Fox Sports channel to compete with ESPN. Is that possible?

Fox Sports 1 will launch in August with the hopes of taking on ESPN in the 24-hour sports market. There's a lot of money to be made in cable sports, but competing directly with the World Wide Leader will be a tall order for the new Fox network. 

ESPN has been dominating the cable sports landscape for decades, but now it has some competition. 

The Fox Sports Media group unveiled plans yesterday for Fox Sports 1, a 24-hour sports network meant to compete with Disney-owned behemoth ESPN and NBC Sports Network, which launched with middling success last year. Fox, which is owned by Rupert Murdoch’s NewsCorp, made the announcement at the company’s Up Fronts in New York, though many people had seen it coming well beforehand. (Fox Chief Operating Officer Eric Shanks even called it a “poorly kept” secret in the official press announcement.)

Fox Sports 1 will launch in 90 million homes August 17, replacing the company-owned Speed channel. The initial programming will include college football and basketball, NASCAR, soccer, and UFC.  There will also be a daily afternoon talk show hosted by Regis Philbin and a daily football show featuring the guys from FOX NFL Sunday.

“Fans are ready for an alternative to the establishment, and our goal for FS1 is to provide the best in-game experience possible, complemented by informative news, entertaining studio shows and provocative original programming,” Mr. Shanks said in the release.

“That’s how big ESPN is: In the sports world, Rupert Murdoch is the scrappy alternative,” quipped Deadspin.

Indeed, the release did seem to take specific aim at taking a piece of ESPN’s sizable cable sports pie. It’s shrewd move for the networks (there are also  a 24-hour CBS sports channel) because the profit potential is huge. Sports programming is highly valuable in terms of advertising, because it’s one of the only things viewers still watch live on TV.  Second, cable companies pay hefty subscription fees to carry sports networks: according to research firm SNL Kagan, ESPN makes $5.54 for each household cable subscription (last year, the industry average was $0.20, according to Bloomberg). The network is set to earn over $7.31 billion in subscriber fees in 2014.

The bad news for subscribers is that more networks will result in more competition for programming.  That means bidding wars escalating the price of licensing rights, which translates to higher subscription fees for cable providers, which means higher bills for all cable customers, even the ones who don’t necessarily watch sports.  The costs have gotten so high that some providers, including DirecTV and FiOS, have an additional monthly surcharge for pricey regional sports networks, like the New York Yankees’ YES network. And despite the occasional whisper of a-la-carte cable pricing or a possible “sports rights” bubble, high programming prices don’t show signs of easing anytime soon.

But that doesn’t mean a 24-hour sports channel is necessarily a sure thing. For one, ESPN is a tough opponent – a moneymaking machine holding long-term rights to many of the most valuable properties in sports, including Monday Night Football and college football’s national title game. What’s more, the network has proven itself innovative outside of live programming, with a robust website and ESPN Films, home of the highly successful 30 for 30 documentary series.

Thus far, competitors haven’t been able to measure up. NBC Sports Network has had a tumultuous first year, going from a ratings bounce during the 2012 Summer Olympics to a disastrous Fall.  Just two weeks after the Games, ratings for the network hit their lowest level since 2003, when the channel was still called the Outdoor Life Network.  NBC Sports invested heavily in hockey, and its ratings woes were further compounded by the NHL lockout – it was left with little more than hunting shows and Olympic reruns to broadcast, and in December 2012 only two NBC Sports programs drew more than 200,000 viewers, and one was a rerun of an NFL game.

That suggests that the 24-hour sports racket isn’t as easy as ESPN makes it look. Fox Sports 1’s success will be contingent on diversifying its brand and landing a variety of deals for high-profile events (NBC Sports had a lot riding on the Olympics and the NHL, which turned out be a problem). In that vein, FOX looks to be off to a decent start, if not an ESPN-dethroning one.