Hartford Business Journal

HARTFORDBUSINESS.COM | SEPTEMBER 16, 2024 9 ON THE RECORD | Q&A survival as the cord-cutting trend has threatened the sports entertainment company's key revenue source: cable subscriptions. According to a report in the Wall Street Journal in March, ESPN's cable business has shrunk dramatically. Since 2011, the number of U.S. house- holds paying for cable packages that include ESPN has fallen by about 29 million, the Journal reported. That's forced Pitaro and ESPN to make some tough decisions, including several rounds of layoffs to cut costs as the company makes the digital transition. That includes last year when ESPN let go of some high-profile on-air personalities like former NFL Hall of Fame quarter- back Steve Young, Max Kellerman, Keyshawn Johnson and Suzy Kolber. Still, ESPN has remained profit- able. In the third quarter of its 2024 fiscal year, which ended June 29, the company reported $4.28 billion in domestic and international revenue, up 5% from a year earlier, and $1.09 billion in operating income, up 4% from the year-ago period. The increases were driven by higher advertising and subscription reve- nues as a result of higher rates, which helped offset a decline in traditional cable subscribers, the company said. 'Pro-competitive service' Pitaro is hardly done trying to serve sports fans. In addition to the streaming service, ESPN also was working with Warner Bros. Discovery and Fox on a joint sports-streaming service venture called Venu Sports that was announced in February. Last month, however, a federal judge temporarily blocked Venu's launch, citing antitrust concerns after a lawsuit was filed by sports- streaming service FuboTV. Pitaro said Disney, Warner Bros. and Fox "respectfully disagree" with the court's decision. "We believe that Venu is a pro-competitive service," he said. "It is pro-consumer, pro-sports fan, and we believe it's giving the sports fan another option. It's primarily directed at sports fans that are on the side- lines today … because they've cut the cord, or they've never subscribed to the traditional ecosystem." Pitaro was the opener for ESPN's media day, spending 45 minutes answering questions and talking about himself and the company. Here's what else Pitaro had to say. The Q&A was edited for space and clarity. Q. ESPN is celebrating its 45th anniversary. Why do you believe the company's future is bright? A. It starts with (broadcasting) rights (to high-profile sporting events). … We've done an amazing job, in my opinion, of acquiring marquee rights, championship rights, differentiating rights with discipline, and we take a ton of pride in that. And I think we are very well set up for the foreseeable future from a live-game perspective. A couple of examples. We entered this fiscal year saying to ourselves, we really want to renew with the NCAA. We really want to maintain our exclusivity with some optionality on the College Football Playoff, and we really want to close the NBA (broadcasting-rights deal). And so, if you fast-forward to right now, we could not be prouder of the fact that we were able to close all three of those deals and on terms that are very attractive from our perspec- tive, not just from a linear perspective. But we think about ourselves as not just a linear network, but a sports and multi-platform sports ecosystem. (In deals inked this year, Disney/ ESPN has paid for rights to broadcast national NBA games through the 2035-36 season, the new College Football Playoff through the 2031-32 season, and 40 NCAA championships for a variety of men's and women's sports — including soccer, lacrosse and baseball — for eight more years.) Q. What's the future of studio programming? A. It wasn't very long ago where I would hear repeatedly, 'Why are you guys continuing to invest in studio program- ming? Like every highlight is just one click away. Why do we need this?' And if you look at our ratings, it's just staggering. If you look at "Get Up!," "First Take," Pat McAfee, "SportsCenter," if you look at our ratings throughout the day, it's really, really impressive. And we take a ton of pride in the fact that ratings are growing for studio programming in a world of cord-cutting. And so, why is that? It's, again, place of record. It's delivering the news with personality, with charm, with charisma, with authority, and so that, to me, sets us up well for the future, including in a flagship, direct-to-consumer world. When you ask yourself, why are people going to subscribe to ESPN? I don't think you can discount or dismiss the quality of our studio programming. Q. What's the most surprising part of your job? A. Well, look, I spent years competing against ESPN (when I was at Yahoo! Media). I would literally wake up every day saying, 'We need to beat ESPN.' Then I spent years sitting at Bob Iger's leadership table, first next to (former ESPN President) George Bodenheimer, then next to (former ESPN President) John Skipper, where I would hear about the attention that ESPN gets now. But I will tell you that I didn't quite realize the amount of attention, how significant the coverage is. And look, … outside pressure is a privilege. It beats the alternative, where folks are not paying attention to the moves that you are making. But I do recognize that when we make the bars move, when we sign an NBA deal, that's going to get a ton of attention. But now I realize how even the smaller moves get a lot of focus and attention. Q. What is your go-to leadership principle? A. My direct reports are all here (in this room). They'll tell you this: 'Discuss. Debate. Decide. Align.' So I've been saying that for a long time. I want to make sure that the right people are in the room, that we're hearing from diverse voices, diver- sity of thought. I want to make sure that I'm learning every single day in this job, and so I like it when people challenge me, and my direct reports certainly do challenge me. Now, we meet every single week as a leadership team and we debate, and then we try to decide as a team. So, Discuss. Debate. Decide. Align. I will tell you that almost always we are able to unite and decide as a team. If we can't decide as a team — I think if Bob (Iger) were sitting here right now, he'd tell you that I get paid to make the decision for the ESPN business. That's my responsibility, and so fortunately, I can probably count on one hand the number of times when we have not been completely aligned as a leadership team. And then the most important element of that is the aligning, right? So, there may be someone in the room who disagrees with the decision, but you get to a certain level at ESPN or at Disney, or anywhere in fact, and if you're not in the majority, okay, but as a leader, your responsibility then is to align. Retired Philadelphia Eagles center Jason Kelce (top left) and retired Alabama football head coach Nick Saban are the newest high-profile analysts at ESPN. (Bottom photo) ESPN debuted a decade ago its $178 million Digital Center 2, where live programming like NFL Live takes place. HBJ PHOTOS | GREG BORDONARO

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