ESPN in Cost Cutting Mode

[Goose85]

I have often speculated what will happen to the Big Boys in college sports if anything happened to the escalating TV revenue they are now getting, and have built into their operating model. The old Ewing line "We make a lot of money, but we spend a lot too."

The Big 10 is in line for a new deal, and all expectations are for a big time contract. They probably will, but maybe not all from ESPN.

Interesting article on ESPN.

A couple quotes from the article.

"The company, majority owned by Walt Disney Co., has lost 3.2 million subscribers in a little over a year, according to Nielsen data, as people have “cut the cord” by dropping their cable-TV subscriptions or downgraded to cheaper, slimmed-down TV packages devoid of expensive sports channels like ESPN."

"The financial stakes are especially high for ESPN because it earns the most carriage fees of any TV channel, about $6.61 a month per subscriber, according to SNL Kagan."

That translates to a loss of over $21 million per month, or almost $254 million per year for ESPN. If the "cut the cord" trend continues this could be really interesting to follow. It will affect the Big 5 conferences the most, as the rest are all used to competing at a financial disadvantage.


http://www.wsj.com/article_email/espn-tightens-its-belt-as-pressure-on-it-mounts-1436485852-lMyQjAxMTA1MjEzMDkxMjAwWj

[MayorBeluga]

Trying not to go political, but it's painful to watch ESPN these days. To borrow a phrase, they've become MSNBC with athletes. I want sports to be a politics free zone and at ESPN it most definitely is not that. No sympathy.

[MKE_GoldenEagleFan]

as with most things, what goes up, must come down... Not saying that ESPN will crash or fall out of the market, but with people changing the way they watch and subscribe to things you can bet they will take a hit. the cut the cord movement isn't going to slow down, in fact it is going to ramp up if anything as cable companies are now paying for all the years they robbed customers.

[Alan Bykowski, "brewcity77"]

That's one place where FS1 could benefit, if they were able to get their channel onto the basic list of channels that doesn't include ESPN. Sell to the providers that they offer similar content at a much cheaper price. Not sure it'd work, but may be worth trying to pitch.

[The Reptile]

A couple of thoughts. When FS1 did some cost cutting there was a lot of panic on this board. Clearly, Fox was on to something and on it before ESPN made a similar move.

On cord cutting, I'm guessing that ESPN will work with Apple on a subscription like they did with HBO and more recently Showtime. They may recoup some subscribers that way but I'm guessing that they may also annoy the subscribers if they price the service like HBO. I don't think cord cutters want to pay $15/month for ESPN when they paid $6+ with cable and nothing today.

The impact that this has on sports contracts will be large but the conferences will likely offer their own streaming packages with partners on services like AppleTV to recoup some of their future losses in revenue when the scales tip the other way. The next 3-5 years will get interesting.

Lastly, ESPN has been unwatchable for over a year now. It's become part TMZ (entertainment news), part Goodmorning America and something that further's someone's political agenda - probably my least favorite combination of TV all in one space. I trust that there are many more sports fans that simply don't like what they see either.

[MU88]

If ESPN subscription streams, the cable companies have the right to take them off the basic tier. That would damage the network significantly. So, it highly unlikely to happen

FYI, FS1 has one of the highest carriage fees for any sports channel, but it still just a fraction of the ESPN.

[Goose85]

Just curious what people think.

Should ESPN experience the same run rate over the next two years (3.2 million subscribers), that would mean another $500 million in annual lost revenue from cable fees.

Do you think with the Big 10's next tv deal (ESPN's deal with the Big 10 ends after 2016-17 season) would still increase from where it is now, decrease, or stay about the same?

[MU88]

If ESPN tries to cut the Big 10s rate, I would suspect that Big 10 would go to Fox or one of the other networks. I don't think ESPN wants that to happen. Also, there is always money for the star (Big 10), the cuts will be felt by the little guy (AAC, MAC, etc). I think ESPN keeps spending for major events and things like the NBA, NFL and P5. However, I think there will be significant cutbacks in other areas. I would expect less on air talent. More young talent. Less remote gameday locations. I think they will do more play by play from the studio instead of sending bodies to the site, especially for second tier events. I would be worried if I was someone like Hannah Storm. She has a name, which means she is probably paid well, but is a minimal/nonexistent draw for viewers.

ESPN has to be very careful when negotiating with the cable companies. Those companies fear streaming services like Roku and need to keep their price down. If ESPN expects higher carriage fees, I think the cable companies are almost to the point that they would seriously consider dropping them.

[TheSultan]

I have a feeling the B10 will be breaking up their package onto multiple networks. For instance, for football they may give Fox a B10 night game while still having the ABC game at 2:30 and the rest divided between ESPN, FS1 and BTN.

Similar with basketball. Different evenings on different networks.

[IWB]

A few years ago when all of the conferences were breaking up and the huge conference TV contracts were flying around I asked an athletic director how it would impact the big east and he told me that it really didn't matter because none of those contracts will live out their entire contract length because the next new media will eliminate their need/value.

He may have been right.