ESPN On-Air Talent About To Care About The Cord-Cutters The Execs Aren't Concerned About

from the disconnect-over-the-disconnecters dept

Tue, Mar 7th 2017 2:45pm — Timothy Geigner

It's been more than a bit perplexing to watch ESPN, sports television giant though it may be, shrug its shoulders at the cord-cutting trend that has refused to bend to the network's pleasure. With streaming being a thing, and that super-charging the cord-cutting revolution, we've made the point for some time that the sports broadcast industry was eventually going to feel the grip of fewer subscribers, as has been the case with much of the rest of the television medium. Yet ESPN barely reacted at all to cord-cutting, other than to insist that established ratings systems are crap and that its loss of millions of subscribers over the past few years was of no concern, mostly because those subscribers were poor. ESPN President John Skipper said just last year:

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.

Yet those comments came almost immediately after a huge round of layoffs at the network in 2015, trimming the behind-the-camera staff to what is essentially a skeleton crew. Still, stock prices stalled for Disney, with much of the blame being placed upon ESPN's subscriber loss. Some market experts have made some rather bold predictions that the subscriber woe for ESPN is over-hyped, even going so far as to predict massive market gains for Disney this year. That optimism seems to be largely built on the recent investment ESPN has made into digital distribution and streaming options. But if anyone out there is buying such optimism, the executives at ESPN do not seem to be among them.

Richard Deitsch at Sports Illustrated has a detailed write-up of ESPN's plans for its on-air talent in 2017 and it certainly looks like that talent is going to have reason for concern about cord-cutting that the executives lack.

SI has learned that ESPN will have significant cost-cutting over the next four months on its talent side (people in front of the camera or audio/digital screen). Multiple sources said ESPN has been tasked with paring tens of millions of staff salary from its payroll, including staffers many viewers and readers will recognize. Those with contracts coming up would be particularly vulnerable, sources said. The company is also expected to buyout some existing contracts, which is something rare for ESPN historically beyond a few NFL talents. The cuts are expected to be completed by June. Sources within ESPN say that there is no set list of names yet and stressed that behind-the-scenes people will likely (key word) not be impacted by these cuts.

Last month Reuters reported Disney had a lower-than-expected quarterly revenue, hurt by the drop in advertising revenue at ESPN. In addition, ESPN continues to shed subscribers at an enhanced rate, down to 88.4 million households in Dec. 2016. That number was 100.002 million in Feb. 2011.

It had to happen eventually. A network can't drop subscribers at rates in the double-digits without eventually taking a hit on the ad-revenue. Couple that with the sports licensing landscape in which partnering with teams and leagues has never been more expensive and it becomes difficult to see a way out this wilderness for ESPN. And, if this seems like a terrible trend for a business generally, it's particularly bad for a brand like ESPN, whose on-air talent has always been a key part of its success. The network likes to argue that it makes the talent popular and not the other way around, and it has some recent examples that demonstrate this to some degree, but the truth is that the talent and the network are more symbiotic than that. There's a reason why the retirement of Chris Berman, annoying slogan peddler though he may be, is such a big deal. He's been a titan for the network. Replacing that while cutting pay for the on-air talent is a unenviable task, to say the least.

And, just to be clear, this is mostly to do with cord-cutting and the numbers we're talking about are enormous.

The most immediate causes of the layoffs are clear. Over the last several years rights fees have skyrocketed, with ESPN now paying over $3.3 billion annually just to broadcast the NFL and NBA. Simultaneously, ESPN’s subscriber count and viewership—the fabled dual revenue stream that has made it the most envied television company in the country—have tumbled. While the loss of 12 million subscribers over five years is mostly due to generalized cord cutting, and not subscribers specifically dropping ESPN, it doesn’t really matter: It still amounts to losing almost a billion dollars annually. The status quo is unsustainable, and with rights fees already locked in for several years, salaries are one of the biggest areas available to cut expenses.

This how media giants die. Not quickly, or with mercy, but rather by being slowly bled to death by the reality of new times and un-adopted innovation. Sources from inside the company suggest ESPN execs weren't even discussing the cord-cutting trend until 2015. It seems that may prove to have been too late to right the ship in Bristol.

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

48 Comments

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madasahatter (profile), 7 Mar 2017 @ 3:00pm

Yawn
ESPN overpaid for the rights for "marquee" sports. They also do not show many other sports such as rugby or Australian rules football. These sports would probably come as complete package with ESPN only rebroadcasting the game.
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Mononymous Tim (profile), 7 Mar 2017 @ 3:01pm

That number was 100.002 million in Feb. 2011.

Because when you're losing people that fast, every .002 million (2,000) people counts.
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Anonymous Coward, 7 Mar 2017 @ 3:03pm

How
I post this on most cord cutting articles. How do I cut the cord? My choices for an ISP are Verizon and Comcast. Both price just Internet at more than Internet plus TV. So cord cutting isn't practical. What's the answer?
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TechDescartes (profile), 7 Mar 2017 @ 3:04pm

Pun-ishment
Bristol, Connect-n-cut
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Anonymous Coward, 7 Mar 2017 @ 3:08pm

Re: How
You have to decide whether the higher price for Internet access is worth the cancelling of your cable subscription.
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Anonymous Coward, 7 Mar 2017 @ 3:09pm

Here's the comment on that Masnick blocked back on his CIA Leak Shows Mobile Phones Vulnerable, Not Encryption:
Methods? We KNOW it's going on, don't need details. It's what SPIES do. This is distraction with no action, mere kibitzing. Just what "they" want.

Apparently, from lack of mention here, you're okay with the CIA fomenting civil war in Syria, supporting actual terrorists who used the chemicals (and you believe the NYT claiming that was Assad), but OMG, my precious app is compromised!

What the hell do you think "smart" phones are for except a 1984 telescreen that you voluntarily carry around everywhere? We are IN the dystopian future, kids.

Basic problem is the uncontrolled deep state -- and you're siding with it against Trump! I suppose here at Techdirt, you'll deny that even exists, still believe that the Russians (with their puppet Trump) are the threat, not the 850,000 spooks in "Top Secret America".

Now, I bet's there's zero agreement to my points from Techdirt regulars, this is such a WEIRD site compared to The Register, so have at it.

----------------
I'm tired of Masnick's hidden censoring of comments (also of his tactic of delaying their appearance). This is a public site, not Masnick's alone: if he doesn't want adverse comment, he can take down the public comment box.
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That One Guy (profile), 7 Mar 2017 @ 3:14pm

Re: How
That right there is probably one of if not the biggest reason that they haven't lost even more people, the fact that they price internet and cable as cheaper than just internet service.

Make it so that people can get internet as a stand-alone and cheaper and I imagine a significant number of people would drop cable in a heartbeat, the 'problem' is that losing so many 'watchers' would make charging the same or more for advertising for cable a tricky proposition, which is why the companies offering both make the 'bundle' cheaper than the individual service, because they'd be hurting even more otherwise.
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Anonymous Coward, 7 Mar 2017 @ 3:18pm

What happens when the bids for sports rights fall off of a cliff. This could be cuts staff now as an emergency measure now, and then reduce running costs as contracts run out.?
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Anonymous Coward, 7 Mar 2017 @ 3:21pm

Re: Re: How
Don't forget that they will increasingly use data caps and throttling in a effort to keep the cable audience.
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Anonymous Coward, 7 Mar 2017 @ 3:25pm

Re: Yawn
ESPN used to show those other sports -- lots of them. That was likely because the broadcast rights were cheap and they couldn't afford anything else. I remember seeing Australian rules football for the first time and thinking that it was pretty interesting; subsequently, I actively sought it out and even learned a little about the game. They dumped it, of course, as soon as they could replace it with sports they felt were more popular.

They're also facing competition from other sports networks: NBC's and Fox's are carried on my cable system as part of the "basic extended" package. Meanwhile, that same package is dropping ESPN News and ESPN Classic in April. So while all of us will still be counted as ESPN subscribers, we'll have half the ESPN channels and some of us will no doubt migrate to the other available choices.

If ESPN would sell me an a la carte package for the events that I want to stream (women's/men's college basketball, college football, certain MLB teams, certain NFL teams, no NBA, no NHL) where I could pay $1 per event, I'd probably buy it. A rough guess based on the last year suggests they'd make $300 off me: I follow two basketball programs and both their men's and women's teams, so figure 25 games from each of those is 100 events; I follow 2 MLB teams, so figure 50 games each for another 100; I follow 2 NFL teams, so figure 30 games there; and I follow several college football teams, call it 50 games, and then add in 20 more for playoffs/tournaments.

But it'd have to be $1. I'm not paying $4.95 to watch a game: that adds up to way too much. And if they want me to subscribe to a team's season, then it'll have to be less than $1, because I can't watch all the games.
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streetlight (profile), 7 Mar 2017 @ 3:25pm

Number of Subscribers vs. Number of Viewers
The assertion here seems that ad revenue is down because the number of subscribers to ESPN has dropped rather than the number of viewers is down. Just because the number of subscribers has dropped certainly has impacted ESPN's revenue and the posting shows the numbers but if the subscribers that dropped ESPN rarely or never watched the channel then viewer numbers could be somewhat static. We need those numbers to have a complete picture and Nielsen should have them. Furthermore costs for contracted programming has increased as pointed out in the post, so without increased revenue from whatever source something must give. ESPN needs to be better at bargaining these contracts and maybe forgoing some contracts. The sports leagues may need to realize they're not as valuable as they think they are.
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Anonymous Coward, 7 Mar 2017 @ 3:30pm

Circuit City got rid of its "talent."
https://news.slashdot.org/story/07/03/29/1531224/circuit-city-and-the-american-dream

Where iz they now?
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Anonymous Anonymous Coward (profile), 7 Mar 2017 @ 3:34pm

Re:
With any luck salaries and bonuses for players would fall off the proverbial cliff, franchises would be forced to build their own venues, and college sports would return to the epitome of amateur sports they once were. Oh, and don't forget the Olympics, one can only hope they feel a seriously destructive hit as well. And, oh, oh, cable prices will drop precipitously.
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Anonymous Coward, 7 Mar 2017 @ 3:35pm

Re: How
When I was with comcast. I did the double play as it was $5.00 cheaper than just internet. When I received the receiver, I stuck it in the closet. Just read the fine print, that savings may only be temporary. If you let it lapse, they will later add another $30 on top of your bill for television.
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That One Guy (profile), 7 Mar 2017 @ 3:44pm

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
We need those numbers to have a complete picture and Nielsen should have them.

Yeah, funny thing about that, last time Nielsen mentioned the increasingly lousy numbers ESPN threw a fit, insisting that the numbers Nielsen had were 'wrong', to which Nielsen went over their numbers again only to respond that no, they got it right the first time.

ESPN doesn't want the numbers, and they certainly don't want anyone else to see them, as they aren't nearly as 'promising' as the empty PR tripe ESPN is constantly throwing out to pretend that business is better than ever and they're just rolling in the money and viewers.
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JoeCool (profile), 7 Mar 2017 @ 3:47pm

Re: Circuit City got rid of its "talent."
That's what happened to my dad a few decades back at one of the jobs he had. He helped build the company up, then they gave his job to someone with no abilities, but willing to work for minimum wage. It hurt them bad in the long run (wound up getting bought and then sold off piece-meal), but too many execs are willing to destroy their companies to get an extra million in their own xmas bonus. What do they care? They've got a golden parachute for when the company goes under.

It's why too many employees do a half-ass (or worse) job these days - they don't care, they're not paid to. If you complain, they'll look you right in the eyes with a bored look and tell you to take your complaint to someone earning more than minimum wage.
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That One Guy (profile), 7 Mar 2017 @ 3:53pm

Re: Re: Re: How
Quite right. Slap the customers with caps and throttling and if they do try to get their entertainment from another source then they still end up paying the cable company.
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Anonymous Coward, 7 Mar 2017 @ 4:47pm

It's not that they aren't concerned. It's that they'll never admit that they're concerned, because that would start hurting their stock price as well as their own job security.
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tom (profile), 7 Mar 2017 @ 5:08pm

Couple the declining subscribers to ESPN with the falling ratings for the NFL and the picture looks even worse. If the NFL starts cutting back on commercial slots, ESPN's revenue will take a sharp hit. MLB is trying things to shorten games as well to stem fan losses. Fewer commercial slots is one of the few things left that can really shorten games.
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PRMan, 7 Mar 2017 @ 5:18pm

Re: How
We talk about this all the time on cord cutting forums.

You are misled to believe that it is more. But you are not paying taxes, broadcast fees, sports fees, additional outlet fees, etc. on pure internet.

This saves $30 or more.
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PRMan, 7 Mar 2017 @ 5:21pm

Re: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
ESPN is correct. The numbers ARE wrong.

They don't count:

Cordcutters sharing their parents' accounts (who are still watching ads)

Cordcutting services such as Sling, Vue, DirecTVNow, etc. Nielsen has no way of counting these yet.

Nielsen is saying, "We are correctly counting traditional OTA broadcast and cable/satellite subscribers."

ESPN is saying, "A lot of cordcutters still watch us and we would really like those numbers to be included when calculating ad rates."
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Anonymous Coward, 7 Mar 2017 @ 5:22pm

Viacom is looking to be the canary in the mine
Viacom pulled their running shows from streaming sources last month. They asserted their focus will be pay-tv.
I'm not about to reconnect cable just for comedy central.
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Anonymous Coward, 7 Mar 2017 @ 5:40pm

Re: Viacom is looking to be the canary in the mine
Mr Viacom must have met Mr ESPN in a bar and here's how it went:

Mr ESPN: I'll tell you, my boy, being on cable is where it's at. Get off of that stupid internet it's for losers.

Mr Viacom: Wow you are sooooo smart Mr ESPN you have so many subscribers and I want to be just like you - Gets back to the office and declares: SHUT DOWN ALL OF OUR STREAMING; WE'RE GOING TO BE ON CABLE EXCLUSIVELY

Writing on the wall: Death to both.
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Anonymous Coward, 7 Mar 2017 @ 7:16pm

Re: Re: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

ESPN is saying, "A lot of cordcutters still watch us and we would really like those numbers to be included when calculating ad rates."

That sucks for ESPN, since Nielsen lacks the ability to properly account for those cordcutters. How would it even measure such things? Would it use estimates that weigh in favor of ESPN's "alternative facts"?
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Anonymous Coward, 7 Mar 2017 @ 7:36pm

Essentials of life
"It [ESPN and spectator sports] remains the widest spread household service in the country after heat and electricity."

This is totally sick if true. TV, Entertainment, and ESPN is a luxury.
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kallethen, 7 Mar 2017 @ 9:00pm

Re: Re: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
You do have a point about viewership numbers for ad revenue purposes. I wouldn't be surprised if viewership has remained constant, and it would be nice if ESPN could solidly show that for purposes of accurately charging for commercial time.

However, I suspect that a large number (not saying majority, but certainly a sizable number) of ESPN's subscribers have historically been people who didn't watch but still had it as a mandatory part of their cable package. Keep in mind that the networks charge the cable providers for the right to carry their channels. That means that ESPN gets a cut of each of those cable subscription fees.

So while ESPN may be keeping it's viewership numbers up, it's loosing out on money from those subscriptions. And THAT is what is starving the company. Even if ad revenue is constant because viewership is constant, the subscription revenue is falling.
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orbitalinsertion (profile), 7 Mar 2017 @ 10:38pm

Re: How
I think that is partly why the content providers and cable/ISP's still don't think much of cord cutting.
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orbitalinsertion (profile), 7 Mar 2017 @ 10:39pm

Re: Re: How
Higher price and bandwidth caps.
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That One Guy (profile), 8 Mar 2017 @ 12:56am

Re: Re: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
That strikes me as "These are the numbers we have, and they aren't good." "You should take into account the numbers you don't have though, they're much better."

If Nielsen doesn't have the numbers for people that cut the cord but still watch in other ways(and I'd be curious to know how ESPN tracks those numbers) then it would be rather absurd to try and incorporate what they don't have into their numbers.
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Ninja (profile), 8 Mar 2017 @ 2:48am

Honestly? This may be a good thing in the end. Without media giants in the way the space may open up for streaming options everybody has been asking for ages now with much lower costs. We'll finally be able to pay to watch our teams matches only at affordable prices, all online.

From the ashes of the legacy players will rise the new age. Good riddance.
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That Anonymous Coward (profile), 8 Mar 2017 @ 3:34am

Perhaps instead of getting rid of the talent, which is trying very hard to keep viewers engaged, perhaps fire the executive level who refused to believe the house was on fire as they were choking on the smoke. Tis a pity that the golden parachutes are never tied to if you cause us to loose X, you get nothing. I said you get nothing, good day sir.

If you could destroy or profit and still bonuses... why would you care that much?
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Anonymous Coward, 8 Mar 2017 @ 5:20am

Death by...
..."un-adopted innovation." Failure to adapt, the perfect assassin.
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ed271 (profile), 8 Mar 2017 @ 5:20am

Re: How
I'm in a similar situation, internet + tv is cheaper than internet. So every time my rate goes up I call my isp and have a confusing conversation beginning with "Well, my tv box is still in the basement and not plugged in, could we take that off to lower the rate?". Then they give me another discount that brings the rate back where it was. They must want to pump up their number of tv subscribers for some incomprehensible reason.
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Anonymous Coward, 8 Mar 2017 @ 7:08am

Re: How
I get promotional material from Verizon all the time asking me to "upgrade" to their TV + internet + phone package. It's sometimes marketed as cheaper, but that package comes with internet speeds that are 1/3 of what I get for internet only. To get the 150/150 service I get now with an attached TV/phone package, I'd have to pay almost double what I'm paying currently.
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SteveMB (profile), 8 Mar 2017 @ 7:12am

Reminds me of this Dilbert cartoon (http://dilbert.com/strip/1995-10-02):

"We're poised for success... There will be no raises because it will be a difficult year."
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trollificus (profile), 8 Mar 2017 @ 7:23am

Re: Re:
Especially, gutting the corrupt Olympic pig* would be welcome.

As a long-time sports (pro and college) fan, I'm starting to feel that consuming media "sports entertainment product" is a suboptimal use of my time and to contribute money to the pockets of franchise owners, agents, and the 'governing bodies" of faux-amateur sports empires is stupid and might even be wrong on a moral level.

Comcast is going to bugger me no matter what, and I think they view "cable basic" as a bit of olive oil. If you know what I mean.

*-Seriously, I didn't mean to put down pigs.
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trollificus (profile), 8 Mar 2017 @ 7:42am

Re: Number of Subscribers vs. Number of Viewers
^ This, exactly. They would be in a much better financial situation right now if they'd have been willing to "lose" some of those bidding wars.
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Anonymous Coward, 8 Mar 2017 @ 7:53am

Re: Re: Re: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

That sucks for ESPN, since Nielsen lacks the ability to properly account for those cordcutters. How would it even measure such things?

Maybe Neilsen can't, but cable companies with digital systems get data on everything you watch (i.e. they can see what channel each digital box is tuned to). I'd be surprised if they're not already using these numbers to negotiate lower rates from ESPN.
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trollificus (profile), 8 Mar 2017 @ 7:55am

Re: Viacom is looking to be the canary in the mine
Viacom has running shows?
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Anonymous Coward, 8 Mar 2017 @ 8:22am

Re: Re: Re: How
Comcast charges less for bundled TV and Internet, but, if you don't rent a "set top" TV box, you don't get TV via the Internet even tho' they claim you do.

I just moved from an area with an independent, local ISP, Charter, and Google in competition with one another to an area with Comcast and AT&T in no-competition. It's $10 more for me to make the statement "cord-cutting is real," but I'd have to pay more, if I really wanted to watch TV "their way."

Funny, the cap I had with Comcast over a year ago in Atlanta was 300GB/mo. I now live in the stix, and the cap is 1TB/mo.
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ShadowNinja (profile), 8 Mar 2017 @ 9:31am

Re: Re: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Cordcutting services such as Sling, Vue, DirecTVNow, etc. Nielsen has no way of counting these yet.

Except ESPN isn't available on any of these cord cutting alternates. So it doesn't matter that they don't count in the ratings.
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DakotaKid, 8 Mar 2017 @ 9:36am

Political stance
ESPN did not bring politics into sports for many years, now they have taken an openly social Justice warrior stance on their commentary and color.This has alienated half of their audience who want sports as an escape from their daily lives. What about that as part of the losses?
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Anonymous Coward, 8 Mar 2017 @ 9:37am

Re: How
Is the ultimate cord cutting is when Comcast forgets to charge you for Internet Service.

Has this happened to anyone? I haven't been charged by Comcast for months and my internet still works. I check my bill constantly and they even told me that it was off. I didn't correct them because I love free shit.

But do you guys have any suggestions?
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kallethen, 8 Mar 2017 @ 9:39am

Re: Re: Re: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
Not true. Sling, DirectTV Now, and Playstation Vue all have ESPN channels.
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Anonymous Coward, 8 Mar 2017 @ 11:31am

Re: How
I had to renew my Comcast bill after my 1 year of Internet only price. All I wanted was Interent again, but it was CHEAPER to get this dumb small bundle of Internet plus Local channels with a Little Digital cable box with no rental on that and either Showtime or HBO, so I picked HBO.

That bundle was cheaper then Internet only so I got it. Do I use it? Not really. The cable Box is still in the packaging. I have never hooked it up as I would have to run a new cable for it and why? I'm still using my Antenna with TIVO to get most of my TV. I don't need the cable box for that. As for HBO, I just use one of my streaming Devices. Comcast doesn't allow me to use the Tivo Box, so I can use HBOGo on my AppleTV's or ROKU's. So that's not a big deal.

I'm still paying a little more then I was when it was Internet only. My speeds are also a little slower then they were. But more then fast enough. Where I was paying $50 a month for 100Mbps download service only, I'm now paying around $66 or so for what I have now with 75Mbps Internet. I rarely use HBOGo.

It's not really cutting the cord now, but it's as close as I can get. If I can go back to Internet only for cheaper once again, I will. I'm not paying for ESPN though in my small bundle.
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Anonymous Coward, 8 Mar 2017 @ 11:41am

Re: Political stance
I'm not a big sports person, but I'd watch the 49'ers once in a while. I didn't watch a single Football game this year including the Superbowl and part of that was because of Colin Kaepernick and his dumb 1 knee thing during the National Anthem. Then that crap spreading to other people.

I'm not going to watch this crap. That's exactly what it is. Turned Sports Political. No thanks. So now I just don't watch any sports, period.
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Anonymous Coward, 8 Mar 2017 @ 3:43pm

Re: Re: Political stance
wow
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AC Unknown (profile), 8 Mar 2017 @ 8:26pm

Re: Here's the comment on that Masnick blocked back on his CIA Leak Shows Mobile Phones Vulnerable, Not Encryption:
Actually, it is Mike's site. It's just that the public (and the spam filters) are tired of this crap.
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