A wise reporter once told me that “ESPN is a network very much in love with itself.”
The accuracy of that description floored me.
Judging from Wednesday’s news of reportedly 100 layoffs of on-air and reporting talent, including college football insiders Brett McMurphy (SEC) and Ted Miller (Pac-12), the honeymoon is over.
I’m not trying to sound flippant about anyone getting laid off. It’s tough looking for a job, especially in the current unstable sports media business. But why did ESPN have to layoff so many people? Quickest explanation: Its cable audience has shrunk considerably in the past few years and it wasn’t hitting its profit margins.
From NBCNews.com, ESPN President John Skipper explained the job cuts in a memo to employees, saying the network was “melding distinct, personality-driven SportsCenter TV editions and digital-only efforts,” changes he pledged to take “further, faster & and as always, must be efficient and nimble.”
The total number cable subscribers … that is what worries ESPN — and other networks — the most. Cable providers pay networks like ESPN a certain amount per customer each month. According to the Wall Street Journal, the providers pay a little more than $28 for a few dozen channels (depending on the provider), with ESPN taking more than $6 of that. So when they say ESPN is down 8 million subscribers, that means revenue from cable subscriptions is roughly down $48-50 million … per month.
Context: Cable channels have all lost 5-12M subscribers over the last few years. ESPN down 8M. Nick down 7M. pic.twitter.com/BZwEeqLZl9
— Lucas Shaw (@Lucas_Shaw) March 10, 2017
According to a November story in BusinessInsider.com, ESPN lost more than 600,000 subscribers during the month of October 2016 — during NFL and college football season. The story also said the estimate was nearly twice as much as the 310,000 subscribers ESPN had been losing on average per month. And 2018 estimates have the monthly average much higher than the 300K mark.
Many of these ex-subscribers are cord cutters, who now get their programming via the internet — something that is expected to increase in the coming years. So the drop in subscribers means less revenue from cable providers and, hence, the drastic measures in reducing the workforce.
And this ESPN explanation …
But I also think the explanation offered former ESPN radio personality Colin Cowherd is close to the mark. In the midst of this tailspin, ESPN, which according to Cowherd was paying the NBA $400 million per year, negotiated a $1.4 billion deal with the league.
Said Cowherd: “You cannot pay four times for the house what you paid for the house last year.”
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