ESPN is willing to embrace over-the-top video, so long as it can do things its way

April 15, 2011

8 Min Read
Q&A: Disney-ESPN's Matt Murphy

Walt Disney Co. (NYSE: DIS) would distribute ESPN on Google TV, Boxee and other over-the-top video platforms -- so long as they can agree to deals that are similar to those it has with cable and satellite providers.

In a wide-ranging interview with Light Reading Cable, Disney ESPN Media Networks (DEMN) Senior Vice President of Digital Video Distribution Matt Murphy says that his company is talking to over-the-top (OTT) providers and other new entrants about delivering ESPN on new platforms.

Disney has long been focused on pushing multiplatform content. It was one of the first programmers to deliver video-on-demand (VoD) programming through Microsoft Corp. (Nasdaq: MSFT)'s Xbox 360, and it recently launched its "WatchESPN" app for the Apple Inc. (Nasdaq: AAPL) iPad, which offers the live video feeds from ESPN's stable of sports networks. Murphy says DEMN wants to build similar apps for other Disney networks, as it works to reach viewers on any screen. (See ESPN Pipes Live TV to Apple Devices .)


— Steve Donohue, Special to Light Reading Cable

Light Reading Cable: You're offering some on-demand content through devices like the Xbox 360. Would you ever allow an over-the-top distributor to carry the same linear feeds that you distribute to cable and satellite homes? Would you give those networks to a Boxee, or a Roku Inc. or a Google TV?

Murphy: The company has been very successful over the last 20 years or so striking partnerships with new entrants into the market. It started with DBS [direct broadcast satellite] in the early '90s, it continued in the 2000s when the telcos decided to get into the distribution game.

There are now other ways for new entrants to come to the market. They may not necessarily have to own pipe or satellites to do it, but they are new distributors. If we are able to come to the same types of agreements that we have with current MVPDs [multichannel video programming distributors], I think we'll be able to figure out a solution for them. We are definitely in the game of distribution, and there has been a history of it in this business of more and more distributors coming to market

Light Reading Cable: Are you having those discussions with over-the-top providers today, and could we expect deals any time soon?

Murphy: There are a lot of new entrants, or potential new entrants, coming into the market. They have a lot of questions. We're also asking a lot of questions. But to predict anything in the near term would be premature.

Light Reading Cable: That would probably upset some of your cable affiliates. Is that one of the things you consider when you are having those discussions?

Murphy: I think affiliates understand we're in the business of distribution. What they're looking for is that they are treated no less favorably than anyone else. They're looking for fairness. And that's why -- again, pick your potential over-the-top provider -- we would look at them the same way that we do our current MVPDs. We would be looking for distribution of our networks with similar pricing and packaging that others enjoy today.

Next page: 'WatchESPN' & the Cord-Cutting Trend

Light Reading Cable: Why is the WatchESPN app only available to Time Warner Cable Inc. (NYSE: TWC), Bright House Networks and Verizon Communications Inc. (NYSE: VZ) subscribers?

Murphy: Those are the affiliates that we've been able to come to an agreement with for these rights. We're in very active conversations with all our affiliates to figure out a way to make this available to their customers.

Light Reading Cable: How do you protect the value for your core networks if you're distributing content on more platforms and more devices? If you distribute ESPN content on the Xbox 360, does that hurt the value of the license fee that Comcast pays for ESPN?

Murphy: We're very cognizant of the value proposition that we have with our distributors. We absolutely understand that they are paying us for products and services for their customers. We're very respectful of that, mindful of that in any of these new partnerships and new platforms. We very much are focused on that core business, and how do we bring value to that business, and continue to perpetuate what is a successful business model for both parties.

At the same time we want to take advantage of technology to serve the needs of our fans, and our consumers, [including] access on other devices and other websites. It's very important for us to be on those platforms, because that's where our fans are.

The fundamental premise of authentication is it starts with a consumer who has a television subscription. Without that underlying television subscription, the consumer does not enjoy the benefits of getting access to -- in this [WatchESPN] case -- the linear networks of ESPN on other devices.

Light Reading Cable: Are you concerned about cord-cutting, that the more content you distribute on new platforms, the easier it is for someone to cut the cord on cable and ESPN?

Murphy: We really see no evidence of it ... particularly as it relates to live events. What we've found, though ... is as you make your content available on these other platforms, and do it in a way that is mindful of the business, there are numerous benefits to it. If you look at ESPN, this past year they had their highest-rated year ever for their networks, yet our content was on more platforms than ever. We had more digital consumption than ever, but ratings still went up. So we think that this stuff is additive and complimentary, and not necessarily giving consumers a choice to start disconnecting their cable and [pay] television subscriptions.

Light Reading Cable: How much demand have you seen for the WatchESPN app?

Murphy: We've been very pleasantly surprised with the number of people that have downloaded the application and are actually using it. We've been in the top 10 of the free apps consistently since the day we launched.

Next page: Beyond ESPN

Light Reading Cable: Are you looking at developing similar apps for Disney Channel, ABC Family, and other Disney/ABC Television Group networks?

Murphy: When our affiliates have posed it to us, we're very interested in it as long as we can figure out a way that it's easy for the consumer to use and that we receive the value that we think it provides. Clearly the ESPN side of the house has been able to figure that out, and we're working hard now on the Disney and ABC side to figure out how we can do that as well.

Light Reading Cable: Is there a way to measure viewing on mobile devices?

Murphy: Much like the Internet 10 years ago, there's measurement, but what are the metrics that advertisers will agree to? There is clearly a lot of work being done by Nielsen (The Nielsen Co. ) and Rentrak [Corp.] and others to solve that, but we didn't want that to be a reason not to move forward and offer this to consumers. It's still very early in the game where we feel that it is in no way harming our television ratings or advertising. What was important to us was to get out there, make it available to consumers, and then work with the industry to solve those other issues.

Light Reading Cable: When it comes to distributing multiplatform content, how much of a challenge are rights issues, in terms of being able to offer content from the NFL and some of the other leagues that you have deals with?

Murphy: It's something that ESPN had the foresight to see that the world was changing years ago. Acquiring the necessary rights to allow us to serve our consumers on whatever device or platform they can consume ESPN on, which is now over 100 million people a week. We've been securing those rights for some time. That's why we were able to launch when we did, and other parts of the company continue to work on acquiring the rights so that they too can deliver the same services that you enjoy on your television to other devices.

Light Reading Cable: What do you spend most of your time on these days?

Murphy: We're very focused on our affiliates, and our affiliates' business, and the new services like WatchESPN that we are bringing to market. It's not only launching new services, but engaging our affiliates in terms of how we can do that with them.

We're very focused on usage and awareness of these services, and we're also focused on developing new products and services. This authentication solution is something that we've been working on for the better part of three years, but there's a lot more that we can do, whether it's two-screen experiences, or other enhancements to this service, or even some of the basic VoD services. We're very focused on our affiliates' core business, and looking for ways to serve our fans by bringing this content to other platforms.

— Steve Donohue, Special to Light Reading Cable

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