ESPN's Failure

For a generation of sports fans, ESPN was the king of sports broadcasting. From the early 1990s, ESPN was edgy with sports announcers like Dan Patrick and Keith Olbermann who combined humor and irrelevance in their sports coverage (This was before Keith Olbermann decided to become a hardcore leftist). ESPN was on top of the world but today, ESPN is bleeding money and now losing subscribers. Recently, they let go of $100 million of on air salaries and this was after several hundred behind the scenes jobs were eliminated two years ago which saved another hundreds of million dollars. The ESPN business model, depending on subscribers, is imploding.

Outkick the Coverage blogger Clay Travis noted, “ESPN's collapse is a basic business reality, just like when the subprime mortgage crisis bubble popped. ESPN assumed that its subscriber numbers were going to remain fairly stable as it spent billions on sports rights. This wasn't a bad bet since its subscribers had gone up consistently from 1979 to 2011. But in 2011, the number of national cable subscribers peaked. Since that time they've been going down every month.”

ESPN's gamble on buying sport rights coverage, including the NBA, and with each subscriber earning $7, looked like a good bet but now ESPN is losing 10,000 subscribers a day.  ESPN pays out $7.3 billion in sports rights but has lost $13 million cable and satellite subscribers over the past several years.  This represents $1 billion in lost revenues and that loss is growing. Based on conservative estimates, ESPN may go from its present 86 million subscribers to 74 million in 2021.

Right now, it is estimated that ESPN subscriber revenues produces a little over $7 billion, which is less than the sporting rights they presently pay out.  While advertising dollars help the revenue stream for ESPN, the subscriber revenue is declining so ESPN will start showing losses within the next four years.

Travis noted, "ESPN has the most to lose in all of media. In fact, ESPN by itself stands to lose as much money as over a hundred cable channels do combined. ESPN stands to lose three times as much from the collapse of cable than Fox, CBS, and NBC do combined. That's because ESPN's business model is more predicated on subscriber fees than any company in America.”

Travis observed that the decline in cable and satellite subscribers hurts all channels but the loss of subscribers for CNN matters less since ESPN revenues depend more on subscriber and as Travis observed, “If AMC makes less money in subscriber fees, they'll pay for fewer TV shows, but ESPN's entire business is predicated on the billions they owe for sports rights every year into the foreseeable future. ESPN made a bet that exclusive live sports rights would be the moat that protected Cinderella's castle from all attackers. The problem is that moat flooded Cinderella's castle instead.”

Fox makes $1.44 billion off advertising from the NFL whereas ESPN makes only $285 million. Part of the reason is that ESPN has fewer games and fewer audience watching. Travis Clay noted, “they lost $1.7 billion showing the NFL.”

Clay noted, “From 1979 to 2011 ESPN had the best business model in the history of sports. (The cable and satellite bundle is the greatest money making venture in the history of media.) But starting in 2011 the business began to change. In a hurry. Most didn't recognize it, but I wrote my first article about ESPN's challenges in 2011. Right at the absolute peak of the cable market, I wrote this piece, "Why ESPN has already lost the future." I didn't get everything right -- far from it -- but my basic thesis was correct -- ESPN was a glorified middleman that most didn't need. ESPN realized this and overpaid for sports rights to ensure its continuing relevancy.”

One way that ESPN decided to increase ratings was to be the left wing sport casting, where their on air talent pontificate on politics even though much of the audience tend to be male and conservative.  This is hardly a way to advance your ratings; insulting a majority of your audience who don’t watch sports to see a bunch of political crap coming through the TV.  

Clay Travis noted on this strategy, “ESPN is trying desperately to stay relevant as ratings collapse and subscribers flee. The decision? [Become] MSESPN, the home for far left wing politics and sports! Only, it’s not working.”  Sports is where we go to see our heroes play and win, to escape from life, to simply enjoy competition. They don’t tune into sports to listen to politics. That is what Fox or MSNBC is for but not ESPN. Many ESPN broadcasters on the air have been released or demoted if they stray from the leftist views and this has been noticed by many former fans of ESPN.  While this is not the only reason or the main reason why ESPN is losing audience, it has hurt ESPN with many sports fans, the base that ESPN needs to win and keep in the future to avoid further losses. Left wing politics and sports simply don’t mix if you want to keep your audience.