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Why ESPN Thinks It Can Sell NBA Games on the Web Without Breaking Up Its Pay TV Bundle

The king of cable TV will sell Web games as an extra, not as an alternative to its core programming.

Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

ESPN is going to pay a bunch of money to show pro basketball games on TV. But it is also going to show pro basketball games to people over the Web, without requiring them to pay for ESPN on TV.

How’s it going to do that?

It may not be quite sure yet. After the Wall Street Journal broke the news that ESPN and the NBA have reached a new rights deal, I’ve talked a few people familiar with the pact, which is supposed to be announced tomorrow.

And it sounds like some of the details about ESPN’s plans to sell NBA games over the Web, directly to consumers, haven’t been worked out yet. Since the service most likely won’t appear for two years, it’s got a little time to work it out.

That said, the basic idea seems pretty clear to me: ESPN has no interest in trying to compete with itself. It’s going to keep showing a package of NBA games to its pay TV subscribers. And it will sell a different set of games — likely “out of market” games — to hardcore NBA fans on the Web.

Bear in mind that the NBA already sells a direct-to-consumer digital subscription itself, even though it has deals with ESPN and Turner. Its “League Pass” service starts at $149 a season, and also offers “out-of-market” games — a deal that’s supposed to protect the value of local teams’ TV rights deals.

So it’s logical to assume ESPN will offer some version of that service, with its own branding.

Bear in mind that while this is a new idea for ESPN, it has already said it’s interested in doing this. For starters, this is what ESPN said it might do when it bought the TV and digital rights to Major League Soccer games earlier this year.

It’s also what ESPN boss John Skipper said to me onstage last month at our Code/Media New York event, when he talked about his interest in creating direct-to-consumer services.

You can see and hear for yourself if you want to watch the video at the bottom of this post. The relevant part kicks in around the 8:20 mark. Or you can just read this excerpt for our interview, when I asked him how he might start selling programming directly to consumers, just like Netflix.

At the time, ESPN had only announced its interest in soccer, but onstage, Skipper allowed that it might do it with other sports, too.

“We think about, are there sports events we could offer, where the consumer would pay us directly – not the content on our current linear networks. This has to be new [content], and it would create a third revenue stream for us. So yeah, we are interested in that.”

Skipper acknowledged that ESPN doesn’t have any experience setting up a Netflix-style subscription service– its customers are pay TV providers like Comcast*, who buy its programming wholesale. “We don’t have a lot of that expertise [in direct-to-consumer services]. Part of the reason to start a service is to begin to acquire that. And I do want to be clear: we are not looking to disrupt our linear channels and the content that’s on them now. We’re going to acquire new content and new kinds of things to do direct-to-consumer.”

I bolded that last part just to hammer it home: ESPN loves its position as king of the pay TV bundle, and it doesn’t want to do anything to weaken its status — or the long-term distribution deals it has locked up with the pay TV guys, which generally run for seven to ten years.

And yes, it’s also possible that one day, if the bundle actually falls apart, ESPN may have to sell some of its core programming directly to consumers, and this isn’t a bad training exercise for that scenario.

If that makes you excited about the notion of a la carte pay TV, delivered over the Web, I understand. But you’re going to need to be very patient.

*Comcast owns NBCUniversal, which is a minority investor in Revere Digital, the parent company of Re/code.

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