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Analysts: ACC Network launch to be boosted by large fan base, local ad prospects


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Analysts: ACC Network launch to be boosted by large fan base, local ad prospects

As part of its broad renewal deal with Verizon Communications Inc., Walt Disney Co. has secured more distribution for its upcoming sports network centered on Atlantic Coast Conference sports.

The Verizon deal, financial terms of which were not disclosed, was reached Dec. 30, 2018, the day before the parties' contract was set to expire at 5 p.m. ET. As part of the disclosed details, the multiyear agreement also includes a retransmission-consent renewal for ABC (US)-owned stations WABC in New York and WPVI in Philadelphia, and continued carriage for cable networks, including Disney Channel (US) and Freeform (US), as well as a suite of ESPN Inc. channels.

The addition of Fios TV, which counts about 4.5 million subscribers, marks the second major linear distributor ESPN has lined up for the ACC Network, which kicks off in August following an agreement inked in October 2017 with Altice USA Inc. for its Optimum subscribers in the New York market. The sports programmer also said it scored ACC Network carriage deals with digital providers but has yet to disclose them.

According to analysts, the conference's large fan base and valuable local advertising prospects bode well for the property's carriage negotiations ahead.

Disney's sports strategy

Curt Pires, founder of sports consultancy CAP Sports Group, said the ACC Network bow is a priority for ESPN President Jimmy Pitaro and Disney Chairman and CEO Bob Iger. He believes Disney's distribution strategy centers on flexibility as it is not necessarily seeking major subscriber-fee gains as in the past. Pires said Disney wants to broaden its content portfolio and might be willing to secure carriage deals for the ACC Network in exchange for channel positioning currently occupied by ESPN Classic.

"They are going to look to get ACC Network in as many homes as possible," Pires said.

When the ACC Network was formally announced in July 2016, then ESPN President John Skipper expressed "complete confidence" that the linear network would "launch with national distribution."

SNL ImageESPN+ on various devices
Source: ESPN

The ACC Network's launch comes as Disney is also continuing to push its direct-to-consumer ESPN+ service, which garnered over 1 million subscribers in the five months following its bow in April 2018, as cord cutting and the proliferation of subscription video-on-demand services weigh on traditional cable TV viewership. Direct-to-consumer services such as ESPN+ also hope to appeal to cord nevers, or young adults who have been reluctant to enter the pay TV universe at all.

For similar reasons, Disney is also scheduled to debut a broader entertainment-focused streaming offering, Disney+, in the fourth quarter.

Conference appeal

Adam Gajo, an analyst at Kagan, a research unit within S&P Global Market Intelligence, highlighted in an interview the ACC's large fan base stretching along the eastern seaboard from Massachusetts to Florida and beyond the conference’s 10-state footprint.

Pires at CAP Sports noted that announcements of the network's inaugural football game between newly crowned national championship winner Clemson and Georgia Tech on Aug. 29, as well as a game between Notre Dame and Duke Nov. 9, will be attractive to distributors. Whereas the draw for the Southeastern Conference's SEC Network (US), which launched in August 2014 to over 60 million linear subscribers, is primarily football, the ACC is widely viewed as the premiere collegiate basketball circuit with such powerhouses as Duke, North Carolina, Syracuse and Louisville. Pires said a schedule featuring several college hoops games per week will provide distributors with valuable local advertising inventory.

In a note following Disney's fiscal 2018 results, MoffettNathanson analyst Michael Nathanson wrote that "the three-year-old bear case for ESPN will turn decidedly better" in the next five quarters as its parent has more than 50% of its traditional affiliate deals coming up. Although ACC Network carriage figures to be part of those negotiations, ESPN will have to accelerate discussions in order to gain as much linear footing as possible before the conference channel's summer bow.

Kagan’s Gajo is not sure whether it "helps or hurts" the ACC Network's distribution prospects to be part of comprehensive negotiations where it would be part of a "larger check" distributors will have to write. Either way, Gajo expects the network to be successful, as it will likely secure wide carriage at launch, if not "to the magnitude of the SEC Network debut," and be profitable for ESPN within "a couple of years."