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A new sports network?
Don't be surprised if the NFL uses a sliver of its games to give a boost to a competitor for ESPN.
August 12, 2005: 4:41 PM EDT
A weekly column by Chris Isidore, CNN/Money senior writer
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NEW YORK (CNN/Money) - Could the home of Lance Armstrong and professional bull riding be the next home for the Tom Brady and the Detroit Red Wings?

Stranger things may happen by 2006. By then, it's possible that the Outdoor Life Network could carrying both NHL and NFL games.

Or maybe those games will be found on a new all-sports network from Rupert Murdoch's media empire. Or maybe prime time NFL games will find their way to the league's own NFL Network. Or maybe some cable network will join the fray.

It's tough to look at the ESPN empire and think what this nation needs is another all-sports network.

But that's pretty much what the nation's sports leagues believe is needed.

More sports networks would mean more bidders for their broadcast rights, and more money for team owners.

Others, including Time Warner (CNN/SI) have taken on ESPN only to fail spectacularly. But while the costs of taking on ESPN are substantial, the payoff from a successful effort could be huge.

ESPN and Fox Sports Net, the collection of regional sports networks from Fox, are the two networks that see by far the greatest per-subscriber fee from cable operators. And ESPN has become the key profit driver for Walt Disney Co. (Research)

"People used to ask if there was enough sports to support one all sports network. Now ESPN has three. They questioned if could have an all-news station. Now you have CNN, Fox News and MSNBC," said John Mansell, senior analyst with Kagan Research. "The only question is whether or not ESPN is willing to pay what is likely to be a substantial premium to keep a new entrant from entering the fold, or whether a new entrant will pay that premium to get in the game."

The Wall Street Journal reported earlier this summer that OLN, owned by Comcast (Research), the nation's largest cable operator, was in talks with the NHL as it returns to the ice after losing a year due to a lockout of players. ESPN has already turned down an option to pay the embattled league $60 million for its games this season.

The Journal also reports that OLN is talking with the NFL about the eight Thursday and Saturday games late in each season that will air on cable beginning in 2006. Comcast was reportedly talking about giving the NFL a stake in the network to land the games.

OLN expects to be in 67 million homes by the end of this year, but Kagan figures show that it is getting only 12 cents per subscriber from cable operators, about what ESPN Classic gets for showing games played years ago.

The NFL Network gets 19 cents per subscriber, while Fox Soccer Channel gets 20 cents per subscriber for showing the other kind of football here, according to Kagan. All those numbers are dwarfed by the $2.60 per subscriber that ESPN pulls in.

So OLN stands to see its revenues, and reach, soar if it can get in the NFL game.

A Comcast official tried to downplay the possibility when asked about it on a recent analyst call, but he didn't flatly deny it.

"ESPN is in such a league of its own and has established such a strong brand and such an amazing franchise with sports fans, it would be impossible for us to compete with ESPN, even if we wanted to," said Comcast Chief Operating Officer Steve Burke. "What we are really trying to do is take Outdoor Life which has a fair amount of momentum now based on the Tour de France and add to it and make it a better channel."

News Corp. (Research) chairman Rupert Murdoch has made rumblings in the past about creating a competitor to ESPN in addition to his Fox Sports Net, which is more a collection of regional sports networks than a truly national offering. But Murdoch appears to have backed away from the idea.

"We have various sports channels, but if you're talking about really taking on ESPN, I think you can take it that we would not do that without a pretty full NFL franchise," he told analysts in January.

While some of the likely candidates to challenge ESPN's dominance seem reluctant to join the battle, don't be surprised to see someone else take the first steps towards a new sports network in the next year.

If it happens, the midwife may be the one player that dominates sports and television like no other -- the NFL.

"We're giving very serious consideration to being part of the launch of another major sports network on cable and satellite television," Tagliabue said in February. "We're also talking to other television networks and companies about the packages we have to sell, including the Thursday night/Saturday package we're creating."

It wouldn't be the first time that the NFL was present in the delivery room for the birth of a major network.

It was the right to broadcast some Sunday night games starting in 1987 that gave ESPN the lift it needed to be a must-carry cable network for most cable operators, even if they were paying more than they wanted for the right to do so.

It was the NFL decision to give Fox the rights to about half its Sunday afternoon games starting in 1994 that helped give birth to what was then an upstart broadcast network.

At this point, the Thursday and Saturday night cable deal is just icing on top of an already sweet TV package that will bring the NFL about $3 billion a year from 2006 through 2011, not counting $700 million a year for the out-of-market game package now available on DirecTV.

The league is rich enough to take a chance on an upstart network for a small selection of its games, especially since such a network could have such a nice upside for it down the road.

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