Double Play

ABC buys ESPN cable service

Cable television has been a money-consuming swamp for the companies that own the three major networks. CBS folded its cultural channel in 1982 after losing an estimated $30 million. RCA, the parent company of NBC, dropped $17 million on the Entertainment Channel before closing it last year. ABC and its partner, Westinghouse, gave up on their Satellite News venture last October, selling out to Turner Broadcasting System for $25 million. Despite all that, ABC last week plunged into the coaxial morass again with its biggest cable venture ever. The company paid $202 million for the U.S.’s most popular cable service, the Entertainment and Sports Programming Network, a 24-hour channel with 30 million subscribers. ABC already owned 15% of ESPN, and will buy the remainder from Texaco, which is conducting a garage sale of unwanted properties obtained when it bought Getty Oil.

The Connecticut-based ESPN ranks among the cable channels most likely to succeed. The network offers round-the-clock sports, ranging from college basketball to Australian football. On weekday mornings, ESPN supplies two hours of financial news on its popular Business Times program. Despite an unanticipated loss of more than $80 million since its start five years ago, the channel is expected to break even by the first quarter of 1985. Last year advertising sales, the bulk of ESPN’s revenue, jumped 60%, to $40 million.

Ownership of ESPN will further ABC’s overall dominance in sports programming, an area where the network never settles for the silver medal. ABC paid a record $225 million for television rights to the Summer Games, and the company last January won an auction for the 1988 Calgary Winter Games with an unprecedented offer of $309 million. Said William Suter, who follows broadcasting at Merrill Lynch: “It was a natural fit. They’ll do a lot for each other.” ABC will gain a huge audience of subscribers, and ESPN will share in ABC’s access to events like the U.S. Open golf tournament. Together, the two networks will have even greater bidding power on future events.