ESPN layoffs sign of shift in sports broadcasting
As the names began to leak out on Twitter, one by one, it became clear that a major housecleaning was under way among reporters and analysts at ESPN, the nation’s best known sports media company.
Big names like Trent Dilfer and Ed Werder were cut from the NFL ranks. Jayson Stark and former A’s pitcher Dallas Braden were gone from the baseball beat. Here in the Bay Area, talented Warriors writer Ethan Strauss would no longer cover the team.
Beyond the public’s ghoulish fascination with who made the cut, however, there was a much larger story. ESPN is the canary in the coal mine for an industry that’s undergoing a major, major disruption, to borrow a well-worn Silicon Valley term. A deeper look at the sports broadcasting landscape shows a multi-billion dollar industry at a crossroads, passing from one-stop shopping to a la carte browsing.
With major Internet players entering the competitive world of sports broadcasting, along with large telecommunication firms, gaming companies and more, what lies ahead for consumers? Like the fuzzy screens of yesteryear, the picture is unclear.
As this disruption plays out, couch potatoes will be left
trying to navigate an increasingly confusing sports menu populated by traditional cable stations, independent Internet broadcasters and streaming services. Watching a Sunday afternoon ballgame is about to get much more complicated. *** Traditional cable television, which has long dominated sports broadcasting, is being challenged by a host of new competitors, ranging from Amazon and Twitter to Verizon to Sony’s PlayStation.
“The reality is the media business is constantly changing,” said Lee Berke, president and CEO of LHB Sports, Entertainment & Media Inc., a consultancy that works with sports teams to develop distribution deals. “It’s usually very volatile. We thought we had moved to the end of history, with cable and pay TV. Then everything changed dramatically, literally over the past couple of years. I’m talking to a range of distributors that had no interest in sports. Now, they’re vitally interested.”
And that, in a nutshell, is why ESPN’s former NBA analyst Marc Stein is looking for work. The competition is getting fierce, and it’s coming from all sides.
ESPN, which is partially owned by The Chronicle’s parent company, Hearst Corp., explained that last week’s layoffs were a cost-cutting measure due to a drop in subscriptions. It’s known as “cordcutting” in the TV world, describing consumers who are sick of paying big money for a full cable package. Instead, consumers are cutting the cable cord and subscribing to on-demand, Internet-based services like Sling TV or PlayStation Vue, then consuming the content they want, when they want it.
Jackdaw Research, a technology research firm, estimates somewhere between 2 million and 3 million cable subscribers have snipped the cord in the past three years. For ESPN, subscriber numbers are down from a peak of 100 million in 2011 to about 87 million today.
“There’s this downward pressure,” said Jackdaw founder Jan Dawson. “As people are looking to cut their cable bills, people look to drop ESPN. It’s not just cord-cutting but cordshaving.
“They’re going to see revenue declines. So, they have taken the axe to one of the few significant variable-cost buckets, which was on-air talent.”
While that trend shook traditional programming (such as sitcoms) to its core in recent years, the sports landscape was largely unharmed, with ESPN continuing to dominate broadcasting, thanks to billiondollar rights deals with the major sports leagues and college conferences. Secondary pay-TV channels, like the legacy broadcast networks, regional Comcast channels, TNT, MLB and the NFL Network, split up the rest of the gamebroadcast pie.
But you can see that world changing, right before your eyes. Just this week, online network Hulu rolled out a live television strategy that includes the ability to get a host of channels, including all ESPN properties, for $40 per month. Amazon paid an astonishing $21 million to be able to stream a single NFL game from London this upcoming season. And Turner Broadcasting, with its online property Bleacher Report, has reportedly struck a deal to broadcast European soccer matches, although specifics of that arrangement have yet to be announced.
“It’s already a complicated picture, depending on which sport you watch,” said Dawson. “NFL is across many channels. The NBA is the same. If you’re a baseball fan, you have regional networks. But it’s mostly traditional TV channels at this point. That picture is going to get more complicated. You’ll have to spend money across different platforms, which is going to be challenging and frustrating. You’ll have to pay more to subscribe to a variety of distributors.
“The only way is down for ESPN. That’s the challenge facing them.”
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So, what does all this turbulence mean for the teams and players? For years, huge TV rights deals have funded a seemingly never-ending climb in revenues, profits and salaries.
By traditional analysis, more competition should drive up the cost of rights. Increased demand for a stagnant supply.
“It’s going to make rights more expensive,” said Berke, the TV dealmaker with LHB. “Right now, you’re in a startup industry again. You have all these competitors competing. Not all will succeed. They can make money with advertising. But they can also generate substantial subscription revenue.”
So, the sports gold rush is heading online. And that’s certainly worked for Hollywood, which has flocked to providers like Netflix. But will sports fans be willing to navigate this increasingly complex broadcasting environment?
Andy Dolich, a longtime Bay Area sports executive and business analyst, wonders whether viewers have the attention span.
“I need a postgraduate degree from MIT to triangulate the global positioning of where do I watch that game,” said Dolich. “Or if I want to watch something outside of the big four sports? The alphabet, or menu, has been so expanded that you can get a migraine headache. The other factor is time. We’re always dealing with time and money.
“I think the greatest challenge to the live sports entities, the owners of teams, the broadcasters in any shape or form, is time . ... The shrinkage of time upsets people’s sports lives. Am I going to watch an extra-inning baseball game from first pitch to last? Am I going to watch every shot of a golf tournament? Probably not. Am I going to watch a 28second compendium of Steph Curry’s three pointers? Probably yes.
“I call it the nanosecond attention span.”
Billions of dollars. Dozens of options. And only 24 hours in the day. That goes a long way toward explaining the troubles at ESPN. And the uncertain future that awaits us all.