ACC Network is off and running with its first distribution deals

http://www.sportsbusinessdaily.com/Journal/Issues/2017/06/26/Media/ESPN-ACC-Network.aspx

The ACC Network is off and running with its first distribution deals.

The ESPN-owned conference channel recently secured its first carriage agreements with digital video providers, guaranteeing that the channel will be available to consumers when it launches in August 2019. The deals mark an important first step that comes as critics question the network’s viability in such a volatile media marketplace. ESPN would not identify the providers who agreed to a deal, saying it is with providers whose carriage deals run beyond 2019.

So far, PlayStation Vue, DirecTV Now, Sling TV, YouTube TV and Hulu have deals to carry ESPN programming. It’s not known which ones also will take the ACC Network, though it should be noted that ESPN’s parent, Disney, owns 30 percent of Hulu.

The ACC Network was part of a larger package of Disney-owned channels sold to some of these digital video providers. It’s not known how much ESPN is charging for the ACC Network, but it’s expected to be lower than the rates for the SEC Network (72 cents per subscriber per month, according to Kagan) or BTN (43 cents, according to Kagan). These early distribution deals are important for ESPN because they will exert pressure on larger distributors to cut similar deals or risk losing subscribers who want to watch ACC sports.

Whether bigger distributors push back on the ACC Network in an environment where pay-TV channels have been losing subscribers remains to be seen, but one of the first tests will come this fall when ESPN renegotiates its affiliate deal with cable operator Altice USA, formerly Cablevision. Altice USA primarily serves areas around New York City, and it is the one major distributor that doesn’t carry the SEC Network, another ESPN-owned conference channel that launched in 2014.

Between now and the ACC Network’s planned launch in 2019, ESPN also has affiliate deals coming up with Verizon Fios (at the end of 2018), Charter (mid-2019) and AT&T (late 2019), sources said.

“We’ve yet to really get into the meat of distribution conversations because it is a couple years away,” said Burke Magnus, ESPN’s executive vice president of programming and scheduling. “We feel every bit as optimistic as we did when we announced it.”

Magnus said negotiations have been helped by the ACC’s on-field successes, which include the two most recent national championships in football (Clemson) and college basketball (North Carolina).

The ACC also touts its massive footprint, which ranges along the Eastern Seaboard from Miami to Boston, accounting for more than 40 percent of the nation’s households.

Still, the ACC has prepared its stakeholders for tough distribution battles, especially in this climate.

The ACC’s presidents were joyous at the news last summer that ESPN was fully committed to an ACC Network, but at the same meeting they were dealt a word of caution. There will be skeptics about the launch of a linear channel, said Commissioner John Swofford and the league’s media consultant, Wasserman’s Dean Jordan.

As recently as last month, veteran media analysts like Neal Pilson and James Andrew Miller said ESPN’s round of about 100 layoffs should be reason for the network to re-evaluate an ACC Network. In fact, the layoffs prompted a May 3 conversation between Swofford and ESPN President John Skipper.

Later that day, Swofford wrote to his presidents and athletic directors with this message: Tune out the critics, the layoffs don’t affect us, our plans for a network are “full-steam ahead.”

That emboldened ACC athletic directors to believe that the network could be successful enough to close the financial gap between their conference and the power five’s richest leagues, the SEC and Big Ten.

At a meeting with his board of directors last February, Florida State AD Stan Wilcox said a new network could deliver as much new revenue as the SEC Network did in 2014 — about $7.5 million per school. The SEC Network staged the most successful launch in cable TV history with more than 60 million homes and delivered a profit of about $210 million in its first year. The SEC, like the ACC, shares all network profits 50-50 with ESPN. While such lofty expectations might seem a little over the top, other ACC ADs said they were going on the guidance they received from ESPN. “We’re not pulling these numbers out of thin air,” one ACC AD said. “This is what we’re being told.”

With ESPN’s ability to grow revenue deeply mitigated against the tide of declining subscribers, a new product like the ACC Network represents one of the ways ESPN can develop new profits.

If the ACC Network launches like the SEC, that could result in a $100 million profit for ESPN, which explains why the media giant is throwing its weight behind an ACC linear channel at a time when it might seem counterintuitive. The ACC also represents the only conference where ESPN owns all the rights, from TV to digital to marketing, another reason why the effort has ESPN’s full backing. ESPN owns most of those same rights with the SEC, but CBS also owns a selection of games.

Whether the ACC Network can replicate that kind of record launch like the SEC remains to be seen, but ACC officials are repeating the same mantra: “We’re very optimistic.”

“The advantage the ACC has over most, if not all, conferences is they couple high-quality football with the highest quality men’s and women’s basketball,” Magnus said. “It’s pretty formidable.”