ESPN Pretends It Saw Cord Cutting Coming, Says Departing Subscribers Old And Poor Anyway

Predictions

from the not-just-a-river-in-Egypt dept

About once a week now you’ll see a legacy broadcast executive take to the media to try and “change the narrative” surrounding cord cutting. Usually this involves claiming that things are nowhere near as bad as the data clearly shows, with a little bit of whining about an unfair media for good measure. ESPN, which has lost 7 million subscribers in the last two years, has been particularly busy on this front. The broadcast giant has been trying to argue that cord cutting worries (which caused Disney stock to lose $22 billion in value in just two days) are simply part of some kind of overblown, mass hallucination.

Speaking to the Wall Street Journal (registration required), ESPN President John Skipper “plays offense on cord cutting” by effectively denying that ESPN is even in trouble. He starts by proudly insisting that the huge losses in subscribers weren’t a surprise to the company:

“We stayed pretty calm. [The loss of subscribers] didn?t come as a bolt out of the blue to us. We had been thinking about this. We had a big town hall meeting in December. We had a priorities meeting earlier where we gathered everybody together to try to ground ourselves in our business.”

Right, except that former ESPN employees have said ESPN execs weren’t even talking about cord cutting as a threat until 2015. The company was also spending hand over fist (like a $125 million update for the SportsCenter set), suggesting they didn’t really see the subscriber dip coming. After pretending that cord cutting didn’t catch ESPN by surprise, Skipper proceeds to admit that “cord trimmers” (people scaling back their TV packages) are a big reason for the subscriber hit, but that the losses aren’t all that big of a deal because the departing customers are old and poor:

“People trading down to lighter cable packages. That impact hasn’t leaked into ad revenue, nor has it leaked into ratings. The people who?ve traded down have tended to not be sports fans, and have tended to be older and less affluent. We still see people coming into pay TV. It remains the widest spread household service in the country after heat and electricity.”

This narrative that cord cutters and cord trimmers are old, poor, and otherwise of no interest is a popular one among cord cutting denialists, but data consistently shows it’s simply not true. Cord cutters and cord trimmers tend to be young, affluent consumers who are just tired as hell of paying an arm and a leg for channels they don’t watch. And, if recent surveys are any indication, there are a lot of users who don’t watch ESPN and are tired of paying for it. In short, most of the data suggests that ESPN has a lot more subscriber defections headed its way with the rise of so-called skinny bundles (an idea ESPN has sued to stop).

When asked what ESPN plans to do to attack the cord cutting trend, you’ll note that Skipper’s first instinct is to deny that the legacy cable industry really has all that much to worry about:

“We are still engaged in the most successful business model in the history of media, and see no reason to abandon it. We?re going to be delivering our content through the traditional cable bundle, through a lighter bundle, through Dish?s Sling TV, through new over-the-top distributors, and through some content that is direct-to-consumer.”

When pressed for what “direct to consumer” services ESPN plans to offer, Skipper can only provide one example: the company’s brief experimentation with streaming the Cricket World Cup. That’s because ESPN’s contracts with cable companies state that if the company actually evolves and offers a direct streaming service, cable companies are allowed to break ESPN out of the core cable lineup. That means more skinny bundles than ever, and an acceleration of ESPN’s problems. So, like a child in the dark, ESPN has decided to hide under the covers and pretend the monster under the bed isn’t real.

There’s no doubt that Disney and ESPN will eventually figure things out and balance the need for innovation with their desire to protect their existing businesses, but it’s pretty clear from public comments and past decisions that it’s going to be an ugly transition. That transition would be so much less ugly for many legacy broadcast companies if they spent a little less time trying to “correct narratives” telling them truths they don’t want to hear — and a little more time preparing to compete with the internet video revolution.

Filed Under: cord cutting, subscribers
Companies: disney, espn