ESPN had talks with NBA, NFL in search for strategic partner

like Disney Considered a strategic partner of ESPN, CEO Bob Iger and ESPN President Jimmy Pitaro have been in early talks about bringing in professional sports leagues as minority investors, including the National Football League and the National Basketball Association, according to people familiar with the matter.

People said ESPN has had initial discussions with both the NFL and NBA about a variety of new partnerships and investment structures. “We have a long-term relationship with Disney and look forward to continuing discussions about the future of our partnership,” an NBA spokesperson said in a statement.

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Spokespeople for ESPN and the NFL declined to comment.

The people, who asked not to be named because the conversations were private, said the talks with the NFL took place in conjunction with the league’s desire for the company to take a stake in its media assets, including NFL Network, NFL.com and RedZone.

People said the NBA and Disney have broached several potential structures around renewing media rights. Disney f Discovery Warner Brothers They have exclusive negotiating rights with the NBA until next year.

Iger said last week in an interview with CNBC’s David Faber that Disney is looking for a strategic partner for ESPN as it prepares to shift the sports network to streaming. He did not clarify what exactly that meant other than to say that the partner could generate additional value through distribution or content. He acknowledged that selling a stake in the company was possible.

Disney owns 80% of ESPN. Hearst owns the remaining 20%.

“Our position in the sport is very unique and we want to stay in this field,” Egger told Faber. “We’ll be open about looking for strategic partners who can either help us with distribution or content. I won’t get into a lot about that, but we’re optimistic about sports as a media property.”

In theory, the multi-league subscription streaming service could offer consumers new bundles of games and other innovative ways to ingest content.

The move would make sense for Disney as it tries to move beyond the traditional cable subscriber model and underscores how badly the company wants to find a solution for the sports network as its audience declines. There is no better partner for sports content than the leagues themselves.

On the surface, it might make less sense for the NBA and NFL, which sign lucrative media rights deals with several media partners that boost team revenue and player salaries with a host of media companies.

Professional sports leagues may face a conflict of interest if they acquire a minority stake in ESPN. Owning a stake in ESPN could upset Disney’s competitors, such as ComcastNBCUniversal, FoxAnd amazon, Paramount Global And apple, who have helped make the leagues billions of dollars by participating in wars for sports rights. Acquiring an ownership stake in ESPN could give the leagues an incentive to increase the value of that entity rather than strike deals with competitors.

Major League Baseball and the National Hockey League may also want to be involved in any deal involving the NBA and NFL, one person said. Involving multiple leagues in a strategic investment would be complex and unprecedented. MLB and the NHL did not immediately respond to requests for comment.

There will also be hurdles for Disney. ESPN also employs hundreds of journalists who cover major sports leagues. Selling an ownership stake in the leagues would obscure the notion of objectivity for ESPN’s reporting machine.

However, the leagues are already commercial partners with ESPN. It’s possible for ESPN to put in place measures to ensure reporters can continue to cover the leagues while minimizing conflict, but they add another layer of complexity to any deal.

ESPN is trying to forge a new course as a digital-first streaming entity. Disney realizes that ESPN will not be able to make as much money as it previously did on the traditional television model.

Selling a minority stake in ESPN to the leagues could mitigate future rights payments, allowing Disney to better compete with the large balance sheets of Apple, Google and Amazon. It would also guarantee ESPN a steady stream of premium content from the leagues.

As of last quarter, Disney’s group of linear TV networks was still seeing revenue growth because the pay-TV provider’s streaming affiliate fee increases — largely driven by ESPN — made up for millions of Americans canceling cable each year. That trend finally ended last quarter, according to people familiar with the matter. Accelerating cancellations have now swamped fee increases, and linear TV revenue outside of advertising is starting to decline.

“A lot has been said about lease versus own,” Iger said last week in his CNBC interview. “If you can lease it and continue to make a profit on the lease, which we have been and we think we will continue to be, then there is value in staying there. We have great relationships with Major League Baseball, the National Hockey League, various college conferences, and of course the NFL and the National Basketball Association. It’s not just about the live sports coverage of those leagues, those teams, it’s about everything you can do with live broadcasts of the leagues, and those teams as well.

ESPN wants to turn itself into a live streaming hub for all live sports. Management wants to launch a feature that would allow ESPN.com or the ESPN app to direct users to games no matter where they are broadcast, CNBC I reported earlier this year.