Friday, December 27, 2013

ESPN provides nearly half Disney's operating profit. Connecticut 'politicians who were not on board with ESPN did not find much success'-NY Times

"ESPN also qualified for $6.2 million in credits to support the production of “The Bronx Is Burning,a television mini-series....For the past 25 years, Connecticut has been last in the nation in job creation, with no net job creation over that period."

12/26/13, "For ESPN, Millions to Remain in Connecticut," NY Times, Steve Eder

"With nearly 100 million households paying about $5.54 a month for ESPN, regardless of whether they watch it, the network takes in more than $6 billion a year in subscriber fees alone. Still, ESPN has received about $260 million in state tax breaks and credits over the past 12 years, according to a New York Times analysis of public records. That includes $84.7 million in development tax credits because of a film and digital media program, as well as savings of about $15 million a year since the network successfully lobbied the state for a tax code change in 2000.

For Mr. Malloy and other public officials in Connecticut, the conventional wisdom is that any business with ESPN is good business. After all, ESPN is Connecticut’s most celebrated brand and a homegrown success story, employing more than 4,000 workers in the state....

This spring, it is scheduled to open the 193,000-square-foot Digital Center 2, which is being built with Malloy’s pledge of nearly $25 million in state support. Workers there recently constructed the massive studios that will house ESPN’s flagship lineup of shows. The main hallways in the building were designed to be wide enough to fit a racecar....

The critics say incentives should be redirected to smaller companies that are more in need than ESPN, which accounts for nearly half the operating profit of Disney, its corporate parent. They also say ESPN, sitting on 123 acres in central Connecticut, is hardly a risk to move elsewhere....

The critics say ESPN has been successful in getting an audience at the State Capitol in Hartford partly because of its ability to communicate its needs effectively to the state’s decision makers. ESPN employs one of the top lobbying firms in Connecticut and has spent $1.2 million on lobbying expenses since 2007, records show. 

But Mr. Malloy, a Democrat who will be up for re-election in 2014, says no lobbying is needed to convince him of what he considers obvious: ESPN is one of Connecticut’s best resources, and the state must use all tools available to aid its growth and keep its home base and the thousands of well-paying jobs it promises in Bristol. 

He sees ESPN as a magnet for attracting other sports media jobs to his state. NBC Sports, which also received state benefits, recently opened its new headquarters in Connecticut. “I don’t want to imagine Connecticut without ESPN,” Mr. Malloy said in a telephone interview, adding that state incentive programs benefited large and small companies. “We want ESPN to have the biggest possible footprint in Connecticut, and we want them spending their dollars in Connecticut instead of any other state.” 

Everyone seems to agree that ESPN is a shining success story for Connecticut, in terms of the state’s early support of an upstart through its development into an international powerhouse. The company’s executives acknowledge that state and local officials have played important roles in their success. But they also say their company has provided an exceptional return on the investment. For the past 25 years, Connecticut has been last in the nation in job creation, with no net job creation over that period....

Since 2000, ESPN has spent about $1 billion on construction in and around Bristol, a town of about 60,000, erecting 13 new buildings and expanding several others. During that period, the company’s work force in Connecticut has swelled from 1,700 to more than 4,000. That makes ESPN the 25th-largest employer in the state, according to rankings by the Hartford Business Journal....

The network’s Connecticut origins stem from its founder, Bill Rasmussen, an executive with the Hartford Whalers who wanted to use satellites to beam Whalers and University of Connecticut games to cable television subscribers. The fact that ESPN made its home in Bristol, an old manufacturing town about halfway between New York and Boston, was a point of pride to locals. 

Politicians who were not on board with ESPN did not find much success: One mayoral candidate campaigned against the network’s dishes, saying they were a danger to birds. That message did not register in a place that was quickly emerging as the home of ESPN....

Incentives to Stay
By the spring of 2000, ESPN had shed its roots as a small start-up and was beginning to look more like a mature corporate behemoth. 

Disney, its owner, looked to ESPN as a key part of its revenue machine and one poised for immense growth. The network had 1,700 employees in Bristol, and another 700 worked elsewhere — as the network now had facilities or subsidiaries in seven other states. 

That is when ESPN did what other big, multinational companies had done: It went to the statehouse in Hartford and sought financial incentives in exchange for continued growth in Connecticut. At the top of ESPN’s agenda was supporting a measure by state lawmakers that would change the corporate tax formula in a way that would save broadcasters money. 

The legislature had done this three years earlier for financial companies. If the adjustment was applied to broadcasters, ESPN stood to be the biggest beneficiary by far — reducing its taxes by about $15 million a year....

The lawmakers were pleased to have ESPN on hand; one even stated, “for the record,” that he watched “SportsCenter” “two nights a week during the legislative session” but “four nights a week the rest of the year.” 

The lawmakers approved the change to the corporate tax formula, and a review by Connecticut’s Office of Legislative Research in 2004 showed that ESPN was fulfilling its promise to the legislature.
That year, ESPN opened the 136,000-square-foot Digital Center 1.

In 2006, as ESPN continued to grow, the Connecticut General Assembly, along with Mr. Malloy’s predecessor, M. Jodi Rell, had designs on expanding the state’s digital media sector. They wanted to offer tax incentives to companies that use the state as a base for initiatives like making films, building studios and increasing their online operations. Since the program began, the state has awarded about $450 million in tax credits to businesses that have spent $1.6 billion in the state. 

ESPN has been among the largest participants in that program, spending $318 million in Connecticut and receiving $84.7 million in tax certificates — about a fifth of the total amount awarded. Companies like Blue Sky Studios and World Wrestling Entertainment have also benefited. 

The program has provided ESPN with financial incentives for the development of ESPN.com ($54 million) and ESPN Mobile ($3.2 million), as well as infrastructure credits for the construction of a research and development building ($6.6 million) and the Digital Center 2 ($14.4 million). ESPN also qualified for $6.2 million in credits to support the production of “The Bronx Is Burning,
a television mini-series.

ESPN regularly sells the tax credit certificates to other entities in private transactions, which could mean that the network receives less value than the amount on the voucher. Such transfers are common and within the rules of the program. 

George Norfleet, the director of the state’s Office of Film, Television and Digital Media, said he was in regular contact with ESPN, treating the network as a “corporate constituent” with room for growth. “We want to make sure that happens here, not in Orlando or Los Angeles,” he said. 

A recurring theme in ESPN’s dealings with the state is that the company could move its operations elsewhere. When Malloy announced ESPN’s inclusion in “First Five,” a state plan to create jobs and promote business development, he said the network had other places where it could have invested. He mentioned recent production facilities in Los Angeles and Austin, Tex.....

Mr. Malloy, for his part, is comfortable with the state’s ties to ESPN. In fact, the governor said he would like more of them. 

We want a larger footprint for ESPN in Connecticut rather than a smaller footprint for ESPN in Connecticut because we know that a large footprint is harder to move out,” Mr. Malloy said."


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