Thursday, July 23, 2009

ESPN Entering Local Sports Markets

The New York Times has reported on ESPN's entry into the local Chicago sports internet services market, and is now planning to do the same in New York, Los Angeles and Dallas - some of the largest sports markets in the country. The implications are that with the media giants push into these local markets, it could reduce the profitability of traditional media outlets, such as print newspapers. But the allure of profits is a strong incentive, and given the large demand for sports in these four large markets, it makes economic sense for ESPN to pursue this strategy.

Typically, small local firms - such as commercial banks - can compete successfully against large regional and national commerical banks in local markets since the local banks have better information or better networks with the local community than large commerical banks. Thus we tend to see markets that are more competitive, but also do not see a large decline in locally small commerical banks.

The same could be true of print newspapers. They have a distinct advantage over regional media outlets - such as Fox Sports North or ESPN since they have greater ties to the local sports community, and thus can meet customers demand with greater flexibility than a national outlet. I understand that ESPN is looking at competiting at the local level with local resources, but the basic idea does not change. The problem is if the local sports media is not either in tune with their customers preferences (possibily due to being in a position as a monopolist for a long period of time - not true in Chicago or New York), and if the local sports media is not meeting local sports fans demands, then ESPN's entry is a serious threat to their profits.

As a sports fan, now living much closer to Chicago I can see the allure of a strong branded media outlet - like ESPN - drawing pageviews from the Tribune or other Chicago sports outlets. As an economist, I think that this increased competition will lead to better sports coverage for sports fans, and that does not seem to be a bad thing.

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