SBD/April 27, 2017/Media

Escalated Cord-Cutting, Rights Fees Among Reasons Cited For ESPN's Massive Layoffs

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Andy Katz (l) was one of several college hoops reporters ESPN let go
ESPN's layoffs yesterday showed that even the "most formidable media kingdom was vulnerable to the transformation upending the sports broadcasting industry as more and more people turn away from cable," according to Drape & Barnes of the N.Y. TIMES. ESPN is "by far the biggest and most powerful entity in the sports media industry, and it has felt the sting as viewers turn away from traditional ways of consuming live sports." The net has lost "more than 10 million subscribers over the past several years," while the "cost of broadcasting major sports has continued to rise." Author James Andrew Miller said, "ESPN was wrapped in Teflon for many years, but big payouts for rights fees plus significant losses in their subscriber base were like punches to the gut and head, and now the company is trying to make sure they are strong enough to fight in the future." Drape & Barnes note the layoffs come as Disney "accelerates efforts to introduce an ESPN-branded subscription streaming service." The offering, expected this year and made possible by Disney’s $1B purchase in '16 of part of BAMTech, MLB’s streaming division, will "include coverage of sports like hockey, tennis, cricket and college sports -- mostly rights that are owned by ESPN, but not televised" (N.Y. TIMES, 4/27). 

IMPACT OF CORD-CUTTING: In Hartford, Stephen Singer in a front-page piece notes as the cable TV industry faces increasing pressure from cord-cutting, layoffs at ESPN "have been expected." The number of households with ESPN's flagship station has "fallen from 99 million to 88 million" in the last three years. At about $7 per month per sub for ESPN alone, by far the "largest carriage fee of any cable network," that would exceed a $900M decline in "annual revenue over the last several years, if all other revenues remained equal." Cord-cutting is "not slowing, as TV viewers have a growing menu of online 'over-the-top' options" (HARTFORD COURANT, 4/27). Seattle-based KING-NBC's Steve Bunin, who worked at ESPN from '03-'12, wrote the net has "two basic options" to make up the lost revenue from cord-cutters -- "cut salary or cut TV rights." Though the company might be able to save up to $200M "in one fell swoop by sacrificing (or letting the contracts expire for) their rights to Big 12 basketball, or international soccer, or the NBA, or MLB, that would also mean less content for ESPN." Bunin: "Less content makes it less desirable for the Average Joe, who’s then more likely to be a cord-cutter, which means less money coming in" (KING5.com, 4/26). In N.Y., Bob Raissman writes ESPN "must continue to cut costs in a hurry or remain a drag on its owner, Disney's bottom line and stock price." He speculated the latest round of cuts -- ESPN laid off around 300 employees a year and a half ago -- will "not stop the bleeding" (N.Y. DAILY NEWS, 4/27). 

SIMPLE ECONOMICS?
In L.A., Meg James reports ESPN's layoffs come after the "latest round of sports contracts kicked in." ESPN has been "forking over substantially higher fees to retain its top-notch portfolio of professional sports." The net also is "spending more on programming to fend off competitors Fox Sports and NBCUniversal, which also are loading up on sports to build their businesses." Additionally, team-owned RSNs have "launched, carving the audience of sports fans into smaller and smaller slices" (L.A. TIMES, 4/27). SI.com's Jimmy Traina wrote ESPN is having "issues with ratings and finances for two reasons." Young people are "cord cutting and dumping cable," and the net is "paying an obscene amount of money to air games." A total of $39B has been committed to the NFL, NBA, MLB and college football, and Traina wrote when that much money is pegged "in this day and age of new media for just four leagues ... it's not going to be easy to make the profits Disney wants you to make" (SI.com, 4/26). In a series of tweets, ESPN Public Editor Jim Brady wrote it is "just silly" that some people believe the layoffs "were all because of politics or not 'sticking to sports.' Brady wrote the layoffs are "almost all about the less favorable economics of an unbundled cable world." Brady reiterated he believed ESPN has "drifted too far to one side politically" and noted there are "surely people who have abandoned ESPN because of its politics, or because they don't want culture coverage or whatever." However, just because "some want this to be about the karma of ESPN’s political shift does not make it so." Brady: "It's economics, pure & simple" (TWITTER.com, 4/26).

CHANGE IN EDITORIAL APPROACH
: The WALL STREET JOURNAL's Ramachandran & Flint write while economics is the "primary factor motivating the cuts, ESPN ... is also rethinking how it covers sports in an age with so many competing outlets." One source said that with sports news and game clips now omnipresent, ESPN "wants to focus more on building strong personalities and more opinion that will likely appeal to younger viewers." ESPN is also "looking to increase diversity and perspectives on its franchise shows such as 'Sportscenter'" (WALL STREET JOURNAL, 4/27).

NEWS REPORTING TAKES HIT: Andy Katz and Britt McHenry are the latest personalities to take to social media and announce they were let go. The “vast majority” of ESPN’s 100 layoffs occurred yesterday, a source said. That means that the phone calls telling talent that they were being let go have been completed. The reason a source termed it a “vast majority” instead of “all” is because some of the talent are in the process of negotiating new deals and ultimately still could wind up leaving the network (John Ourand, Staff Writer) In DC, Matt Bonesteel writes ESPN’s reporting ranks were "especially devastated by the cuts, as a number of well-respected journalists who worked mostly for ESPN.com -- as opposed to the network’s on-air personalities -- announced they were being let go" (WASHINGTON POST, 4/27). Also in DC, Cindy Boren wrote ESPN for years was the "ultimate destination for sports journalists, many of whom made ungracious exits to go to Bristol." This was a "rugged day" (WASHINGTON POST, 4/26). In Hartford, Jeff Jacobs acknowledges ESPN "had difficult decisions to make" in who to let go, but in "too many cases, ESPN did not choose the better angles of reportorial endeavor." Sports journalism is "not better today than it was yesterday." Jacobs: "Too many screamers and preeners survived. Too many substantive reporters did not" (HARTFORD COURANT, 4/27). Author Jeff Pearlman wrote, "This is a shedding of quality. This is an assault on the profession" (JEFFPEARLMAN.com, 4/26).

ESPN let go Burnside, an NHL reporter,
as the Stanley Cup Playoffs heat up
LOSING THE PUCK
: In Boston, Chad Finn writes the layoffs "offer a vague signal of ESPN's direction -- its hockey and college sports coverage teams in particular took a massive hit" (BOSTON GLOBE, 4/27). In Toronto, Bruce Arthur writes ESPN "all but ditched hockey," as their "small but powerful crew of writers" -- Pierre LeBrun, Scott Burnside and Joe McDonald, among them -- were laid off. Hockey in America "succeeds in many markets, and struggles in many others, and nationally, it is a distant cousin of the big boys." ESPN had a "beachhead of quality work that respected the game, and all but abandoning it makes this a bad day." Hockey was "just a small slice at ESPN, and now it’s been cut to a ribbon" (TORONTO STAR, 4/27). Meanwhile, in Boston, Jordan Graham writes ESPN "came under fire yesterday not only for who was fired but for the timing of the layoffs." Some of the company’s top NFL reporters and analysts "were laid off days before the NFL draft, and at least two reporters covering NBA teams in the playoffs also lost their jobs" (BOSTON HERALD, 4/27).
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