ESPN Ignored Cord Cutting Threat, Paid For It With Huge Viewership Losses

from the denial-is-unproductive dept

Historically, the cable and broadcast industry has made a full-time sport out of trying to ignore the changing TV landscape and the threat posed by internet video. There’s a fairly significant number of cable and broadcast execs who still believe that internet video, cord cutting, cord trimmers (users who cut back on cable packages) and recent ratings declines are some kind of mass delusion akin to the yeti or the mysterious chupacabra. Others think this recent commotion is just a fad we’re going through that will magically resolve once millennials start procreating.

One of the biggest culprits for rising TV prices is sports programming, which is driving more and more users to either internet video, or so-called “skinny bundles” provided by TV operators. Companies like Verizon have gone so far as to boot ESPN from the core cable lineup (and have been sued for it by ESPN). Like so many broadcasters, ESPN apparently hoped things would stay the same forever, but recent subscriber data suggests that’s very much not the case. Analysts, in fact, point out that new data indicates ESPN has lost around 7 million subscribers in just two years:

“ESPN topped out with 99 million US subscribers (?subs?) 2 years ago, according to their filings with the Securities and Exchange Commission. Since then, its sub count has been shrinking. It?s currently at around 92 million. That drop in subs has meant a big drop in profitability for ESPN which has been at the heart of its parent company?s profitability.”

And, at least according to former ESPN insiders like Bill Simmons, neither ESPN nor Disney saw the hit coming (it’s apparently hard to see with your head buried squarely in the sand):

“Did ESPN or Disney see the cord-cutting decline coming? It doesn?t look that way, despite predictions from a number of market watchers that it was a sizable risk. The sports network reportedly spent $125 million or so on a revamp of the Sports Center set, which seems like an odd investment if you think your viewership is going to fall. Former Grantland editor Bill Simmons also said on a recent podcast that he never heard ESPN executives talking about their concerns about cord cutting until last year.”

ESPN now finds itself at a notably tricky crossroads. It could remain comfortably in denial, or it could embrace the modern era and start building its own, more flexible sports streaming video empire. The problem? ESPN’s contracts with cable operators dictate that if it launches a standalone streaming service, cable operators will be allowed to boot ESPN from their core cable lineups. That will of course accelerate ESPN’s losses, but it would also accelerate ESPN’s adaptation to a market evolution the company has refused to take seriously.

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Companies: disney, espn

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Comments on “ESPN Ignored Cord Cutting Threat, Paid For It With Huge Viewership Losses”

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60 Comments
kallethen says:

So they have two options. A) Cling to the leaking ship with the false hope that it won’t sink; B) Abandon ship and swim.

Speaking as a person from Connecticut where ESPN is based from, I personally hope they chose the latter. I sadly expect the former…

(Also should note that I’m one of those people considering cutting the cord.)

ltlw0lf (profile) says:

Re: Re: Re:

After cutting cable 9 years ago I just signed up again this past week. This is due to it being cheaper to get cable with internet than just internet.

Does this include the cost of “fees”? My cable bill dropped by a significant amount when I cut TV out, despite the bundling, mainly because of the additional “Franchise Fee”, “Universal Access Fee” and “Service Fee” that got tacked on to my cable TV bill. My internet bill is $99, with no fees, and bundled with cable TV it was closer to $150 despite the “$10 off for bundling.”

Anonymous Coward says:

Re: Re:

I’m similar to your kids in age, but…
I had cable a few years ago, because that’s what was expected of me.

what killed it for me was when the cable company was delivering SD (480), when i could get HD (720, 1080) from the antenna. I hooked up both, and started tracking what i watched, i found that i was only watching a few shows on cable, everything else over the air. do you know how many shows you can buy off amazon or netfilx for $50 a month?

Anonymous Coward says:

It's more than just that with ESPN

They’ve changed. A LOT. In the past 5 years or so, they’ve shifted drastically to having more content to attract people who are not traditionally sports fans (garbage like this is the best example: http://espn.go.com/video/clip?id=13663527 ) which has driven many people who want to turn on ESPN to get highlights, actual sports news, and analysis by professionals (not reports of what Lebron tweeted about a game, which is a regular occurrence) or pictures of how people were dressed when showing up to a sports event (and we’re not even talking athletes, just celebs who are showing up to watch).

This has driven MANY people away from watching ESPN for anything other than live games or using their website. They’re still fine for the moment, but they’re hemorrhaging views/clicks like crazy from their content.

Anonymous Coward says:

Re: It's more than just that with ESPN

Add in to this: their recent revamp of their website is AWFUL. It is just suck piled on suck, with a topping of suck and a side order of suck.

I’m sure the ignorant, incompetent, inferior assholes who designed it are quite proud of themselves. But they apparently lost site of the fact that when I’m looking for the final score of last night’s game, I don’t need or want to pull down 500K of photos, videos, Javascript, responsive web design bullshit — most of which caters to the pathetically naive losers who have fallen for the outright fraud called “fantasy sports”.

Text, you stupid motherfuckers, TEXT.

Anonymous Coward says:

they wont acknowledge what is happening until the 7mn turn into 70mn and it is far too late to do absolutely anything to save itself! this is exactly the same as far the music and movie industries that again refuse to even consider giving customers what they want at sensible prices, prices low enough to remove the bother of downloading from unofficial sites!!

Whatever (profile) says:

A big part of the issue for ESPN (and some others) is the concept of skinny basic services. ESPN use to be a given in almost every cable package, much like CNN. But skinny basic services don’t have them in there. The results are of course subscriber loss.

It’s not any one thing. Cord cutters are not enough alone to account for such a big drop.

PaulT (profile) says:

Re: Re:

Hmmm, not seen anything from you for a while, though I’ve been here less too. It seems you’ve gone from factually incorrect and/or obnoxious statements to just repeating a point from the article and pretending you have a point of your own. An improvement, I suppose.

In reality, it’s the same point – many people don’t see value in paying for ESPN and so will go to a cheaper option that doesn’t include ESPN. Whether that means leaving the channel out of a cable package or abandoning cable entirely, the effect on ESPN is the same – as is their culpability if they simply assumed everyone would keep paying for a channel they didn’t watch once other options existed.

Anonymous Coward says:

I for one can’t wait for the tipping point when even sports fans drop ESPN when they have to pay the real cost of the channel instead of being subsidized by the masses who don’t give a flying fulcrum about sports. My folks enjoy their TV subscription, but despite never tuning in to ESPN ever, they get counted as a sub and their money pays that station.

Anonymous Coward says:

Re: Re:

Same here. One of the biggest reasons I refuse to get a cable subscription is I don’t want to subsidize ESPN, Fox News, and tons of other cable channels I’ll never watch.

It’s a HUGE waste of money that really adds up fast when you add up all the cable TV channels you’re forced into getting that you never watch.

Friend of Anonymous Coward... says:

Re: ESPN Looses Subscribers...

Yeah, now that’ll be interesting. I’m a cord cutter since this past May, and I’ve thought about just how many of these cable/satellite channels will sink or swim once things reach a tipping point and subscribers really being to think about the channels they want to pay for as opposed to those they are being forced to pay for. Before I cut my cord, I took stock of all the channels I was being forced to pay for as part of my lineup as opposed to those few channels I actually wanted…

It’s why we as subscribers don’t have al-a-cart programming. I had it once, it was great. It’s the different networks that killed it and fear it as they realize that many of their channels would fold as no one would want them in their lineups making them unworkable for those few whom would actually have to pay for them and there by making the channel unprofitable…

Grey (profile) says:

Not a Millennial.

3 kids, and they haven’t had to deal with commercial TV in 8 years or so.

Only thing my wife and I watch “live” now is Adult Swim. Don’t care for most sports, Cable news is a joke, and the “educational” channels are more of a joke than the news.

Only reason we still have any traditional cable is that my 58 year old, recovering-from-multiple-strokes-and-organ-shutdown Mother in Law likes it, and even SHE has learned how to stream Netflix from her phone to the Chromecast/Fire stick. few more weeks and we’ll cut everything but Internet.

So close.

PRMan (profile) says:

Re: Re:

Same thing. I only have cable because of my 78-year-old father. If he didn’t live with me, I would have cut it ages ago.

My daughter mostly watches Netflix or CrunchyRoll. My wife has shifted all her viewing to Netflix or YouTube. The few shows we do watch (Flash and Arrow, for instance), we could easily watch for free at CW.com.

If it weren’t for my dad, I would have cut my $100+ Dish bill long ago.

Peter (profile) says:

Re: Not a millennial either

I’m closer to the age of your mother-in-law who has learned to cast from her phone, but I’ve cut the cable and now stream all video entertainment. Beyond Netflix, Hulu, and Amazon, which give me far more viewing options than I would ever need, there’s the lesser-known world of Kodi, which opens up international streams. It’s a mystery to me why anyone with affordable broadband access would be willing to pay for the ad-infested garbage delivered through their cable wire. It’s such a glaringly bad deal.

Violynne (profile) says:

Cord cutting has nothing to do with ESPN’s loss of viewership.

Has anyone at Techdirt actually seen the channel lately? Rhetorical, since the answer is obvious.

When ESPN first hit cable, it was an add-on which had a separate subscription cost.

The more popular it got, the more it made sense to include it into cable packages (as well as other channels).

Then ESPN had two whammys hit them about the same time:
1) They grew in popularity, thus causing them to turn into mega jerks and price gouge for their fame and

2) Disney bought the station, and you deserve a lobotomy if you didn’t know what was going to happen after that.

Cutting the cord isn’t helping, I’m sure, but most people just got tired of the crap that’s Disney ESPN.

Nothing can save it now. It’s not even a shell of its former self and all the anti-sports fan idiocy it could throw at viewers:
-Now with more ads, turning the viewer into the product for the last 10 years!

-placing stats in sport score tickers no one gave a damn about, forcing “viewership” until the team you cared about rolled past because the NFL/MLB won’t let you watch that team on television.

-side-stepping hot issues in order to appease the NFL until it became (thanks, internet!) “newsworthy” that finally discussing it won’t piss off Goddell and company.

-Evolving into more stations no one asked for or watched.

I’m relishing and salivating at watching ESPN become a has-been, since calling it a “sports station” lost its meaning more than 20 years ago.

GOOD RIDDANCE!

Anonymous Coward says:

Re: Re:

And here’s (part of) the irony of that:

Sports is one of the easiest things in the world to do well.

First, because it constantly creates new content. Today, there will be soccer games and women’s college volleyball games and hockey games and men’s college basketball games and 37 other things.

Second, because much of that content is interesting: it contains its own drama and humor. It’s not necessary to write scripts, the stories create themselves. (And if you don’t think so, then go stand near the finish of a major marathon and wait for the people who come in 4 hours after the winners. If you can’t find struggle and triumph there, then you’re not watching with the right kind of eyes.)

Third, because you don’t need a $125M set. You don’t need 3 hours of pregame and 2 hours of postgame. You don’t need anything beyond (a) point cameras at it (b) commentate sparingly. That’s it.

Fourth, because there’s an audience for everything. I like watching Australian rules football, and you know, back in the very early days of ESPN, they actually showed it here in the US on a fairly regular basis. Other people like watching golf (I have no idea why, but alright, fair enough). And others like cricket or swimming or baseball. There’s always someone who wants to watch something and thus the problem reduces to connecting audience with content.

Fifth, because — with few exceptions — none of this is really complicated. The navel-gazing in-depth analysis that goes on for hour after hour after droning hour is largely bullshit. “He dropped the damn ball” is apparently too straightforward and doesn’t fill 18 minutes of airtime. It also doesn’t require three analysts and an ex-coach. The layers and layers that have been heaped on this cost a fortune and add little.

ESPN has become enormous, bloated, self-infatuated — and ready for a fall. Time for someone to launch an online-only service that obliterates them.

madasahatter (profile) says:

Re: Re: Re:

On of the best sports announcers I ever heard was the late Skip Caray. He was known at times not to say anything other than a minimal amount to set the stage for the viewer. He was also known to irreverent, especially when the Atlanta Braves were bad. I always got the sense Skip was sports fan who lucked into announcing, taking sports seriously but not himself.

Anonymous Coward says:

Re: Re: Re: Re:

I was a huge fan of (the late) Jack Buck. He also knew when to STFU and let the story tell itself. I think that he understood that his role was to complement the game, not to be the center of attention. And there were so many times he did exactly that — a far cry from some of ESPN’s current announcers, who make themselves the show.

blogagog (profile) says:

radical leftist

ESPN is extremely far to the left politically, which seems strange for a non-political format such as sports. I’m just noting this because it may be an additional reason for the cord cutting that’s going on. It was the final straw for us at least. You can’t get DirecTV without ESPN, so we decided just to junk the whole system.

Now we use the internet, Netflix, and Hulu+. Might even dump Hulu+, since no one at my home uses it appreciably.

Wendy Cockcroft says:

Re: Re: radical leftist

This is how the current political spectrum looks to me:

Far left (communism, Marxism – Govt. owns all or most industry)
Left (Socialism, progressivism – tax-funded services for the public including healthcare, education and infrastructure)
Liberal (reduce government interference/regulation in personal life choices, push the boundaries of what is accepted as normal, everyday behaviour and practice in the name of inclusivity and fairness)
Neoliberal (Privatise All The Things! The market will take care of it)
Neo-reactionary (Democracy is mob rule. Bow to your corporate masters. Might makes right. Women should be pregnant and barefoot in the kitchen, etc.)
———————————————-

The Right has merged the Left and the Liberals together into a political gestalt consisting of unwashed hippy Marxists who want to vote the rich into poverty, nick all their stuff, and share it out among the stoners, etc. Meanwhile they’ve successfully shifted Neoliberalism to the middle ground and let the Neoreactionary movement take over as the mainstream right while everybody else pretty much stayed where they’ve always been.

Every time I get into an argument with a right winger over politics I ask them to take a look back in time to who was saying what back in the day. At this point I get labelled an Eisenhower-era Republican and somehow that’s okay. The thing is, Eisenhower would be written off as a leftist today and even Reagan would be smacked around a bit for falling short of ideological correctness.

It has never been more important to think for ourselves so let’s be careful not to go along with it when people start hanging labels on people they don’t like. Political discourse is being dragged rightwards because people are afraid of the labels and no one is applying the damn brakes.

Anonymous Coward says:

It's greed, not denial or even ignorance

A hospital I worked for was trying to come up with a 16 channel lineup for the patient TVs. Only 1 ESPN channel was wanted, but due to ESPN’s greedy requirements, we had to have something like 3 or 4 channels or none at all. Sadly, I think the hospital opted for the former.

ESPN can also eff themselves for forcing me to pay for their channels that I had absolutely no interest in (not a sports fan, so sue me ESPN!!) with the basic cable service I had. I’m happy to say that I am no longer a FORCED ESPN customer because I no longer have cable.

Derek Kerton (profile) says:

You MUST Buy This. Oh, And We Just Raised the Price.

ESPN has benefited from a number of factors:

– Great brand, has market power, IS beloved by its fans
– Disney offers a “take ESPN for ALL your subs, or leave it” deal to cablecos
– Cablecos afraid of losing subs for lack of sports accept the bad deal
– Thus ESPN gets forced into every cable subscriber’s plan.
– ESPN then ratchets up the price, year after year.

The long-term effect of this has been that cable companies PAY about $30/mo per subscriber for the content channels, or an average of 14 cents per channel. But how much of that $30 does the cable co pay for ESPN? A whopping $6/mo!! For me, I’ve watched about 0 minutes of ESPN in my 20 years of cable subscription, which means over $1,000. So excuse me while I politely think “Fuck those guys!” Also unpleasant is the fact that I’m giving $1/mo to Fox News.

See the cost of content in your cable bill:
http://blogs.wsj.com/numbers/how-much-cable-subscribers-pay-per-channel-1626/

BTW, if you want to follow the money, there are two places your $6/mo goes: to wildly overpaid athletes and to fat cat team owners. So F those guys, too. The reason I can get angry is because these transactions have NOT taken place in a free market. The athletes have a union and agents, sports teams have market control and are exempt from anti-trust laws, the cable cos have franchise monopolies and regulatory capture, the networks have price control…Geez, the entire supply chain is a litany of market failures. The only group with no union, no organization, and no seat at any of the tables is the group footing the bill, aka YOU. Don’t tell me the reason the guy who throws the ball slightly better gets paid $40 million is because “the market has said that’s his value” – the market is not a fair one.

But ESPN and cablecos have been oblivious to the following for years:

– Despite it’s great brand, many people don’t give a fig for ESPN
– These people resent having to buy it.
– Most people are unaware of how much they are paying ESPN. If they knew, they’d get even angrier.
– With the Internet, the market will seek to find a way to sell me the content I want, and less of the content I don’t.
– Customers will eventually be shown the actual price of ESPN, and they will compare it to other things like Netflix…and unless they are a die-hard sports fan, they will not be impressed with the relative value.

So now, ESPN is not just suffering under the weight of cable cutting, but even more ironic, I would argue that they, singularly, are the biggest driving force behind it.

Dave (profile) says:

You're ignoring a few numbers, Karl.

It’s easy to look at that subscriber loss of 7 million over two years and think the sky is falling at ESPN, but there are a lot of other numbers missing from the equation here.

To wit:

According to Nielsen, from October 2013 to October 2014, ESPN and ESPN2 lost 3,635,000 homes, or roughly 3.67% of its subscriber base.

Then, from October 2014 to October 2015, ESPN and ESPN2 lost 3,484,000 homes, or roughly 3.66% of its subscriber base.

However, ESPN’s contract with Time Warner Cable has an annual carriage fee escalator of 6.5%. Chances are good that they have similar terms with every other pay TV carrier in the U.S. The increase in those carriage fees is outpacing the decrease in subscribers. That’s very likely to continue through 2016, even though the rate at which ESPN is losing subscribers has clearly increased over the last three months.

What’s more, ESPN and ESPN2 still collected nearly $8.3 billion in carriage fees during the last fiscal year. Add in ESPNU, ESPNEWS, and SEC Network, and ESPN easily collected more than $9 billion carriage fees in FY2015 — to say nothing of advertising revenue, which must be good, because ESPN’s overall viewership ratings were up in 2014 and might actually be higher this year.

Of course, the subscriber loss for ESPN and ESPN2 over FY2016 still made about $150 million disappear from ESPN’s bottom line. This is why Bill Simmons, Keith Olbermann, and Colin Cowherd didn’t get their contracts renewed, why Grantland was shut down, and why 300+ ESPN employees got laid off. It’s also why Disney has ordered ESPN to cut about $350 million in costs over the next two years.

The point is that ESPN still has a long way to go before it’s done milking this pay TV cash cow. Yes, more consumers are waking up to how they’re getting ripped off, but cord-cutting and cord-shaving is still happening at a slow-enough pace that ESPN has time to figure out how it can adapt to the changing market — and it will. Eventually. In the meantime, sports fans are still tuning in, and that doesn’t look like it’s going to change anytime soon.

madasahatter (profile) says:

Re: You're ignoring a few numbers, Karl.

Cording cutting is due to a couple things: younger people not interested in cable and their elders not interested in what is on cable coupled with its lack of value.

If the perceived value of cable is more than most are willing to pay for it they will cut the cord. As the numbers drop, carriage fees and advertising revenue will drop. When the contracts come for carriage the cable operators will demand varying discounts to keep channels. The cable operators probably will try to shift to a mixed broadcast/streaming model.

Klaus says:

Re: You're ignoring a few numbers, Karl.

If you’re saying that ESPN can go on increasing their charges year on year against a diminishing number of subscribers, then it sounds like you’re ignoring a few fundamentals about price elasticity and how the market reacts to increases in price.

They don’t seem to have much brand loyalty. When (not if) alternates to ESPN become more widely available, ESPN is going to struggle. If, as you say, they’re cost-cutting, it sounds like they’re no longer in denial.

sehlat (profile) says:

You MUST buy this is a great way to generate cord-cutting.

Back in 1992, I got a really neat offer from Comcast. I could get a five-channel package that included the then-new Sci Fi Channel. Problem was, that channel was the ONLY one that appealed to me. I forget what the other must-take-this channels were, but they didn’t even make the needle on my interest-o-meter wiggle. And $30/month just to watch ONE channel?

I asked about getting just the one channel. I was told it was five channels or nothing. So I chose nothing, canceled my account, and let the cable rot. I told my wife, to hell with them. A few years ago, my wife invited Comcast to perdition for crappy programming and crappier internet.

Haven’t gone back, even though I regularly get treeware spam in my mailbox. Fortunately, I have a capacious blue bin to see such trash safely off to recycling.

After 23 years, it’s good to see others realizing that they don’t need greedy bastards telling them what they can and can’t watch.

JBDragon (profile) says:

Cutting the Cord

I cut the cord around 5 years ago I guess. I hated getting that $170 a month Cable bill. For what? Mid speed Internet service at the time which is a fraction of the speed I have now, and a duel HD DVR cable Box. Of course you can’t get the CHEAPER cable bundle because the few channels you actually want are only on the big expensive channel packages. I had already cut Showtime because of the raising prices.

I’m not a sports person. I don’t give a crap about ESPN, ESPN2, ESPN3, what Fox Sports and so on and so on. Those are all the most expensive costing channels that only a small group of people really care about. I get more then enough sports from the Broadcast channels, which are FREE with a Antenna. The whole Retransmition FEE that Cable company’s pay, which are also getting costly I have issues with. It should be FREE. It’s free with a Antenna, and yet, just to give some a better picture because they may have a weak single or don’t want to put up a antenna, you gouge the cable company’s. As far as I’m concerned, they’re doing these company’s a favor. Getting more people to watch their shows and Commercials that they are also getting paid for.

After having U-Verse for a while for Internet only, until they jacked rates up, I went back to Comcast for Internet only and currently pay $50 a month. I use a Large Antenna and get all the broadcast channels for free Legally, which I can record with my Tivo and even stream online for free. With Netflix, I’m pretty much covered. I still have to much content to watch!!!!

I sure don’t miss ESPN. Monday Night Football? Oh well!!!
$120 a month at old rate prices I’m saving. Money staying in my pocket and not going to Comcast. I had Netflix before I cut the cord and so I don’t consider it a extra cost.
$120 a month is $1,440 per year in savings. In 10 years, that’s $14,400. how many years have you had cable and plan to continue? 10 years is not a long time sucking the teat of Comcast. Why give it to them for mostly crap!!!

Now if you cut the cord and then sign up for everything under the rainbow, you’re not saving money. HULU, YUCK! You start signing up for Netflix, Hulu+(Which you can get a lot of content for FREE with HULU, there are ways!!!) SlingTV, HBO Now, etc. You won’t be saving anything. Say your a huge fan of Game of Thrones. Why pay $15 a month or $180 just to get that? Wait for the season to be over. Sign up for a month to HBO Now, Binge watch the whole season and anything else and then Cancel when the month is up!!! Now you just watched a whole season for $15, see you once again next year!!! If all you watch is HBO, then maybe $15 a month is a good deal for you.

Mr Big Content says:

I Blame PASSIVE-AGRESSIVE PIRACY

Ive have come here to warn you about an INSIDOUIS NEW FORM OF PIRACY. Its bad enough when people WATCH THINGS WITHOUT PAYING FOR THEM, but now they are NOT WATCHING THINGS AND NOT PAYING FOR THEM!!!

We need the Govermnent to PASS NEW, STRICTER LAWS TO BAN THIS HIGHLY ILLEGAL PRACTISE. Because the PIRATES KEEP FINDING NEW WAYS TO STEAL OUR PROPERTY. We need more PROACTIVE LESGISLATION to BAN TEH DANGEROUS NEW TECHNOLOGIES BEFORE THEY CAN BE INVENTED!!!!

rc west says:

Racist anti white network

Garbage racist network – the ONLY focus since 2015 is bashing white people every day, all the time. Hey espn – you rotten race baiting network – it’s NOT the white guys fault that coppers are blasting criminal afro’s across the country. And we DON’T want to hear about it all day long on every one of your shows – we DO NOT care and we don’t want to hear how bad the afro has it. What about how bad the Latino or Asian’s have it? Never even hear about them – and they are not the one’s killing each other in Chicago every weekend like the afros. Pffft See ya espn. You are one LOST network!

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