- ESPN and MLB are opting out of their TV deal early. The partnership will end with the 2025 season.
- ESPN’s sports rights are of particular interest ahead of the fall launch of its flagship streamer.
- Analysts say the sports broadcaster is in a “position of strength” when it comes to negotiations.
ESPN and Major League Baseball are ending their TV deal. ESPN isn’t sweating the divorce.
The companies announced on Thursday that they opted out of their contract early. The decision to end the deal with the 2025 season came after ESPN felt it was paying more for the rights to its Sunday slot than streamers Apple and Roku were for their games, a source close to ESPN told Business Insider.
Like other sports broadcasters and streamers, Disney’s ESPN has been snapping up sports rights, from renewing its deal with the NBA last year to re-upping its college sports contract with the ACC. As it nears the fall launch of its flagship streamer, its decisions are publicly under the microscope. The company appears to be picking and choosing its battles carefully.
“Sports rights have gone up so much, at some point, there has to be some financial discipline,” Jessica Reif Ehrlich, managing director at Bank of America Securities, told BI.
MLB Commissioner Rob Manfred wrote in a letter first published by The Athletic that he didn’t think the league should reduce its fees for ESPN, which has exclusive games, unlike Apple and Roku’s packages. He also wrote that the league was displeased with the lack of coverage ESPN provided outside game-time broadcasts. The MLB declined to comment on this story.
As the two prepare to part ways, some analysts told BI that the Disney property won’t miss out on too much. ESPN has the rights to many sports and events outside baseball. In the next few months alone, the NBA and NHL playoffs, the Masters tournament in golf, and many college sports are coming.
“ESPN, generally, is in a position of strength,” Reif Ehrlich said. She pointed to ESPN’s distribution footprint, which includes traditional pay TV, sports-focused streaming bundles, and its own streaming services. “ESPN is a highly desirable platform for any sport.”
ESPN is making power plays ahead of its streaming launch
MLB isn’t the only league ESPN is playing hardball with.
The company recently walked away from its exclusive negotiation window with Formula 1 without a contract, Puck News reported. It is also in negotiations with the UFC, though no deal has yet been announced.
The source close to ESPN told BI that baseball has a long season, and its ratings haven’t been as strong as some other sports.
Last year, the MLB said ESPN’s Sunday Night Baseball program had an average viewership of about 1.5 million, the most the MLB had on the platform in over five years.
Under the MLB deal, ESPN could show baseball games on Sunday and some other events, as well as mostly regular season highlights on SportsCenter. It didn’t have the rights to the World Series. With the restrictions on what ESPN could cover, the move to split was not shocking, said Rief Ehrlich.
As Disney works to launch ESPN’s flagship, it is arguably more important that it picks and chooses the content it wants and becomes more selective, the analysts said.
ESPN is saving $600 million in programming expenses by cutting the MLB, according to a MoffettNathanson report published on February 21.
Of course, walking away from MLB could undermine ESPN’s long-term ambition of being the streaming home for sports in the US.
“Considering the totality of Disney and ESPN’s streaming ambitions, we believe an opt-out would likely be a mistake,” Lightshed Partners wrote in a report earlier in February.
Still, the decision likely came down to whether Disney thought the MLB rights could meaningfully draw subscribers for its streaming services.
“Disney didn’t value [the MLB] as a prime mover of acquisition,” Joe Bonner, an analyst at Argus Research, told BI.
