ESPN recently cut 300 employees and this layoff is just the first round with a few more anticipated. There are two main reasons for ESPN’s struggles: Losing subscribers and spending large amounts on sports broadcasting.
In regards to losing subscribers, the chart above shows ESPN is declining in regards to households with subscriptions to the company. Cable companies are composing packages that exclude ESPN, resulting in a loss of 8.5 million subscribers over the past 4-5 years.
Additionally, ESPN is spending egregious amounts on the rights to broadcast certain sporting events. The new deal concerned with airing Monday Night Football for the NFL equates to $1.9 Billion. The amounts for other major and non-major sports or events are not far behind. ESPN predicts an amount of nearly $6 Billion combined from all major commitments by 2018 and beyond.
Essentially, ESPN is overpaying for many of their events including Monday Night Football. Fans and critics alike are concerned that there may not even be a bidder within $500 Million of that number (Sports Business Daily).
The rights to air Monday Night Football games will undoubtedly earn ESPN a profit. However, overpaying is not a smart business decision. This set the template for overpaying for the rights to air NBA and MLB games. ESPN is competing with itself when it comes to bidding for rights.
The moves, including layoffs, continued a troubled period for the sports media giant that started when Disney CEO Bob Iger told CNBC, “The business model may face some challenges over the next few years.” Consequently, these concerns raised eyebrows and advised many to sell-off media stocks during the past summer.
Disney’s sports media arm is trying to right the ship and pivot on certain aspects of their business plan. Let us all hope that they remain afloat.
Credit to the Urban Twist who originally published this article