 4-seed University of Virginia and 13-seed Furman University, in which a fifth-year UVA senior accidentally forced a turnover to give Furman the go-ahead three-pointer for the win. It’s both sublime and devastating, which illustrates exactly why they call it March Madness.