For several years I have been writing on this site about the coming business implosion at ESPN. Today, with the announcement that over 100 on air talent at ESPN were being let go, many will finally come to realize what Outkick readers have read here for the past several years — ESPN’s business model is fundamentally broken and there is no saving it. The continuing collapse of ESPN is the biggest story in sports — the sub-prime mortgage crisis with bouncing balls.
I don’t say that to gloat over ESPN employees who lost their jobs today — many of them are outstanding people who regularly read this site or listen to our Outkick broadcasts, some of them are also good friends — and I know exactly how they feel today because I have been fired before in sports media too. Six years ago I, along with the entire staff, was fired from FanHouse. That firing is what led me to found Outkick. I decided on that day that I would never allow anyone else to control my success or failure in this business. I took a risk and started Outkick and it has been the best business decision I ever made. It’s a cliche, but when one door closes another door really does open. That goes for anyone who loses a job for any reason, it sucks, but it doesn’t define you.
The people being fired at ESPN today aren’t being fired because they are bad at their jobs, they’re being fired because ESPN’s business is collapsing. That collapse has been aided by ESPN’s absurd decision to turn into MSESPN, a left wing sports network, but that’s more a symptom of the collapse than it is a cause of the collapse. ESPN’s business is collapsing and the network is desperately trying to find a way to stay above water. You know how a drowning person flails in the water before slipping under? ESPN’s left wing shift is that flailing. They think going left wing will save them. The reality is the opposite, ESPN going left wing was like giving a drowning person a big rock to hold and thinking it would keep them from drowning. Instead, it just made them sink even faster.
That’s why ratings are down 16% this year compared to last year and viewers are abandoning the network in droves.
Middle America wants to pop a beer and listen to sports talk, they don’t want to be lectured about why Caitlyn Jenner is a hero, Michael Sam is the new Jackie Robinson of sports, and Colin Kaepernick is the Rosa Parks of football. ESPN made the mistake of trying to make liberal social media losers happy and as a result lost millions of viewers.
ESPN has spent the past several years disputing all of my columns about their business imploding, sending one person after another, and one website after another in wave after wave to argue that I’m wrong, that my numbers are off, that their business remains sound. As recently as seven weeks ago the head of ESPN PR was Tweeting me about this Outkick article, “Your number is vastly inaccurate, click-chasing, and irresponsible.”
Today I fired back at him.
If anything the only way I was “wildly inaccurate” was by underestimating how many people at ESPN were going to be fired.
As with most big stories Outkick has covered — conference expansion, the fake Missouri protests, the Peyton Manning mooning incident, Ryan Lochte’s peeing outside and being robbed — this site has been 100% right and the worldwide leader in sports has been 100% wrong. That’s why Outkick is growing like gangbusters and ESPN is firing people left and right.
The simple truth of the matter is this — ESPN spent way too much on sports rights just as its cable and satellite subscriptions began to collapse. On track for $8 billion in programming costs in 2017, ESPN will rack up its 15 millionth lost subscriber since 2011. Every single day so far in 2017 over 10,000 people have left ESPN. The numbers are astonishing and the collapse is rapid. All those lost subscribers add up to big money — that’s over $1.3 billion a year in money that comes off ESPN’s books every year. And ESPN is on the hook for billions and billions a year for all the years ahead. That’s guaranteed payments to leagues that ESPN can’t escape no matter how many employees it fires.
As I’ve written before, if the current subscriber loss trajectory keeps up ESPN will begin losing money by 2021. And if the subscriber losses accelerate it will happen even sooner than that.
The collapse of the cable bundle is a huge story that will impact every cable channel, but ESPN stands to lose more by itself than 100 other cable channels combined. That’s because ESPN standing alone costs more than 100 channels on many cable and satellite packages. ESPN by itself costs nearly five times the second most expensive channel on cable. ESPN’s in infinitely worse shape than any other cable network out there too because it makes more than any other channel off the current business model and because those channels don’t have the billions in fixed costs that ESPN does. If CNN makes less money on subscriber revenue, they can spend less on news gathering. If AMC makes less money in subscriber fees, they’ll pay for fewer shows, but ESPN’s entire business is predicated on the billions they owe for sports rights every year into the foreseeable future.
Moreover, the sports businesses of Fox, NBC, and CBS are more protected because the vast majority of their best games are all on network TV, which may well return to primacy when it comes to sports. Look at the roster of games that Fox, NBC, and CBS have — virtually all of the top draws air on the main broadcast networks. The NFL’s AFC and NFC packages, the World Series, the Super Bowl, the SEC game of the week, the best college football games in other conferences, Sunday Night Football, the big Olympic events, the U.S. Open, the British Open, and the Masters, all air on “free” TV. ESPN — and Turner — are the only two networks that put their biggest sporting events on cable. (The college football playoff, Monday Night Football, and most of the NBA’s Eastern Conference playoffs air on ESPN, which is how ESPN justifies its massive cable and satellite subscription fees. Turner carries the majority of the NCAA Tournament games on cable as well.)
In theory it would make more sense for ESPN to just rely on ABC and switch its biggest games to that network, but the problem is, it can’t. Not under the existing television contracts which promise cable and satellite companies exclusive big events on ESPN to justify the enormous cable and satellite fees. That’s why all this cost cutting is happening — because ESPN gambled that sports broadcast rights would ensure that Fox and NBC and CBS never dented the worldwide leader in sports. Instead, ESPN built a moat of programming rights to surround the ESPN castle and ensure that the worldwide leader would never be challenged. Unfortunately that moat has flooded its business. ESPN is dying as a business because it thought Mike Conley deserved $30 million a year to play basketball.
From 1979 to 2011 ESPN was part of the greatest business in the history of media. But from 2011 on we’re going to witness the biggest media collapse since AOL. It’s creative destruction writ large and ESPN is a dead company walking. Today sucks for many employees, but it was inevitable because the sports rights bubble has burst and the fallout is really just beginning.