IN 1996 Warner Brothers released “Space Jam”, a film starring Bugs Bunny and Michael Jordan, a basketball star. It drew sniffy reviews from curmudgeonly critics but made pots of money. The plot was wildly implausible: Mr Jordan and Mr Bunny beat a team of evil aliens at basketball, thus saving everyone from having to work at an alien theme park called Moron Mountain. But that’s fiction. In real life, sports stars and cartoon characters would never work well together.

Or would they? In fact, at Warner Brothers’ great rival, they do. Disney is best known for cartoons that enchant children, from “Snow White” to “The Lion King”. But its most valuable asset is ESPN, a cable sports network beloved by beer-guzzling grown-ups. Disney owns 80%; Hearst, a privately-held media firm, controls the rest. Disney does not disclose the numbers, and estimates vary, but ESPN is probably responsible for 40% of Disney’s operating income, 60% of its free cashflow and as much as half of its share price.

A whole new ballgame

When the story began, it was not obvious that it would have a happy ending. In 1979, when cable TV was in its infancy, ESPN’s founders had the idea to launch a 24-hour cable network that would focus on university sports in Connecticut, where they lived. No one thought a network could survive showing only sports, but it took off. In the beginning it was bootstrapping and rowdy. In “Those Guys Have All The Fun”, a history of ESPN, James Andrew Miller and Tom Shales write about how staff bet on the games they covered, and a couple of secretaries were involved in a prostitution ring organised by a mailroom employee.

ESPN has cycled through nearly as many owners as Cruella de Vil had Dalmatians. It started life with the backing of Getty Oil, which listed ESPN in its “other” category of investments, along with almond groves. Later it was majority-bought by ABC/Capital Cities, which Disney acquired in 1995 for $19.5 billion. Disney really wanted the broadcast network ABC, not ESPN.

The two firms’ cultures are as different as Lady and the Tramp. Disney has been around for 90 years, has 166,000 employees and is headquartered in California. ESPN is still based in Connecticut and is lean, with 7,000 workers globally. As one might expect of a clan of sports-lovers, ESPN is hyper-competitive. It has a “can-do mentality”, says Bob Iger, the boss of Disney. Being in suburbia has helped it shun the trappings and groupthink of Hollywood.

Disney smartly gives its subsidiaries autonomy. The boss of ESPN, John Skipper (a former Disney executive), and Mr Iger (a former ABC sports producer) both love sports and speak often, but are 2,900 miles apart. Disney’s biggest contribution to ESPN has probably been its fat wallet, which paid for new sports rights and technology. ESPN was one of the first firms to offer live video on its website, and it has launched an application so cable subscribers can stream ESPN on mobile devices.

At Disney’s coaxing, ESPN experimented with brand extensions such as restaurants and mobile phones that pinged match results to subscribers, but both flopped. Not all brands, it transpires, can be trotted out to theme parks and toy shops. Disney learned this, and focused instead on new content and platforms. ESPN has a fleet of channels and websites aimed at specific audiences, such as Hispanics and women, as well as a magazine, and is savvy when it comes to mobile and online viewing.

ESPN’s muscular profits depend on three things. First, fans watch sports live: no one wants to see Monday Night Football on Wednesday. Because viewers cannot fast-forward through the adverts, advertisers pay more for slots on ESPN.

Second, ESPN offers spectacles you cannot see elsewhere. Rights to broadcast games are often exclusive. ESPN shows more sports, including baseball, car-racing and poker, than any other network. SportsCenter features some of America’s sparkiest sports commentators, whose banter is as irreverent as an English football chant, minus the swearing. (Keith Olbermann, an over-the-top political pundit, used to be one of them.)

Third, ESPN pioneered “affiliate fees”, which cable operators pay for the right to carry each network. In 2013 ESPN will probably earn $6.6 billion from them, more than three times what it makes from ads, according to SNL Kagan, a research firm. Because it has so many exclusive sports rights, ESPN has been able to haggle its fee up to $5 per subscriber, per month: far higher than any other network’s. These fees are more predictable than ad sales, which is why investors are such fans of cable networks.

In the long run, however, affiliate fees are vulnerable. They are one reason why Americans’ cable-TV bills are so high—even for those who do not watch sports. Some viewers may cancel their cable subscriptions, or press cable operators and networks to “unbundle” channels, so that they pay only for the channels they actually want. This process could accelerate if Congress weighs in on the side of couch potatoes who feel gouged.

ESPN’s success attracts imitators. BT recently outbid ESPN for three-year rights to televise England’s Premier League football (soccer) for £738m ($1.1 billion), far more than it cost last time. Without football, it is not worth doing business in Britain, so ESPN decided to sell its British assets to BT. In March Rupert Murdoch’s News Corporation announced plans to launch Fox Sports 1, a national cable network, in America. Such rivals will bid up the price of sports rights when they are auctioned.

ESPN should not try to win at any cost. Auctions, unlike football games, carry a winner’s curse. ESPN must learn to play defensively. It has the advantage that most of its contracts are locked in for years. And it has Disney, a backer with proven skill at making brands live happily ever after.

Economist.com/blogs/schumpeter