ESPN Cuts Costs–Will Sports Fans Cut The Cord?

The ‘Worldwide Leader in Sports,’ ESPN, is headed toward a future that will feature its cable channels unbundled from the current cable/telco model. At least that’s what a large majority of millennials assume…

espn_topsearchThe financial model that encompasses ESPN’s array of content and its marketability has evolved immensely in just the past decade. While ESPN is the ‘Worldwide Leader’ when it comes to cutting-edge ideas, content production, timely and breaking sports reporting, marketing, and acquisition of talented media personalities — all which are critical to viewership in the sports medium — they are not viewed as the ‘Worldwide Leader’ when it comes to their offerings that can be categorized as ‘cord cut content.’

ESPN COST CUTTING = INEVITABLE UNBUNDLING?

Recently ESPN has been receiving attention for a reason it would prefer not to, cost-cutting.

Just last month, the ‘Worldwide Leader’ laid off 300 employees, and while those layoffs were dressed by Disney and ESPN President John Skipper as a consequence of rising rights costs — specifically their nine-year $24 billion dollar deal with the NBA — multiple sources made sure to indicate that the impact of ‘cord-cutting’ cannot go overlooked either.

Along with laying off 300 employees ESPN has also received more attention for its cost-cutting by parting ways with a number of their highly-recognizable/highly-paid personalities. Most notably their former mid-morning shock-jock Colin Cowherd, former Grantland.com editor-in-chief Bill Simmons, as well as the provocative host of ‘Olbermann,’ Keith Olbermann. All of whom had long, respected, and storied ESPN careers before their dismissal this past summer.

Former ESPN Ombudsman Robert Lipsyte wrote about the shutting down of Simmons’ former passion project, Grantland, at TheNation.com and provided an insider’s perspective into the dynamics that revolved around its closing.

While there are multiple sources that have indicated the impact of ‘cord-cutting’ for ESPN, there is quite possibly no voice (or in this case, written word), short of their President John Skipper that could have come from a more respectable and profound voice than that of their former ombudsman Lipsyte (since dismissing Lipsyte in December of 2014 ESPN has not hired a replacement).

In his article for TheNation.com Lipsyte remarked;

“ESPN is currently besieged by the rising cost of buying the rights to show sports events, the declining profits in audience fees and advertising revenue as people cut their cable cords, and Disney-ordered budget cuts.” (Lipsyte, The Nation, Nov. 2015)

ESPN’S SHARE OF YOUR CABLE BILL…

PayPerPersonTo fully understand the impact of ‘cord-cutting’ on the ‘Worldwide Leader’ it is critical to know the share of consumer’s cable bill that ESPN currently occupies. According to a digitaltrends.com article from July, which cites a Wall Street Journal report, cable providers are by far paying more to offer their subscribers ESPN than any other network. $6.04 is the going rate for ESPN within a cable bundle, $4.56 more than the next closest cable network, TNT.

This gross cost burden to cable companies bundles, along with an emergence of options to view the Worldwide Leader without ‘the cord,’ has made the conversations about ESPN ‘cutting their cord’ plentiful and consistent. However, pontifications — predominantly from millennials — have gone as far to assume that ESPN will have no other choice than to ‘cut their cord’ sooner than later if they wish to remain feasible in today’s climate of sports content offerings. This line of thinking is not completely incorrect, however, it is reckless to assume that a cable channel with as much, and sometimes more, exposure and ratings than the likes of ABC, CBS, Fox, and NBC would suddenly feel inclined to completely ‘cut their cord’ and depart from traditional cable.

Disney CEO Bob Iger has acknowledged dropping cable subscription numbers for ESPN, and even went as far to tell CNBC’s Squawk Box that he sees ESPN as a media property that could eventually be sold a la carte, much like HBO, but, that will not happen in the next five years.

Iger went on to say while appearing on the popular CNBC show;

“Technology is the most disruptive force that so-called traditional media … is facing.” [But] we decided to view technology as a friend, not a foe, to bring better customer experiences across all of our businesses from making media look crisper on HD televisions to mobile and online viewing apps to enhanced attractions at theme parks.” (Iger, CNBC’s Squawk Box, July 2015)

ESPN’S FUTURE… DESTINED TO ‘UNBUNDLE?’ (SPECULATION & ANALYSIS)

When evaluating comments by Disney CEO Bob Iger and ESPN President John Skipper, along with taking into consideration their continually strong cable ratings in relation to their competitors I find it hard to believe the train of thought that predominately comes from my millennial peers that ESPN is destined to ‘cut their cord’ or die.

In my mind, the proof is in the pudding that there will always be ESPN channels available to cable subscribers as long as there is cable television. ESPN has made tremendous strides in their digital platform offerings, enough so that consumers that prefer to not have traditional cable can get their fill of sports content through ‘Watch ESPN,’ the ESPN mobile app, ESPN.com and other digital offerings from the Worldwide Leader.

Could there be a ESPN app available for purchase for those without a cable subscription in a half-decade, similar to Time Warner’s HBO Now endeavor? Sure. For the reasons I hashed out in this blog such as the rising costs of content rights and the gradual decline of cable subscribers. That said, indications are clear that the Worldwide Leader is still a ways off from needing to ‘cut their cord’ to sustain and thrive in today’s ever-changing media climate.

Cole Bair

One thought on “ESPN Cuts Costs–Will Sports Fans Cut The Cord?

  1. I think it’s all too likely that ESPN will cut their ties from cable. It’s been a profit stream like any other. But, the gold vein is drying up. But if the costs people are paying to keep Them in their cable package could easily be transferred to a full a la carte option where people would gladly pay 10 for a full subscription.

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