As cable TV sports giant ESPN continues to contract with a massive loss of subscribers, and a corresponding loss of advertising income even as its budget continues to rise, some are warning that the network’s focus on cable TV is a very bad business model going into the future.
ESPN has lost an astounding 12 million subscribers since 2011, according to a lengthy new analysis of the network’s status by Bloomberg.
Indeed, in the final quarter of 2016 the network lost 621,000 subscribers in a single month, the most it has ever lost at one time. The sports network’s losses drove down the stock of network owner Disney by seven percent last year.
Faced with the fall in subscribers and the consequent drop in advertising revenue, ESPN recently announced a major round of layoffs to save what was reported as “tens of millions” of budget dollars. It was later revealed that the layoffs will affect mostly on-air talent.
The fall of ESPN coincides with the rise of liberal political content seen on the air, content many say is driving even more subscribers away. The complaints about the liberal politics being ladled over its sports coverage became so pervasive that the network’s ombudsman, Jim Brady, felt pressured to write an extensive article about the problem on the network’s website.
But, as Bloomberg notes, the network faces another, more long-term problem. The way Americans consume entertainment — especially sports — is in flux with many dumping cable TV and relying more on the internet, and streaming video on mobile devices.
ESPN, it appears, is so focused on its pay TV business model that it is failing to keep up with the customers’ needs. In response to this charge, though, ESPN executives insist that the move to “cut the cord” is exaggerated, Bloomberg says.
While other cable TV networks are now offering streaming services, ESPN has found it difficult to emulate the model. HBO, for instance, charges a $15 a month fee for customers to watch its programming over the internet. But, ESPN would drown with such a low fee. According to Bloomberg, to pay its budget, ESPN would need 43 million customers paying $15 a month to survive with internet services. It is an unrealistic number.
A major budget problem are the exorbitant fees that the network has to pay to the various leagues for broadcast rights. ESPN’s broadcast fees amount to more money than many networks spend on their entire budget.
As ESPN’s future continues to be questionable, one solution would be for the leagues to understand that the days of the billions in broadcast rights it had been seeing are likely coming to an end. In the future, those fees will simply have to be cut if the leagues want to stay on broadcast TV and internet services.
It all portends a future where professional sports will be earning far less money than it has been used to seeing, and that this gravy train is probably coming to an end.
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