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The Power of ESPN

ESPN Google

 

Google just announced an idea that could forever change the business model for advertising on the internet. In short, Google is toying with the thought of allowing web surfers to see their favorite websites ad-free in exchange for a $1-$3 monthly fee. This new service has been given the name Contributor. To begin, Contributor will launch on a number of popular sites, including Mashable, Imgur, wikiHow, The Onion, and Urban Dictionary.

HOW IT WORKS: If you are an avid reader/user of a participating site and  don’t want to see ads, you can sign up to pay a monthly amount between $1-3 through Contributor. Then, when you visit that site (or any of the other participating sites) you will be shown blurred-out boxes with a Thank You message from Google instead of the pesky, slow-to-load ads. From that $1-$3 monthly fee, Google will take a portion and the rest will be split among the participating sites.

There are some more technicalities behind Contributor (Like the fact that if a website’s ads are completely hosted by Google, users who pay the monthly fee will not see a single ad. However, Contributor will not block other ads/ad sources that the website might have), but for the most part, the above 2 paragraphs are the basics.

Now when I heard of this new phenomena, I instantaneously thought of its future implications in relation to ESPN.

Why you ask??

ESPN is probably the most powerful cable network there is and there ever will be. In the business of TV, there are per-subscriber fees. In order for a cable network like ESPN, TNT, or Discovery to be available to a cable company (Time Warner, Directv, etc.), the network and the cable company have to agree on this per-subscriber fee. A per-subscriber fee is basically the money networks make for selling their content to cable providers. For the sake of a simple argument and a simple example, lets say TNT has an agreement with Directv. That agreement says that every month, Directv has to pay $0.64 to TNT for every cable subscriber (customer) Directv has. Directv pays this because they know  they need to offer TNT to make their cable subscribers happy. To continue a simple discussion, lets say TNT agreed on a per-subscriber fee of $0.64 with every cable network in America. The Discovery Channel, on the other hand, demands only $0.24 cents from every cable company. Now we all know ESPN is a very popular network. If a cable company doesn’t offer ESPN, people will get VERY VERY upset VERY VERY quickly and seriously consider changing cable companies. ESPN knows they are in high demand, so they require cable companies to pay them somewhere close to $7.50 for every cable subscriber. This high fee gives cable companies access to ESPN and all of its corresponding channels (like ESPN 2, ESPN Classic, ESPN 3, ESPN News, etc.). In the grand scheme of cable networks, ESPN has the highest per-subscriber fee by a long shot.

Now if ESPN is able leverage itself so well against cable companies, what’s stopping it from leveraging itself against companies like Google and this new Contributor business? As I pondered this new digital advertising business model, I was able to just envision ESPN saying something along the lines of, “Hey Google, you know how you get $0.75 of that $2 monthly Contributor fee?? Well we want $0.75 of that too, and then the remaining $0.50 of that $2 fee can get split among the other, less popular 38 sites like wikiHow and The Onion. We both know that ESPN.com and all our affiliate sites are bringing in the most visitors, so we deserve rightful compensation.” There are rumors that your monthly Contributor fee will only be split among sites you actually visit, and not all the sites that are participating. Regardless however, the concept of per-subscriber fees could be making its way into the online, digital domain, and if that is the case, ESPN is sitting back and not complaining one bit.

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