Cord Cutting Is About To Punch ESPN Squarely In The Face

from the dying-cash-cows dept

Wed, Jul 15th 2015 4:58am — Karl Bode

If there's a primary reason for ridiculously-high cable TV prices, it's sports content generally, and ESPN specifically. On one hand, sports programming is one of the biggest reasons that people continue to pay for traditional TV. But with the slow but steady rise in cord cutting and an increase in so-called "skinny bundle" streaming services, it's pretty clear that the "worldwide leader in sports" is starting to get a little bit nervous. Cord cutting has hit segments like kids broadcasting harder than other areas, but it's increasingly clear the death of the traditional cable cash cow is headed in ESPN's direction at a pretty reasonable clip.

According to a recent Wall Street Journal report, the channel is tightening its belt after starting to feel the cord cutting (and more accurately, the cord trimming) pinch. ESPN has lost 7.2 million viewers in the last four years, and a little more than three million in the last year:

Since July 2011, ESPN’s reach into American homes has dropped 7.2%, from more than 100 million households—roughly the size of the total U.S. pay-TV market—to 92.9 million households, according to Nielsen data. Viewership of SportsCenter, its marquee and high-margin sports-news show, has sagged since September, due in part to the fact that younger consumers are increasingly finding sports news at their fingertips on smartphone apps.

There's a cable and broadcast industry narrative that consumers just can't live without sports, and the blathering talking heads on ESPN somehow get included in this argument. But a recent survey by DigitalSmiths suggested that only 35.7% of consumers would include ESPN in their cable lineup if they were able to pick and choose their channels (a la carte TV). In fact, the channel came in at 20th place in terms of the most desired channels among those surveyed. So according to SNL Kagan data, there are about 94.5 million homes each paying $6.41 per month ($7.5 billion annually) for a channel they're not really all that interested in.

That's pretty clearly not sustainable, and ESPN could be served by getting ahead of the curve and launching its own direct-to-consumer streaming service. But the Journal points out that the company's current contracts with pay TV providers state that if ESPN goes that route, the cable operators have the right to boot ESPN out of their core channel lineups:

If ESPN offers its channel as a direct-to-consumer streaming service, some pay-TV operators have the contractual right to boot ESPN out of their most widely-sold channel packages and sell it a la carte, according to people familiar with the matter. ESPN would have to charge about $30 a month per customer in an over-the-top offering to make the same money using that model, analysts say. But those distributors would have the right to undercut ESPN in their retail pricing, the people said.

And you might recall that ESPN sued Verizon when the company decided to pull ESPN out of the core channel lineup, arguing at the time that this was necessary to protect "innovation":

ESPN is at the forefront of embracing innovative ways to deliver high-quality content and value to consumers on multiple platforms, but that must be done in compliance with our agreements. We simply ask that Verizon abide by the terms of our contracts.

In other words, if ESPN actually decides to get out ahead of cord cutting and cord trimming by focusing on a direct-to-consumer effort, they'll open the door to more cord cutting and cord trimming, since they'll no longer be able to force people to pay an arm and a leg for a product many of them don't actually watch. Isn't the Internet video revolution kind of beautiful?

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Filed Under: bundles, cable, cable tv, cord cutting, espn, internet, streaming

36 Comments

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Ninja (profile), 15 Jul 2015 @ 4:36am

I don't think it would be a bad business choice. A streaming service would have a tremendous reach and they could provide separate feeds for those who like volley so they can watch their stuff even if there's some soccer match at the same time frame. They can even make older matches available permanently for those who like to revisit history or something. That's a lot of value that may improve their reach above those 35% mentioned in the article. I myself might consider it (depending on the pricing obviously) because I do like to watch sports sometimes.

There's plenty of value that can be added to a whole lot of things media related out there simply making it goddamn available whenever, wherever and however people want.

Honestly cable is on an extra, unneeded shift already. Good riddance.
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- Anonymous Coward, 15 Jul 2015 @ 6:10am
  
  Re:
  There are a lot of awesome things they could do (such as that which you mentioned as well as on-demand, multi-angle vantage points) but won't because legacy.
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  - Ninja (profile), 15 Jul 2015 @ 8:00am
    
    Re: Re:
    You went well beyond my ideas. Choosing cameras, re-watching some polemic foul while you keep seeing the game on a split screen or something. Heck, that would be very valuable. But as you said legacy.
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- Blackfiredragon13 (profile), 15 Jul 2015 @ 10:24am
  
  Re:
  The only time I turn on anything sports-related is to see what sad excuse of a pop star they trod out for the super-bowl halftime show. Because really, if you have a sport revolving around men with too much testosterone running into and tackling each other you needs a sissy pop group or star rather than say, a heavy metal or hard rock band like disturbed or halestorm, right?
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Anonymous Coward, 15 Jul 2015 @ 5:30am

I tried to read the article but it is paywalled.

Note that NewsCorp, owner of WSJ, also has pay-TV, among other, interests.
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ADam (profile), 15 Jul 2015 @ 5:42am

Never looked back.
I was an early adopter of cable cutting. Pulled their plug 13 years ago. I tried satellite for a short time 10 years ago. Nothing was different. I've never looked back with regret on that decision and the channels I never used were sports and children's programming channels. Never felt a loss from dropping it... and in fact with the average price of cable to get what I do want being in the neighborhood of 80 dollars per month even then... I've saved $10,000 over that time period.
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Anonymous Coward, 15 Jul 2015 @ 5:43am

Love me some college football
I really only watch ESPN when it is college football season. I would love to pick channels, heck even shows a-la-cart rather than pay >$150/month for the mid-level cable package. But I am sure that a few channels and shows a-la-cart will cost as much more than a cable package. It is my belief that people aren't cutting just to get rid of all the stuff they don't watch, they are cutting to save costs. My cable bill is just a little more than my electric bill now and that seems pretty ridiculous. But my 2 line cell phone bill is more than my electric bill as well.
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- Peter, 23 Jul 2015 @ 9:17pm
  
  Re: Love me some college football
  With Sling TV and the ESPN app, you can stream all the college football you want. The app actually gives you far more viewing choices than cable ever did.
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Anonymous Coward, 15 Jul 2015 @ 5:54am

If it would truly cost $30 per month per subscriber for a streaming service for just this one channel to continue to make the same money as received from cable companies, that just highlights to me how much cable TV consumers are being overcharged for it.

No channel will willingly do anything to reduce their revenue. Their shareholders won't stand for it. This is why they are fighting so hard against a la cart. Many of these channels aren't worth as much as they think they are and consumers aren't permitted to prove it to them, short of cutting the cord entirely.

I will not shed a single tear for the plight of cable companies and channels long used to bilking consumers with ridiculously high bills.
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- Anonymous Coward, 15 Jul 2015 @ 5:58am
  
  Re:
  ESPN is trying to free themselves from the cable monopoly; that they're now offering their channels on Sling TV is a provable example.
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Designerfx (profile), 15 Jul 2015 @ 6:10am

sling TV
Sadly, sling bundling ESPN is a waste. I'd love to pay ~7 less a month for sling.
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Digger, 15 Jul 2015 @ 6:22am

What ESPN?
I've had ESPN and every other Sports related channel included in my package on parental lockout since day 1.

Sports are a big no-go in my household.

I would prefer that all sports and shopping related channels be removed altogether.
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- mcinsand, 15 Jul 2015 @ 6:45am
  
  Re: What ESPN?
  I'm really curious about what seems to be an anti-sports stance. If you want to go further on your perspective, I'd like to read it. Don't get me wrong, since I have no use for ESPN, either. If I have an interest in an activity, then I want to participate, rather than to watch someone else play. I enjoy golf and biking, but the last thing I want to do is to sit in front of the TV and watch someone else have my fun for me.
  
  Also, I do think we have a serious problem with misfocused attention in our society. Rather than pay attention to people that make decisions that will actually impact our lives, celebrity-worship is our new religion. That applies to E!, ESPN, and a host of other channels.
  
  Regards.
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- Anonymous Coward, 15 Jul 2015 @ 5:20pm
  
  Re: What ESPN?
  you sound like a fun parent
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Jason, 15 Jul 2015 @ 6:24am

"Cord Cutting Is About To Punch ESPN Squarely In The Face"
If there was nothing more here than that headline I'd already be happy with this article. :)

The thing is, I don't hate sports. I just don't watch them. (Most times anything I might actually want to watch is on network TV anyway.)

What really bugs me is all the bundling. The four or five "extra" channels I actually do want are inevitably spread across three or four bundles. But it's all but impossible to avoid getting saddled with ESPN and its family of channels since they're included with most of the base level packages.
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rebrad (profile), 15 Jul 2015 @ 6:24am

Sports Not Politics
I like sport and watch it often. But when ESPN and NBC started mixing politics with sports I've gone elsewhere to get my fix, even as far as the radio or just reading a book. I asked my cable company offer the channels I watch without the crap I don't want or I'm gone. I can find most of what I want on the internet it just requires a little more work.
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Anonymous Coward, 15 Jul 2015 @ 6:27am

Math is Difficult
"are about 94.5 million homes each paying $6.41 per month ($7.5 billion monthly)"
Better check that math. Should be 605 million/month.
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- Karl Bode (profile), 15 Jul 2015 @ 6:51am
  
  Re: Math is Difficult
  Sorry yes, fixed. Should have read "annually."
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Anonymous Coward, 15 Jul 2015 @ 6:28am

Math is Difficult
Or 7.3 billion annually
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Dave (profile), 15 Jul 2015 @ 6:35am

More fun facts about ESPN
1.) Disney has ordered ESPN to cut $100 million from its 2016 budget and $250 million from its 2017 budget. (Source: Washington Post) This might explain to some why the million-dollar contracts of Bill Simmons and Keith Olbermann are not being renewed.

2.) Based on current Nielsen estimates, ESPN is currently losing 300,000 homes per month. Last I checked, SNL Kagan reported that ESPN's carriage fee is $6.61/month, and ESPN2's carriage fee is $0.83/month. That means ESPN's total carriage fee income for those two channels decreases by $2,232,000 every month. Assuming a steady decline through the end of 2015, ESPN will be down to 91.4 million homes by Christmas and will have missed out on $174 million in carriage fees thanks to cord cutting and cord shaving.

3.) With ESPN on the hook for nearly $14 billion of the NBA's shiny new $24 billion TV deal, we could see a number of leagues moving back to broadcast networks in the coming years, simply because ESPN can't afford them anymore. The Big Ten is up for grabs in 2017, and TV deals for the NFL, MLB, NHL, and MLS all expire between 2020 and 2022. Who knows how many subs ESPN will have lost by 2022?

This piece explains why I think broadcast networks could take the upper hand on ESPN when it comes to televised sports in the future:

http://www.whatyoupayforsports.com/2015/07/how-broadcast-tv-networks-could-reclaim-sports/
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- Anonymous Coward, 15 Jul 2015 @ 8:00am
  
  Re: More fun facts about ESPN
  ESPN2? ESPN8, "The Ocho", would be worth $6.00/mo, but only if they continued carrying dodgeball.
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  - Gwiz (profile), 15 Jul 2015 @ 8:13am
    
    Re: Re: More fun facts about ESPN
    Usually you pay double for that kind of action Cotton.
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- Anonymous Coward, 15 Jul 2015 @ 8:22am
  
  Re: More fun facts about ESPN
  The Big Ten is up for grabs in 2017, and TV deals for the NFL, MLB, NHL, and MLS all expire between 2020 and 2022. Who knows how many subs ESPN will have lost by 2022?
  
  As if ESPN paid *any* attention to the NHL.
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streetlight (profile), 15 Jul 2015 @ 6:50am

The cable companies may respond
One part of the revenue/cost equation is the response cable companies may take or are already taking. Cable companies are also the providers of Internet services through which cable cutters get their streaming content and with the potential for price increases for data consumption through subscription fees, data caps and overage charges, the cost of getting streaming can increase. Add the cost of a few streaming packages to actual Internet costs, and for many who want content through the Internet, they could find it nearly as expensive as a cable subscription, particularly for a household of multiple, simultaneous viewers. The streaming packages may also not be all that ala carte. How many of those channels in a streaming package are of no interest to individual subscribers? Yes, you got rid of ESPN, the religious channels or others you're not interested in from cable TV packages, but you're likely still paying for stuff you don't care about. And the cable companies need to satisfy their stockholders by keeping or increasing profits.

Life is complicated.
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bgmcb (profile), 15 Jul 2015 @ 7:23am

MNF
Getting people to pay for Monday Night football was pure genius.
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Anonymous Coward, 15 Jul 2015 @ 8:06am

ESPN is only the #20 on the list of most wanted channels?!?
"But a recent survey by DigitalSmiths suggested that only 35.7% of consumers would include ESPN in their cable lineup if they were able to pick and choose their channels (a la carte TV). In fact, the channel came in at 20th place in terms of the most desired channels among those surveyed."

That shows just how much Cable Providers are overpaying ESPN, since they're the most expensive cable channel included in basic bundles.

I'm surprised to see the weather channel ahead of ESPN by a comfortable margin to, despite their dropping ratings and the cuts they were forced to take in the latest dispute between cable providers.
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Paul, 15 Jul 2015 @ 8:10am

Love my free OTA TV antenna.
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joe, 15 Jul 2015 @ 10:00am

screw that pc station
i quit watching espn a couple years ago...it's gone so ghetto i can live without it...them and their pc world...
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Anonymous Coward, 15 Jul 2015 @ 10:17am

I watch about 5 channels
I watch about 5 channels, commercially broadcast. Only problem, my area get *ZERO* HD channels. I have a starter sub, which began about $11/month, and has more than doubled. Dish adds local channels for $5. If I could get my local channels for $5, I'd do it in a heartbeat and be happy.

$6.71 for ESPN, even though it's not in my sub? Ridiculous. (I actually thought it was only $5.) My cable company shouldn't have to pay ESPN even when it's not in my sub.
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John Fenderson (profile), 15 Jul 2015 @ 11:24am

Symbolic
ESPN all by itself represents much of what is wrong with cable TV.
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ECA (profile), 15 Jul 2015 @ 11:40am

YEA!!
LEts look at this from the cable/sat side.."asif"

HOw to drop Excess channels..
Let people select the channels they want and pay for ONLY the ones they View.
Considering customers watch about 20 channels out of 200+..
90% of those channels are Paid under $0.50 to show..

Cable and Sat can monitor WHICH channels are watched..They know how many people are watching Which channels...
Cable and Sat, could CHARGE the Broadcaster, insted of the consumer...If they dont get enough Viewers to PAY for the channel..
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Anonymous Coward, 15 Jul 2015 @ 2:03pm

I no longer care. Cut the cord over a decade ago. While they have since fixed the local blackout, at the time it was one of the things that pissed me off that I could not watch my favorite team. I no longer have any connection to televised sports and I am not missing it. Nor am I missing the bill that needed to be paid every month.

Even if ESPN was to come up with a reasonably priced alternative, I no longer care. The damage was done long ago and so was the remedy. That lack of connection means lack of interest today. I am not and will never again be part of their market.
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Kevin Schmidt, 15 Jul 2015 @ 4:20pm

Plug and Play boxes are legal
You can get a cord cutting streaming box at any big box department store for around one hundred dollars. You can legally stream anything you currently pay for on cable or satellite, including any pay per view event, live sporting event, or movie.

What makes internet streaming legal is because it is legal to broadcast these streams in some other countries, and it is legal in the US to watch streams from those countries.

Not legal is recording the streams, or showing them at public events, restaurants and bars.

The catch is, the boxes must be programed, which is very difficult for most people who still can't figure out Facebook, or don't have a couple hours to figure it out.

In that case, it may benefit those people if they buy a box that comes preloaded with a user friendly menu, and updates automatically.

Here is one place that offers plug and play streaming TV boxes:

http://tvstreamer.uboxlive.com/

For everyone else who wants to save three hundred dollars, they should just figure out how to use KODI on their own.

Either way, streamers don't need cable anymore. They don't have to pay for limited selections. Now they get over 10,000 TV stations around the world, any movie ever made, any TV show ever made, any live broadcast event, broadcast educational course, and of course, lots of password protected porn
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- Anonymous Coward, 15 Jul 2015 @ 5:39pm
  
  Re: Plug and Play boxes are legal
  scam at it's finest. go truck that crap elsewhere please. $400 for that old ass hardware is pathetic. Reselling links that exist online is a fun business to be in i bet.
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ECA (profile), 15 Jul 2015 @ 9:19pm

you would think..
That the broadcasters would WANT to make things cheaper for themselves..
THEY DONT..they hold all the cookies and get Paid from Every side..REALLY..
Long ago Cable had a good idea over the RELAY stations that Broadcast around the country..

The corps could install 2 Sats to cover ALL the USA..and Broadcast for free..and cover 80% of ALL of the Americas...

The MOST expensive thing to do...is to PROTECT yourself, Make things HARD to do..so that no one can steal your product..
But if you give it away FREE...its very simple..and COSTS LESS..
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Andrew D. Todd, 15 Jul 2015 @ 11:39pm

Again, Let's Work This Out In Network Terms And See Why Broadcast Is Obsolete.
Let's say, notionally, that there are twenty houses on your street. The cable company has a copper coaxial cable running down your street, with a capacity of, say, 600 MHz. This is divided into a hundred standard television channels, of 6 MHz, or 12 Mbits each. Each house's pro-rata share is five channels (30 MHz or 60 Mbits). There are only about twenty broadcast channels with sufficient viewership that two or more people on the block are likely to be watching them at the same time. If only one person on the block (5%) is watching a channel, broadcast does not offer any technical efficiency over having that person watch the program on the internet. If you allot twenty channels to the most popular broadcast programs, that still leaves 48 Mbits for each house. At the head of the street, you have a switch/server. Upstream of the switch/server, economies of scale cut in, and it is not too expensive to feed the switch/server with an optical fiber from the central office. The scarcity is the subscriber loop, either individual or shared, as in the case of cable. The cable companies have been desperately denying this logic, and broadcasting shows along the length of coaxial cable, which no one on the block watches. What is the sound of one hand clapping?

If we go by traditional Nielson Ratings, that is, how many people are actually watching the program, we might find that there is only room for about five broadcast channels. Given the way your street is built, a program would have to get a Nielson rating somewhere up in the 30-40% range before it caused significant congestion on the internet portion of your joint subscriber loop. The last time people got Nielson ratings in that range was before cable television, when there were only three or four channels to chose from. Organizing enough football fans in the neighborhood to watch the game at home on television to justify a dedicated channel would be as difficult as organizing a neighborhood picnic, at which the young men all actually play a football game while the women are preparing supper.

In the year 1998, before the advent of the internet, TV Guide had a circulation of thirteen million, and Sports Illustrated had a circulation of three million. TV Guide's circulation probably reflected the number of people who were willing to minimally inconvenience themselves to program VCR's to capture particular programs, not the rather smaller number who were willing to actually watch the television at a stipulated time. Sports Illustrated had to pad out its circulation with a conspicuously advertised "Swimsuit Issue," for men whose wives would not allow them to simply subscribe to Playboy or Penthouse. At the time, daily newspaper circulation in the United States ran about 237 per thousand, or 63 million. Unlike, say, woodworking hobbyists, sports fans are noisy, and they tend to make themselves visible, but there aren't really all that many of them.
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