Predictions

by Karl Bode


Filed Under:
cord cutting, espn, internet, tv

Companies:
disney, espn



ESPN Analysts Routinely Told Execs Not To Worry About Cord Cutting

from the nothing-to-see-here dept

ESPN has long personified the cable and broadcast industry's tone deafness to cord cutting and TV market evolution. The company not only spent years downplaying the trend as something only poor people do, it sued companies that attempted to offer consumers greater flexibility in how video content was consumed. ESPN execs clearly believed cord cutting was little more than a fad that would simply stop once Millennials started procreating, and ignored surveys showing how 56% of consumers would ditch ESPN in a heartbeat if it meant saving the $8 per month subscribers pay for the channel.

As the data began to indicate the cord cutting trend was very real, insiders say ESPN was caught flat footed by the trend. Instead of adapting for the streaming era, the company spent years doubling down on bloated sports licensing deals and SportsCenter set redesigns.

These decisions ultimately came back to haunt the "worldwide leader in sports," resulting in ESPN losing 16 million subscribers over seven years (and an estimated 17,000 defecting viewers per day). As the accountability hammer began to fall, ESPN execs tried to pretend they saw this coming all along. ESPN subsequently decided the only solution was to fire hundreds of longstanding sports journalists and support personnel, but not the executives like John Skipper (since resigned) whose myopia made ESPN's problems that much worse.

This week, the Wall Street Journal offered up a report on the arguably stupid debate over whether ESPN's programming is partisan. In it was buried this little nugget indicating that the analysts ESPN paid to help prepare it for the future routinely told company leadership that cord cutting was a nothingburger that would never become a widespread issue. Even as late as 2014, when the stats were becoming very clear, analysts were telling execs they had nothing to worry about

"ESPN’s research department presented data arguing cord-cutting was unlikely to become widespread, according to attendees.

"They were flat-earthers," said one former ESPN executive.

At the same time, ESPN was spending aggressively. The company agreed to triple the fees it would pay the NBA, which it believes is growing in popularity. On the talent side, Mr. Skipper closely managed negotiations, desiring to beat back rivals like Fox Sports 1 and NBC Sports. Agents, former ESPN executives and hosts said that led him to overpay for several on-air personalities.

You'd hope that ESPN kept its receipts. Amusingly, executives could have simply read Techdirt for free and been better informed.

The irony is that ESPN hasn't fully gotten the message the cord cutting revolution is sending: give your customers what they want. While many don't watch sports at all, those that do and cut the cord simply want a standalone version of ESPN streamed for a monthly fee. And while ESPN recently unveiled a new streaming service it claims finally delivers this, we've noted how that's not actually true. ESPN's still so worried about cannibalizing the traditional cozy cable TV cash cow you still can't get a standalone ESPN streaming service without subscribing to traditional cable.

The thing many cable execs don't want to admit is this: rising programming costs and surging competition and choice means TV isn't going to be as profitable as it used to be. Companies can either cling tightly to outdated models in a misguided attempt to prevent inevitable evolution until it's too late, or they can get out ahead of the phenomenon now. There's still a large number of cable and broadcast executives under the false impression that there's a choice in the matter.


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  • icon
    That One Guy (profile), 30 May 2018 @ 4:42am

    Someone didn't read #45 on the Evil Overlord list...

    "ESPN’s research department presented data arguing cord-cutting was unlikely to become widespread, according to attendees.

    So the research department provided bad data that resulted in the company making bad decisions(and continuing to make them). I'd say it's pretty clear who needs to suffer a little 'headcount reduction'...

    ESPN subsequently decided the only solution was to fire hundreds of longstanding sports journalists and support personnel, but not the executives like John Skipper (since resigned) whose myopia made ESPN's problems that much worse.

    ... Can they get anything right?

    reply to this | link to this | view in chronology ]

    • icon
      Ninja (profile), 30 May 2018 @ 7:11am

      Re: Someone didn't read #45 on the Evil Overlord list...

      When you are about to lose your cash cow hard you tend to follow those 5 steps: denial, anger, bargaining, depression and acceptance.

      I'd say they were in denial at that time. Maybe anger as in "How the fck are these damn millenials not procreating yet? No, it's still ok, it won't be a widespread problem."

      Some are now in the bargaining stage, trying to offer their own crappy service and asking "pretty please!" if people won't give them money while at the same time trying to retain past control. I'd replace depression with panic here (these 5 stages are for grief). There are a few folks that are starting to panic. These are actually fairly advanced and may actually live to see the end of this process if they reach acceptance and adapt or partner with stuff like Netflix. Nobody has reached that acceptance stage as far as I can understand.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 30 May 2018 @ 8:03am

        Re: Re: Someone didn't read #45 on the Evil Overlord list...

        The WWE feels like it has. Its making massive TV deals for RAW and Smackdown, but they are preparing for the day when the TV money isn't there. They abandoned the pricey monthly PPV business model for a solid lower cost month to month streaming service that no longer has any commitments, with plenty of historic content, exclusive current wrestling content("PPVs", NXT, 205 Live, Mae Young Classic), documentaries, original and behind the curtain programming to create an excellent value proposition, and runs at a profit. They are ahead of the game, and have positioned themselves to manage the transition if and when TV revenue slows, or ceases entirely.

        reply to this | link to this | view in chronology ]

      • icon
        JoeCool (profile), 30 May 2018 @ 8:17am

        Re: Re: Someone didn't read #45 on the Evil Overlord list...

        Actually, I think some ARE in the panic stage. That stage is when you see them throwing money at politicians and regulatory agencies in the attempt to get back what they suddenly realize is gone and bargaining failed to return.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 30 May 2018 @ 12:09pm

          Re: Re: Re: Someone didn't read #45 on the Evil Overlord list...

          The 5 stages of grief and loss are: 1. Denial and isolation; 2. Anger; 3. Bargaining; 4. Depression; 5. Acceptance. People who are grieving do not necessarily go through the stages in the same order or experience all of them.

          They've done the first three; I have no idea what depression would look like, and they surely haven't done step 5.

          reply to this | link to this | view in chronology ]

  • icon
    ShadowNinja (profile), 30 May 2018 @ 7:08am

    > At the same time, ESPN was spending aggressively. The company agreed to triple the fees it would pay the NBA, which it believes is growing in popularity.

    So... Basketball was tripling in popularity, which justified paying them triple what they used to for basketball content?

    Even an elementary school student could tell you that this math doesn't add up.

    reply to this | link to this | view in chronology ]

  • identicon
    Anon, 30 May 2018 @ 7:39am

    Remember When...?

    Remember when long distance was expensive, to support a vast hierarchy of overpaid Bell middle management? Remember when IBM (and then other premium brands) could charge more than twice the price of a no-name PC for essentially the same product? Remember when airlines were regulated and cartelized and simply flying was extremely expensive?

    So now, remember when ESPN could dictate the price of sports broadcasts? When there's a river of money running by, social pressure or economic reality will eventually figure out how provide more for less and make money. If they don't, someone else will figure out a way to get around any restrictions.

    (My dad used to fly Icelandic to Luxembourg via Iceland regularly - half the price of flying to Europe any other way in the 60's because they weren't part of the cartel.)

    Sometimes this progress is bad - Wal-Mart is cheaper but the personal service of dedicated stores is gone; airlines are a helluva lot cheaper, but arguably a race to the bottom in service... but the point would be the cost savings more than justify the crappy service.

    Sports streaming will be complex an confusing and less reliable for a while, until a better model supplants mandatory cable packages...

    reply to this | link to this | view in chronology ]

    • identicon
      MathFox, 30 May 2018 @ 8:36am

      Re: Remember When...?

      I remember the times when it was cheaper for me to make a call from the Netherlands to the US, than to call long distance in the US. Then came Skype and (video-) calling became essentially free.

      I see some shops compete on price, some shops on choice and yet others on service. That gives choice to the consumer, he can chose to pay for good service. (I am willing to pay some more for an airline ticket if it gives me a better flight (quicker, better seat, drink service...)

      In the area of streaming there already is movement; I expect that a "Sportflix" will emerge within a decade.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 30 May 2018 @ 9:01am

      Re: Remember When...?

      "cost savings more than justify the crappy service"

      Sounds like a personal choice that may not be applicable to the general public, is there a survey which statistically represents all income, class, race, religion ... in order to see if cost is the primary driver.

      Remember when business did not lie to their customers?
      Yeah, neither do I.

      reply to this | link to this | view in chronology ]

  • icon
    DannyB (profile), 30 May 2018 @ 11:35am

    Why pay for ESPN?

    Why would I want to PAY for ESPN, which is about sports, which I find mildly offensive, highly uninteresting. I wish ESPN had to PAY ME to even have it take up space in my programming lineup - - - IF I still had cable tv. But I got rid of cable tv a few years ago. And haven't looked back. So worrying about ESPN is a purely hypothetical exercise for me. Being FORCED to pay for it is long gone.

    reply to this | link to this | view in chronology ]

  • icon
    ECA (profile), 30 May 2018 @ 1:02pm

    ESPN, World wide??

    Umm...
    Then why dont I get the Badminton regional Olympic trials..
    Table tennis? from Taiwan??

    I just dont see it..
    Also, international?? HOW much do they pay to do it in other countries? Any one remember how much they PAID to get most sports ONLY they can cover?? ITS ALLOT.. Insted of ABC/CBS/FOX/??? all covering an event..we PAY 1 company that Bought out the rights.
    We used to be able to watch all the Channels, and random events..Go look up Wide World of sports..

    reply to this | link to this | view in chronology ]

  • icon
    TheResidentSkeptic (profile), 30 May 2018 @ 2:26pm

    And the divide grows...

    ... all the content "controllers" have the same problem - the divide/gap between what they value their content at, and what consumers value it at. The more they increase the price, the fewer consumers are willing to pay as it exceeds their value point.

    Shame no one ever tried explaining this to them ...

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 30 May 2018 @ 3:54pm

      Re: And the divide grows...

      If they do not understand that how are they supposed to evaluate their price point?

      reply to this | link to this | view in chronology ]

    • icon
      ECA (profile), 30 May 2018 @ 10:30pm

      Re: And the divide grows...

      IF they are willing to OVER PAY to pay off the owners and established concern groups..
      LET THEM..

      They have a corner on something, ADVERTISING THE TEAMS/EVENTS/... which will get more buying the goods and events.

      I want to go back and watch MORE on MORE channels, and MORE from other countries.. There are Thousands of sports events around the world...

      reply to this | link to this | view in chronology ]


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