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ABC Television | ESPN (US)

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The American Broadcasting Company, known as ABC, is one of the big four US television networks. Since 1996, the business has been a subsidiary of The Walt Disney Company. Although the fortunes of all four networks tend to fluctuate from season to season, ABC had arguably a harder time than most in the late 1990s and early 2000s. It slipped to the bottom of the rankings towards the end of the 1990s before being brought back to life by the enormous but comparatively short-lived success of Who Wants To Be A Millionaire. Another slump occurred between 2002 and 2004, before the network enjoyed another half-hearted revival as a result of hit series including Desperate Housewives, Grey's Anatomy and Lost. More recently though it has been stuck in 3rd or 4th place by ratings. As a result, it is overshadowed financially within the group's media networks portfolio by the hugely successful ESPN sports brand, almost certainly the world's most lucrative cable property, as well as several Disney-branded kids' networks. However, during 2015, analysts began to be alarmed at the possible impact on ESPN of a move by consumers away from traditional cable subscriptions. This caused a slump in Disney's share price despite the spectacular success of other divisions.

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Brands & Activities

Broadcasting

ABC's performance has been mercurial to say the least since its purchase in 1996 by Disney. In the early 1990s, it was the #1 US network with hit shows including Moonlighting, Roseanne and Ellen. However the creative streak dried up at around the same time it was acquired, and the network had slumped to bottom of the pile by 1998, rescued briefly between 1999 and 2001 by the substantial but comparatively short-lived success of Who Wants To Be A Millionaire. Another slump followed between 2002 and 2004 until a string of hit shows in the 2004/05 season propelled ABC back to the top of the heap. Even the network itself seemed taken by surprise by the success of its new hits, drama series Ugly Betty, Lost, Grey's Anatomy, and above all, Desperate Housewives, which proved an unexpectedly major success, garnering as many headlines for the off-air bickering between its stars as for its provocative plotline. Better still, all four were made by company-owned production facility ABC Studios, and their popularity lasted through several seasons.

By 2009, though, most of those shows had begun to show signs of tiring, with the result that ABC ended up as the lowest-ranked network by total viewers for the 2009/10 season. It regained 3rd place for 2010/11, overtaking NBC once again, with an average of 8.5m total viewers. It has slowly regained some of its poise, regaining the #2 spot in total adults for 2012/13. For 2013/14, though, it was back at #3 for total viewers, and has remained there more or less ever since.

ABC broadcasts to a network of 242 regional television affiliates (including eight stations which it also owns, mainly in major cities). Like other networks, its programming department is broken up into separate operating units. Its main peak-time unit is ABC Entertainment. The biggest jewel in the scripted entertainment crown is arguably still Modern Family, still the network's most consistently successful performer for the past few seasons, though audiences have waned from past highs. Other current or past successes have included comedies such as The Middle, The Goldbergs, Last Man Standing, Ugly Betty and Scrubs. The drama portfolio is led by Grey's Anatomy, still soldiering on in 2016 in its 12th season. Its creator Shonda Rhimes has gone on to develop a string of other series which now dominate ABC's drama roster, including How To Get Away With Murder, Scandal and The Catch. The network's reality hits include perennial favourites Dancing With The Stars and Extreme Makeover, dating show The Bachelor and business show Shark Tank. In the late night comedy segment, the network has Jimmy Kimmel Live.

For 2015/16, ABC was the #3 network in total viewers but slipped to #4 in the 18-49 demographic. It top show was Dancing With Stars (around 13.4m total "Live+7" viewers), the #8 show overall. That was the only ABC entry among the top 20 shows. It was followed by Grey's Anatomy (11.2m), Scandal (10.7m), How To Get Away With Murder (10.3m), Modern Family (9.8m) and The Bachelor (9.5m), Modern Family (7.9m), The Middle and Scandal (over 7m), Last Man Standing and The Goldbergs (both over 6.5m). Virtually all the network's returning shows performed less well than the year before. Top show in the 18-49 demo was Grey's Anatomy.

The ABC News unit is well-known for current affairs flagships Good Morning America, Nightline and 20/20, but the division has under-performed as a result of spiralling costs and fierce competition, especially from fast expanding Fox. The company was involved with protracted talks to merge the news division with Time Warner's CNN during 2002, but the negotiations ended without a deal. ABC Daytime is a long-established leader in soap opera entertainment with series such as All My Children and General Hospital, as well as the Live With Kelly & Michael chat show (previously Live With Regis & Kelly). Until recently, the group also controlled an extensive radio network. It spun off its ABC Radio Network into rival Citadel Communications in 2007.

Cable Networks

Although ABC is the best-known business within Disney's Media Networks division, the star performer within the group is undoubtedly cable business ESPN, the undisputed leader in sports programming in North America, still far ahead of Fox's relaunched Fox Sports 1 and NBC's NBCSNs. Disney has an 80% shareholding in ESPN; Hearst owns the remaining 20%. It is by far the most valuable cable brand in the US (and the world) with estimated revenues across its various strands well in excess of $11bn. Affiliate fees per subscriber for just ESPN and ESPN2 were estimated by SNL Kagan at around $7.50 per month mid 2015, over six times its biggest sports rival. That's equivalent to around $8.3bn in subscriptions, before additional advertising revenues.

Perhaps the most compelling evidence of ESPN's success was the group's decision to transfer ABC's flagship Monday Night Football, the most successful primetime sports series in television history, which it had shown since 1970, across to ESPN from 2006. It paid an estimated $1.1bn a year to acquire broadcast rights, and surrendered its less widely watched Sunday Night Football rights to rival NBC. That contract was renewed in 2011, to run until 2021, at an increased cost of $1.9bn a year or a total of $15.2bn. The channel has several other key rights packages. In 2012, it extended its deal with Major League Baseball, which covers around 90 key matches a year, for a further 8 years. That contract now runs until 2022 at a cost of around $700m a year, twice the previous figure. In 2013 it acquired rights for college football playoffs for 12 years at a cost of $7.3bn.

ESPN is the #1 TV brand among men, and the group has not been slow to leverage that appeal across other assets, launching several spin-off channels, with ESPN2 and ESPNEWS, the country's only all-sports news networ. These are partnered by Spanish language ESPN Deportes and ESPNU, the largest syndicator of college sports programming in the United States. The brand also has a commanding digital presence through the WatchESPN service, which allows streaming of its various channels across multiple devices.

ESPN has alliances or shareholdings in a variety of international partners, mainly now in Latin America, as well as in the speciality arm of Canada's CTV. It took its biggest step to-date into the international sports market in 2009, paying around £250m to acquire broadcast rights for a package of British Premier League football matches, following the collapse of local pay TV operator Setanta. These formed the heart of a new ESPN UK cable service launched that same year. However audiences remained small, and the group surrendered ownership, selling the package and rights to use the ESPN name in 2013 to local pay-TV operator BT. A joint venture with News Corp, ESPN Star Sports, serving Asia was also ended in 2012 when the group sold its shares.

Yet despite its historic popularity, fears began to emerge during 2015 of the impact on ESPN from the growing trend towards "cable-cutting" by US viewers shifting to lower-priced on-demand services over traditional cable. ESPN's footprint of 92m households at the end of fiscal 2015 was down from 95m a year earlier and a peak of 99m in 2013. It has returned to the same levels as in 2006. Traditional subscriber numbers have continued to decline in 2016, partly offset by increases via selective services such as Dish network's Sling TV. The channel has announced plans to launch its own dedicated streamed media service in 2018. At the same time it is countering a slide in viewing figures for its flagship show Sportscenter by signing up Vice Media to produce a range of Vice Sports shows.

The ESPN brand also encompasses a wide range of radio, theme park, magazine, event and videogame spin-offs. In 2005 Disney even launched an ESPN Mobile cellular service in a virtual partnership with Sprint. However, customer response was below anticipated levels and the service closed its doors to new subscribers the following year. Also in 2006, ESPN made a push into sportswear with a range of T-shirts and fleeces produced in a partnership with VF Corporation. In 2007, ESPN took its first steps into the cricket market, acquiring leading global website Cricinfo from Wisden, followed by the rugby site Scrum.com.

The Disney Channel has also proved a notable success, expanding from two channels (in Taiwan and the UK) in 1996 to more than 12 channels, reaching 195m households in 55 countries around the world, and 95m in the US. Several shows have developed into break-out successes, notably the Hannah Montana teen music series, and made-for-cable movie High School Musical. The premiere of High School Musical 2 on the Disney Channel in August 2007 became the most watched cable telecast in US history, attracting an audience of 17m viewers. The channel also generates substantial ad revenues, estimated at $1.2bn in the US in 2011 by Kantar. In 2001 the group also acquired the worldwide Fox Kids cable network, rebranded during 2004 under the name Jetix. This eventually covered 58 European and Middle Eastern markets. Previously part-public, Disney bought out minority shareholders in 2009 and later rebranded the whole network as the international arm of US spin-off Disney XD. It now has 78m subscribers in the US and another 123m internationally. Disney Junior, carrying more educational content, reaches 74m viewers in the US and 130m internationally. ABC Family, previously Fox Family Worldwide in the US, rebranded in 2016 as Freeform. It reaches 94m homes in the US, and generated ad revenues of around $662m in 2011. The group's various international interests include Indian cable portfolio UTV.

In the US, ABC co-owns A&E Networks, a joint venture with Hearst that controls a collection of documentary, drama and rerun channels including A&E, Lifetime, The History Channel and others. The relationship with Vice Media has also blossomed. What was originally a loose partnership has evolved, and the Disney Group is now the single biggest outside investor in that iconoclastic media company, having accumulated an 18% holding by the end of 2015, partly direct and partly through the A&E Networks joint venture. (21st Century Fox and WPP are also shareholders in Vice, and the company has a long-term relationship with Time Warner's HBO service for whom it produces content). In 2016, A&E transferred its struggling H2 cable strand to Vice, which relaunched it as a dedicated Viceland channel.

In 2009, the group agreed a deal to become the third broadcast partner in Hulu.com, the online video service launched by NBC Universal and Fox. ABC acquired a 27.5% stake for an unspecified sum, and also committed cash towards marketing. As a result, the group made its TV content, including Lost and Grey's Anatomy, available through Hulu from summer 2009, as well as back catalogue material. However, the deal excludes cable TV shows such as Hannah Montana and High School Musical. ABC's share increased to 33% in 2012. It also has a 50% share in Fusion, a youth culture TV and digital joint venture with Hispanic broadcaster Univision.

Also part of the ABC group is the adult book publishing business Hyperion Books. Its imprints include Miramax Books and ESPN Books.

Financials

Media Networks is the biggest business by far within the Disney group, contributing 44% of group revenues in the year to Sept 2015, and 53% of operating profits. Combined divisional sales were $23.26bn, up 10% on the previous year. Operating income rose 6% to $7.79bn. advertising revenues rose 4% to $8.36bn, but the biggest share of revenues - $12.03bn in ye 2015, up 13% - comes from affiliate fees. There is also a fast-growing revenue stream from on-demand and streaming services, which topped $2.87bn in ye 2015.

For the year to 2016, Media Networks reported a rare freeze in performance. Revenues rose by a modest 2% to $23.69bn as continuing strength in the main broadcasting business offset a worrying decline at cable networks. Operating income was flat at $7.76bn.

Cable is the bigger of the two businesses by some margin, as well as being the whole Disney group's most lucrative enterprise. In fiscal 2015, the cable business reported a further 10% rise in revenues to a record $16.58bn, now more than 70% of Media Networks' income stream, while operating income rose 6% to $6.79bn. However, revenues for ye 2016 were essentially flat at $16.63bn, while operating income slipped 1% to $6.75bn.

The ABC broadcasting division has shrugged off most of its past problems, but it continues to wrestle with the general decline in broadcast TV advertising sales compared to the mid-2000s. Nevertheless, revenues for ye 2016 rose 6% to $7.06bn. Operating profits were flat at just over $1.0bn.

Management & Marketers

The Disney Media Networks division is run by two co-chairmen. Until recently, Anne Sweeney was co-chair and president of Disney-ABC Television Group, with responsibility for all the group's cable, satellite and broadcast properties globally except ESPN. She was widely regarded as the most powerful woman in American TV. However she announced plans to leave the group in 2015 to become a film and TV director. ABC News president Ben Sherwood stepped up as her successor. The other co-chair was until the end of 2017 John Skipper, who succeeded veteran executive George Bodenheimer as president of ESPN and ABC Sports at the beginning of 2012. At the end of 2017, however, he stepped down from that role to battle a long-established substance addiction problem. His predecessor George Bodenheimer was reappointed as executive chairman for an interim period; James Pitaro was eventually appointed to the role in March 2018.

Sherwood's promotion to the top role also led to an internal dispute ABC Entertainment division president Paul Lee over strategy. That resulted in Lee's sudden departure from the network in Feb 2016. He was replaced by Channing Dungey, previously head of ABC drama.

Background

ABC was originally formed in 1927 as the Blue Network, created by RCA as a second strand to run alongside NBC. It was sold off in 1943, and became The American Broadcasting Network in 1946. In 1953 it became Walt Disney's exclusive television partner, airing all the company's first excursions into the medium, including The Mickey Mouse Club, Disneyland and Zorro. In the 1970s it struck gold again with hit series such as Charlie's Angels, Starsky & Hutch and Happy Days. ABC also pioneered the concept of made-for-TV movies as well as big-budget mini-series such as Rich Man, Poor Man and Roots. At the same time, the network earned a reputation for powerful news coverage (ABC News: Nightline and 20/20) and high quality sports programming (The Wide World of Sports and NFL Monday Night Football). In 1984, ABC acquired cable sports channel ESPN, selling on a 20% stake to Hearst Corporation.

In 1988, ABC was acquired by Capital Cities, a media conglomerate with a variety of interests in newspapers, regional television stations and magazine publishing. Eight years later Capital Cities was itself engulfed by Disney in a $19bn deal, then the second biggest entertainment deal in corporate history after the Time Warner merger. At the time, ABC was the #1 US network having scored considerable success with hit shows such as Moonlighting, Roseanne and Ellen. But the network's creative juices seemed to dry up almost as soon as it had been acquired, and performance dipped dramatically. ABC's fortunes received a welcome boost in 1999 from the huge success of new game show Who Wants To Be A Millionaire, imported from the UK (where it had also proved a big hit with audiences). Keen to milk this ratings winner for all it was worth, ABC eventually began airing the show four times a week in a primetime slot. Inevitably, the show's popularity quickly faded and ABC once again slipped in the ratings, dropping over 20% by the end of 2001, while also reeling from a downturn in advertising spend. The network was back in third place for 2002, then slipped into fourth place in 2004 with the key television audience aged 18-49.

Meanwhile Disney bolstered its broadcast interests with the purchase in 2001 of the Fox Family Worldwide network from joint owners News Corporation and Haim Saban, paying $5.3bn in cash and debt. The group also bought Saban Entertainment, a production and merchandising company with a library of 6,500 half-hours of children's programmes, including the Power Rangers series. In addition to the US network, Disney took charge of a 76% interest in Fox Kids Europe and Fox Kids Latin America, with a combined 35m subscribers in 60 countries. The US package was rebranded as ABC Family, while Fox Kids Europe was rebranded as Jetix.

Last full revision 21st May 2016

* Archive page for historical reference only. This profile is no longer being actively updated. See active page here *


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