This morning, ESPN announced layoffs were coming, and it appears that people will be getting released throughout the day. Paradoxically, though, this comes right as interest in sports has never been higher. The problem isn’t that nobody wants sports; it’s that how ESPN, and televised sports in general, serve up sports is out of sync with how people want to consume them.
ESPN, at root, makes money from retransmission fees, which is what a network charges a cable company, per user, to carry that network. Thanks to how cable works, you have to buy a bundle of channels and don’t get any choice as to what’s in that bundle. And as of 2014, ESPN got $6 per subscriber from every cable company, whether they were a rabid sports fan or just flipped past ESPN on their way to Food Network. ESPN could charge that both because televised sports were seen as a must-have, especially in the war against streaming services, and because ESPN splashed out on deals with all the major leagues (bar the NHL), the NCAA, and other big ticket sports properties. Sports were supposed to be appointment television that people would hang onto their cable subscriptions for.
And cable desperately needed appointment television. Cable bills rise, on average, 5% a year, which cable providers have kept hidden by charging fees instead of upping the overall subscription costs. The problem, of course, was that as bills rose, ESPN demanded more money, which caused bills to rise. Viewer wallets couldn’t sustain this spiral forever.
The breaking point allegedly arrived in October, when Nielsen claimed ESPN lost over 600,000 subscribers in the space of a month. Analysts blamed both cord-cutters, people who dumped their cable subscriptions, and “cord-shavers,” people who buy cable, but only use “skinny” packages that feature a handful of channels. In other words, people could finally choose whether or not they wanted ESPN on their cable dial, and they started choosing not to have it. By the end of 2017, 25% of households just won’t have cable, period.
ESPN and sports leagues have lagged behind how people consume media, in part because catching up will almost certainly involve losing money. TV is shifting from a buffet where you pay for a lot of programming you’ll never watch to a cafeteria where people can pick and choose what they want to see. Even most sports fans aren’t going to watch every single game in every single season from a league, and more and more, they’re asking why they should be expected to pay for it. This also means that consumers can act punitively, either against the league or against ESPN’s more “colorful” personalities, by booting the network from their package.
This doesn’t mean ESPN is doomed, necessarily. It’s still a well-known brand, and it has a strong opportunity to become the Netflix of sports. Currently, each league has its own streaming service, most of which are exorbitantly priced by the standards of casual fans. That’s a gap ESPN could jump into; Netflix has no interest in sports and sports streaming is a workable business model. But the leagues are still getting rich deals from broadcast networks, increasingly because that’s the only content anybody under the age of 50 watches on broadcast TV, and are loath to face a future where prices have to come down.
So in the end, ESPN is at the mercy of the medium it covers, and will have to hope commissioners and owners realize what the future is before it’s too late.
