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ESPN Pretends It Saw Cord Cutting Coming, Says Departing Subscribers Old And Poor Anyway

from the not-just-a-river-in-Egypt dept

Thu, Jan 21st 2016 9:33am — Karl Bode

About once a week now you'll see a legacy broadcast executive take to the media to try and "change the narrative" surrounding cord cutting. Usually this involves claiming that things are nowhere near as bad as the data clearly shows, with a little bit of whining about an unfair media for good measure. ESPN, which has lost 7 million subscribers in the last two years, has been particularly busy on this front. The broadcast giant has been trying to argue that cord cutting worries (which caused Disney stock to lose $22 billion in value in just two days) are simply part of some kind of overblown, mass hallucination.

Speaking to the Wall Street Journal (registration required), ESPN President John Skipper "plays offense on cord cutting" by effectively denying that ESPN is even in trouble. He starts by proudly insisting that the huge losses in subscribers weren't a surprise to the company:

"We stayed pretty calm. [The loss of subscribers] didn’t come as a bolt out of the blue to us. We had been thinking about this. We had a big town hall meeting in December. We had a priorities meeting earlier where we gathered everybody together to try to ground ourselves in our business."

Right, except that former ESPN employees have said ESPN execs weren't even talking about cord cutting as a threat until 2015. The company was also spending hand over fist (like a $125 million update for the SportsCenter set), suggesting they didn't really see the subscriber dip coming. After pretending that cord cutting didn't catch ESPN by surprise, Skipper proceeds to admit that "cord trimmers" (people scaling back their TV packages) are a big reason for the subscriber hit, but that the losses aren't all that big of a deal because the departing customers are old and poor:

"People trading down to lighter cable packages. That impact hasn't leaked into ad revenue, nor has it leaked into ratings. The people who’ve traded down have tended to not be sports fans, and have tended to be older and less affluent. We still see people coming into pay TV. It remains the widest spread household service in the country after heat and electricity."

This narrative that cord cutters and cord trimmers are old, poor, and otherwise of no interest is a popular one among cord cutting denialists, but data consistently shows it's simply not true. Cord cutters and cord trimmers tend to be young, affluent consumers who are just tired as hell of paying an arm and a leg for channels they don't watch. And, if recent surveys are any indication, there are a lot of users who don't watch ESPN and are tired of paying for it. In short, most of the data suggests that ESPN has a lot more subscriber defections headed its way with the rise of so-called skinny bundles (an idea ESPN has sued to stop).

When asked what ESPN plans to do to attack the cord cutting trend, you'll note that Skipper's first instinct is to deny that the legacy cable industry really has all that much to worry about:

"We are still engaged in the most successful business model in the history of media, and see no reason to abandon it. We’re going to be delivering our content through the traditional cable bundle, through a lighter bundle, through Dish’s Sling TV, through new over-the-top distributors, and through some content that is direct-to-consumer."

When pressed for what "direct to consumer" services ESPN plans to offer, Skipper can only provide one example: the company's brief experimentation with streaming the Cricket World Cup. That's because ESPN's contracts with cable companies state that if the company actually evolves and offers a direct streaming service, cable companies are allowed to break ESPN out of the core cable lineup. That means more skinny bundles than ever, and an acceleration of ESPN's problems. So, like a child in the dark, ESPN has decided to hide under the covers and pretend the monster under the bed isn't real.

There's no doubt that Disney and ESPN will eventually figure things out and balance the need for innovation with their desire to protect their existing businesses, but it's pretty clear from public comments and past decisions that it's going to be an ugly transition. That transition would be so much less ugly for many legacy broadcast companies if they spent a little less time trying to "correct narratives" telling them truths they don't want to hear -- and a little more time preparing to compete with the internet video revolution.

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Filed Under: cord cutting, subscribers
Companies: disney, espn

40 Comments

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Violynne (profile), 21 Jan 2016 @ 8:43am

There's no doubt that Disney and ESPN will eventually figure things out and balance the need for innovation with their desire to protect their existing businesses...
Indeed. Here's what that plan will look like:

WARNING - NSA DIRECTIVE - WATCHING THIS COPYRIGHT MATERIAL WITHOUT A CABLE SUBSCRIPTION IS ILLEGAL UNDER THE US COPYRIGHT ACT OF 2022, SECTION 909, ARTICLE 1.

VIOLATORS WILL BE SUBJECT TO ASSET FORFEITURE BASED ON ACCUSATION BY DISNEY OR ITS SUBSIDIARIES. TOTAL ASSET FORFEITURE VALUE WILL NOT BE LESS THAN $500,000.

BY VIEWING THIS COPYRIGHTED WORKS, ALL LEGAL RECOURSE IS WAIVED AND ANY DISPUTES MUST BE SETTLED THROUGH ARBITRATION.

Of course, it'll be unskippable and last 22 minutes.
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Anonymous Coward, 21 Jan 2016 @ 9:47am

Re:
Please drink your verification can, citizen.
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Anonymous Anonymous Coward, 21 Jan 2016 @ 9:50am

21rst Century Marketing
Insult your potential customers, that always gets them to give you money, on a monthly basis no less. Bigger insults get bigger RMI (Recurring Monthly Income, the only thing they actually care about, except not spending money on servicing custom...erm, already captured payers).
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TechDescartes (profile), 21 Jan 2016 @ 9:53am

ESP Network
Of course they saw it coming.
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Anonymous Coward, 21 Jan 2016 @ 9:56am

We stayed pretty calm. [The loss of subscribers] didn’t come as a bolt out of the blue to us. We had been thinking about this. We've got to ignore these off-field distractions. Despite the losing record, we're just a few subscribers away from having a perfect season. We've got some finances that are a little ding'd up, but we're gonna get healthy. We're elder statesmen and we've got good durability. We may appear to lack consistency, but we're not back on our heels: we're getting back into our offensive rhythm. We give back to the community more than anyone, and we're giving it 110%. We broadcast to win.
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Anonymous Coward, 21 Jan 2016 @ 10:14am

Re: 21rst Century Marketing
See, that's your problem right there: in the 21st century we don't have customers anymore, we have consumers.
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PRMan (profile), 21 Jan 2016 @ 10:16am

Re: 21rst Century Marketing
This has nothing to do with the 21st Century and everything to do with monopolies.
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PRMan (profile), 21 Jan 2016 @ 10:17am

""cord trimmers" (people scaling back their TV packages) are a big reason for the subscriber hit"

How? ESPN is in every level of service tier down to the very bottom, aren't they?

Other than 4 months of college football, I never watch ESPN. When I cut the cord, I will probably go with Sling TV for those 4 months.
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ECA (profile), 21 Jan 2016 @ 10:26am

What I saw over the years..
USA, GEOCENTRIC, restricted format sports.
There are TONS of sports around the world going on..
There are TONS of Olympic events going on around the world.
More variety and diversity and selection, then ANYTHING shown on this sports channel.

I saw MORE in Wide world of sports, then on ESPN..and that is OLD

Then they spread out abit..
And added MORE commercials then was ever created..and CHARGED a fortune to show them..And would show, enough that 60minutes of sports was 30 minutes of commercials...

I got a look at One world Sports, and it was ALLOT BETTER
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Thomas (profile), 21 Jan 2016 @ 10:28am

SlingTV was a tricky way to avoid the contracts
ESPN is handling this in a semi-smart way. It's not quite direct to customer, but it's pretty close and keeps as much of their current revenue as they can.
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Max (profile), 21 Jan 2016 @ 10:29am

"We are still engaged in the most successful business model in the history of media" - Exactly. "Still". For now.
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Not an Electronic Rodent (profile), 21 Jan 2016 @ 10:42am

Riiiight!
The people who’ve traded down have tended to not be sports fans, and have tended to be older and less affluent. We still see people coming into pay TV.
OK, Mr. ESPN..... let's examine that for a moment:
1/ Old and "less affluent" you say? Well since these are departing customers, clearly they used to be young and rich enough to afford and want your service and aren't interested any more. Given increasingly long lifespans and the skew of population towards the elderly, isn't ignoring that demographic dumb all by itself?
2/ Not sports fans? But these people are "trading down" their package, right? So why did they have (presumably) sports before, then? And how does them not being sports fans make them giving you less money a better thing for you than if they were sports fans?
3/ Still see people coming in to pay TV, huh? Good for you... and how many would that be compared to the ones leaving? Are they taking as many services as the ones leaving? Seems a little vague to me... care to elaborate?

Looks like deja moo.... I think I've seen this bullshit before.
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Anonymous Anonymous Coward, 21 Jan 2016 @ 10:53am

Re: Re: 21rst Century Marketing
Once the current trade treaties get implemented all the 21rst Century will be about will be consolidating corporations until there is only one.

There can be only one.

If that isn't about monopolies then I don't know what is.
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Anonymous Coward, 21 Jan 2016 @ 10:55am

...The people who’ve traded down have tended to not be sports fans...

You mean you had a choice?

When my mother got DirectTV ESPN was part of the basic package; you know: those channels that start after your local over-the-air channels.

However, ESPN does have more than one channel and if you wanted the additional channel(s) those were in the higher tiers. I wonder if that's what Mr. Skipper might be referring to: folks dropping the higher tiers but still getting the basic ESPN channel only because it's in the basic package. As currently packaged to drop ESPN requires dropping the entire basic package resulting in dropping cable/satellite entirely.

One more thing: less affluent may not mean anything. If your price is too high - and it is - folks won't want to buy no matter how affluent they are.
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Anonymous Coward, 21 Jan 2016 @ 10:59am

A collection of ESPN's fables...
> and have tended to be older and less affluent.

Those grapes were sour anyway.
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Anonymous Coward, 21 Jan 2016 @ 11:03am

That's hilarious. The older people are cord cutting? They are precisely the demographic still watching cable. Be in front of a TV at a certain time tuned to a certain channel? Put up with ads? How very 50s-90s of them. The comments about poor are even more insane. Nothing has changed with that at all lately. Pay for TV and cable? Pay for computer and internet? What's the difference?
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radix (profile), 21 Jan 2016 @ 11:08am

Devil's advocate
That impact hasn't leaked into ad revenue, nor has it leaked into ratings. The people who’ve traded down have tended to not be sports fans, and have tended to be older and less affluent.

Cord cutters and cord trimmers tend to be young, affluent consumers who are just tired as hell of paying an arm and a leg for channels they don't watch. And, if recent surveys are any indication, there are a lot of users who don't watch ESPN and are tired of paying for it.

You and ESPN are talking about different revenue streams. If all (or rather, most of) the people dropping ESPN aren't watching anyway, then it may be completely true that ratings and ad revenue aren't impacted.

Is there any data showing the percentage of revenue that ESPN gets from carriage fees vs ads? If 90% of subscribers never turn to ESPN, but subscription fees only make up 30% of revenue (just making up numbers), then really only 27% of revenue is at risk to cord cutting, instead of the bigger sexy 90% number that these doom and gloom articles throw around.
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Geno0wl (profile), 21 Jan 2016 @ 11:27am

Water?
So according to John Skipper it goes...
Heat?(people heave a heating company now?)
Electricity
Pay TV
Water maybe?

Only the most rich of elite idiots who are disconnected from "normal society" would list "heat" as a household service(not gas and electric) and think Cable is more prevalent then water.
no wonder he didn't see Cord cutting coming down the pipe...
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Geno0wl (profile), 21 Jan 2016 @ 11:30am

Re:
Presumable basic Cable only gets ESPN1 or ESPN2, the extended packages also get.....
ESPN Latin America, ESPN Films, ESPNews, ESPNU, ESPN Classic, ESPN Deportes, Longhorn Network, SEC Network
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Anonymous Coward, 21 Jan 2016 @ 11:34am

Re: Re: Re: 21rst Century Marketing
Once the current trade treaties get implemented all the 21rst Century will be about will be consolidating corporations until there is only one.

There can be only one.

If that isn't about monopolies then I don't know what is.

You just really messed with my enjoyment of watching "Highlander".
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Anonymous Coward, 21 Jan 2016 @ 11:35am

Sometimes I feel like I'm the only person on the internet that likes to watch sports. I think ESPN does a pretty good job with most sports that I watch.

My favorite though is baseball and on that they do a relatively bad job. I hate it when I can't get a game through MLB streaming because ESPN has bought the rights for that game.

If MLB fixed their blackout rules, it would be perfect.
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ECA (profile), 21 Jan 2016 @ 11:38am

Re: Riiiight!
#3..ARE they given the ability to NOT have ESPN, on a new cable subscriber..Are they TOLD they can Cut their bill, by $5-8..
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blogagog (profile), 21 Jan 2016 @ 11:57am

Beats water?
"We still see people coming into pay TV. It remains the widest spread household service in the country after heat and electricity."

It is a sad state of affairs when more households have tv service than running water service.
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Digression Guy, 21 Jan 2016 @ 1:28pm

Is there a TD Style Guide?
Speaking to the Wall Street Journal (registration required)
Wouldn't it be more appropriate to put most occurrences of "registration required" in wink-wink-quotes?
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Anonymous Coward, 21 Jan 2016 @ 1:39pm

Re: Beats water?
I'm actually confused by the 'Heat' providers. Do they conduct it by warming up a big metal cable that runs through everyone's homes? Or do most Heat Utilities have some sort of giant IR-Cannon? Maybe they have 'heat-techs' that go house-to-house and snuggle with customers...
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Anonymous Coward, 21 Jan 2016 @ 1:53pm

Re:
I'd be a cord-cutter instantly if it weren't for MLB's rules. As it is, I have to pay for my cable provider's penultimate package just to have reliable access to my team's 155-or-so games/yr that aren't nationally televised.
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Anonymous Coward, 21 Jan 2016 @ 1:59pm

"Usually this involves claiming that things are nowhere near as bad as the data clearly shows,"

As bad as the data clearly *SHOW*

Data is a plural word!!! https://www.youtube.com/watch?v=VyFpOp8Ft0Q
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Anonymous Coward, 21 Jan 2016 @ 2:22pm

I am a 37 year old cord trimmer then cord cutter. I switched to Sling TV which had ESPN and 20 channels. It was cheap, but eventually I noticed how little live sports ESPN had that I wanted to watch and when there were games on that I wanted to watch, there were restrictions. Example, Monday Night Football can only be watched on a tablet or TV device like my Amazon Fire. I could not watch it on my phone. Then the black out restrictions for nationally televised basketball and baseball games for my local sports team because Comcast has all the rights to the games. The rest of the "sports" were poker, college sports and pool and a whole lot of ESPN commercials. It drove me nuts so I cut Sling TV completely. Now I use Netflix and Amazon for shows that I can watch on my own schedule rather than find what is on and only get to see the last 10-15 minutes of a broadcast show.
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JBDragon (profile), 21 Jan 2016 @ 3:00pm

Re:
Exactly, it's the OLD people that are holding onto Cable. I cut the Cord. My Dad Moved into my house and he used to have Satellite. Getting used to not having it, He now tells me he has to much stuff to watch and doesn't miss it. He's retired, no job, so watches a lot of TV!!!

To me what seems to really be surprising, is not a shift to Netflix and whatnot, but to YouTube!!! So many teens, that's all they all seem to watch or make their own video's to put up on anything and everything. They don't watch anything else!!!

That is the Generation that will be coming in, getting Internet only, and still watching lots of youtube, and I'm sure Netflix or whatever, but ESPN? That's way down low on the list.
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JBDragon (profile), 21 Jan 2016 @ 3:10pm

Re: Water?
Who in their right mind want to pay $200+ cable bills? CableTV is a Luxury item. CableTV came about because of poor statically Analog TV. It's skyrocketed to the expensive garbage we have not. 200 channels of crap in which you might only watch 20 of them at most. But it's setup where you have to get the most expensive bundle to get that 1 or 2 channels you actually want. This is all by design.

A Girl at work that just lost her Mom from Cancer, She and her brother live in the house. They have a 200+ Comcast bill. They don't make a lot of money. With a house payment and everything else, maybe ESPN is right, Poor, but not POOR, POOR as they are in a house and not living in a cardboard box. She wants me to setup a Antenna and whatnot for her. Her brother can't do it, and toss that huge cable bill. To me that's just crazy. I pay $50 a month for Internet only.

The prices for all that TV content just keeps shooting up way, way faster then people's paychecks!!! The list of people I know who cut the cord or plan to is growing. My brother did it last year. He would have done it sooner but his wife was stopping him. Some people are really in denial with what's happening. It's right in front of your face.
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Anonymous Coward, 21 Jan 2016 @ 3:10pm

Re: Water?
Really wish I'd read this before I made my comment below. Gotta stop going into 'skim' mode. I did try to figure out how a Heat Company might work, though.
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JBDragon (profile), 21 Jan 2016 @ 3:12pm

Re: Re: Beats water?
My Plasma is a heat provider!
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JBDragon (profile), 21 Jan 2016 @ 3:23pm

Re:
I hear SlingTV isn't all that great. Then again it's owned by DirectTV, a Satellite TV company. What do you expect. I still think that $20 for what you get is to much. Maybe at $9.99 it would be worth it?

I cut the cord about 4 years ago. I was already paying for Netflix and Amazon. Hell I had Amazon just for 2nd day shipping before they even added all this PRIME Streaming Movie/TV service and other things to it. I use Amazon Prime Music all the time as it's FREE and commercial free being a prime member. It's a pretty good App on my iPhone.

So those service I don't consider a extra cost for cutting the cord as I had them before I cut the cord. I just recently switched from Media Center, to a TIVO setup to record all the broadcast channels with a Antenna. So I get ABC, CBS, NBC, FOX, CW, PBS in HD and 5.1 surround, plus other channels like MeTV and Antenna TV, etc. Those have a lot of great old series on them. Want to watch Hogan's Hero's or Colombo, or and so on and so on. It's great for that. Tivo supports Amazon and Amazon Prime, Netflix, HULU (No thanks, and others with a universal search for content from all of them, plus PLEX support. So a pretty good all in one solution.

I can skip commercials. Watch in the family room and continue in the bedroom using the Tivo Mini. Which can do everything my Tivo Roamio does. So I don't anything and can watch on my own time. I have no monthly costs in doing this.
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Anonymous Coward, 21 Jan 2016 @ 4:06pm

only read the title
I am neither old nor poor and the second I get the option to ala'carte channels ESPN will be the first one I drop. Hell I might even have a little party.
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Anonymous Coward, 21 Jan 2016 @ 4:06pm

only read the title
I am neither old nor poor and the second I get the option to ala'carte channels ESPN will be the first one I drop. Hell I might even have a little party.
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Anonymous Coward, 21 Jan 2016 @ 5:02pm

Disney and ESPN. Avarice and Greed.
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PaulT (profile), 22 Jan 2016 @ 12:21am

Two other things that come to mind. Firstly:

"The people who’ve traded down have tended to not be sports fans"

Erm, shouldn't that be an even bigger red flag and something to really worry about? Which leads on to:

"We are still engaged in the most successful business model in the history of media"

But... they've just admitted that they've lost revenue by simply not being able to force people to pay them who weren't even interested in their channel to begin with. Their successful business model was therefore based partly on a mandated tax. That should be a sign that it's unsustainable once customers have a choice about paying the tax, surely?

The other thing that comes to mind is that they seem blinded to the other part of reality. In the long term, the issue is not simply about people they lose or retain as customers. The issue is the people who never even consider them. Put it this way - a young, affluent person who 10 years ago might have subscribed to cable including their channel is now able to access all their entertainment options without even considering ESPN as an option. They lose that customer before they even know he exists. That's where some of their real problem lies...
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Wendy Cockcroft, 22 Jan 2016 @ 5:47am

Re: Re: Water?
They need to be educated but you may find it's a matter of "Keeping up with the Joneses." They'll stop doing that when they stop caring what the flippin' Joneses have or don't have and do what's best for them.

I recommend cutting the cord for convenience if nothing else. People who are still on cable are being milked like cows.
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Simon, 22 Jan 2016 @ 7:20am

There must be a lot of old poor people on Reddit then given how every thread related to ESPN is overwhelmingly dominated by people looking to drop it.
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klaus (profile), 22 Jan 2016 @ 9:32am

Shocking
"It remains the widest spread household service in the country after heat and electricity."

Really? Americans pay more for TV than food, transport, holidays, education...?

And ESPN President John Skipper doesn't see a problem with that?
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