By, Zach Janes & Doug Topping
ESPN’s Economies of Scale
ESPN’s greatest advantage is the fact that it has grown to be so big that it achieves a highly efficient economy of scale. This is one of the essential factors which led to its monopoly power in the sports broadcasting industry. They broadcast in over 200 countries, being the only 24 hour network in the United States that is devoted to everything to do with sports. Their programming and advertisements can be transferred easily between the different leagues or even different sports that they are broadcasting, making ESPN significantly more cost effective than any other companies trying to compete. ESPN easily out buys any competitors to get whatever broadcast rights it wants. For example, ESPN owns the rights to Monday Night Football, Sunday Night Baseball, and Friday Night NBA Basketball. They also control more than 70% of all college bowl games (Mark, 2010).
It’s hard to understand how one sports broadcasting company can gain monopoly power over the rest. It is clear that first they had to become bigger and more cost effective in order to out buy them on every occasion, but how did ESPN get there? Well just like every other broadcasting company, they would pay a certain amount of money for the rights to broadcast an event, and then would have to make enough money in advertising to cover that. The big difference with ESPN is that everyone who buys cable packages in the United States is also paying for a subscription to ESPN. Many people don’t know this, but it is a small amount for them, which adds up to a significant subscriber revenue for ESPN. In fact, people pay more to subscribe to ESPN than any other network. For example, in 2008, CBS’s market cap at $3.97 billion was less than the $4.3 billion that ESPN got from cable subscription fees (Travis, 2008). When you put that on top of the money they make from advertisements on some of the most watched events throughout North America and even the world, ESPN became unstoppable. They became able to pay more for any broadcasting rights than anyone else, giving them monopoly power.
ESPN has come to the point where no one can compete with them, so they essentially decide how Americans consume sports media. They control the times of broadcasting, what sports are shown, and how the viewers will even view the event, because they have control. They entered the industry and gained monopoly power by becoming bigger and more efficient then everyone else. Now there are barriers to entry for all other companies, as it is impossible to compete for broadcasting rights with ESPN. Although some consumers in America may want variety, they can seldom get it. If they are in love with sports it is most likely they will only be able to watch them via ESPN, especially bowl games. ESPN sport shows thrive as well, as they have the most convenient time slots and are on the same channel that the huge majority of sports are on. No matter what consumers want, ESPN will continue to out buy its competitors, keeping the sports media industry on lockdown. Of course, some people love ESPN as well, but they better get used to it as a monopoly.
ESPN currently controls many things and buys the rights to them preventing other companies from using them or broadcasting them. ESPN is currently in control of 29 of the 34 bowl games for college football, Sunday night baseball, and Friday night basketball. ESPN is constantly growing and buying the rights to sports events preventing others from broadcasting that event. By controlling major sports events ESPN only grows bigger making their reach even larger. ESPN has become so powerful now that they are able to buy any rights to a sporting event they please. Currently ESPN broadcasts in over 200 countries and is still expanding.
Mark, . "3 Companies That Have Virtual Monopolies In The United States." Buy Like Buffett. N.p., 23 S. Web. 12 Apr 2012. <http://buylikebuffett.com/finance/3-companies-that-have-virtual-monopolies-in-the-united-states/>.
Travis, Clay. "Exploring the ESPN Business Model (Hint: It Involves Swimming In Piles of Cash)." Deadspin, Sports News without Access, Favor, or Discretion. N.p., n.d. Web. 12 Apr. 2012. <http://deadspin.com/5098814/exploring-the-espn-business-model-hint-it-involves-swimming-in-piles-of-cash>.