Clay Travis posted an interesting article in Out Kick The Coverage the other day about ESPN. It lost about 623K subscribers just last month. In one month! If the trend continues, their sunk costs will exceed their income within five years.
Which makes me to believe that both Pro and College sports are currently living in an ESPN bubble which is about to burst. I see a direct correlation between ESPN, coaching salaries and facility improvements. ESPN’s success has resulted in excessive salaries for both Pro and College coaches and massive collegiate infrastructure improvements.
What will happen if and when the ESPN bubble bursts? Will the excessive salaries crash? Will the building boom collapse? Will the universities (and UA) have enough income from other sources to maintain the salaries and bond payments?
It appears AD Jeff Long was wise to spend now in the vast upgrade of athletic facilities because it appears NOW is the golden years for positive cash flow.
There is a trend there to be sure. But you should also remember that Clay Travis is on the payroll of Fox Sports, ESPN’s main competitor, and never misses a chance to suggest that ESPN is failing. All of college football, including all of the SEC, knows this stuff. But there is going to be a transition to distribution other than via cable bundles (Sling being an early example of this).
Also,Jeff Long has said our facility improvements are being paid for by ticket sales and donations, not TV money. The SEC Network money would come into play only if the other sources of income aren’t sufficient.
The people that I have spoken to say the power teams will break away from the NCAA if the TV money ever dries up. That will free them up to make money outside of the NCAA’s rulebook. The chances of that happening are slim.
If the subscription numbers continue to drop, ESPN will probably have to go back to the negotiating table with the leagues at some point, although I don’t think it will be any time soon. It will find other ways to cutback before it does that.
This isn’t just an ESPN problem. Every cable company is feeling the impact of cord cutting. The difference is that ESPN feels it more because it charges close to $7 per subscriber and includes the biggest bundle, as to where networks like FS1, TBS, TNT, etc., charge between $1 and $2 per subscriber.
I think those losses are cable and satellite subscriptions. There is belief that Nielsen - which tracks these numbers - does not do a good job of tracking the numbers from non-cable or satellite providers, like OTTs.
With or without cable bundles, ESPN gets to name it’s price. What has happened in the past is that everyone (including more than 75% of households that do not consume sports) has paid for the subscriber fees. Now that people can pick and choose their channels, there is one likely result (if economics holds true): the end-user pays more. The less than 25% of us who consume sports coverage will pay for it now. Those who wish to stay with cable bundles will also pay for it (sharing the cost). Those who wish to pull the plug that want ESPN will likely pay substantially more in subscriber fees. That is to say, everyone who wants ESPN or continues with the current cable bundling will pay for the increase in subscriber fees by ESPN.
I think ESPN saw this coming and they have purchased a lot of rights to Esports (that’s right, people watch other people play video games…). There is relatively little cost to ESPN and they expand their viewership which should buoy some of the losses of those who do not watch sports at all.
The market-prices for broadcast rights will dip in the next cycle (a lot of contracts come up between 2020 and 2026); however, all should stabilize at true market value in the wake of those decreases. There is also the possibility that someone like FOX starts a bidding war for these broadcast rights and they do NOT dip. If this happens, the inevitable decrease will be delayed and the true market value may remain at it’s current rate.
Regardless, ESPN is a strong brand and is backed with Disney $$$ - they will survive and thrive.
I think ESPN has changed the way it does business. It won’t pay high cost for on-air talent. It has decided to go more with actual games for content. You have seen the gradual exodus of some of the top talent on-air talent from ESPN. They will pay less for play-by-play and analysts, and less for studio talent. They will replace with in-experienced voices. The huge ESPN campus may shrink. But it won’t go away.
The place I was the last few days did not have ESPN. I did not miss it. But my intent was to get away from everything for a few days. The only TV my wife and I watched were some old early versions of Cheers. That was Netflix. We could watch four in a couple of hours. We didn’t want anything else as far as TV. Now I don’t think I could go on forever like that, but it was fine for a few days.
I got tickled when I pulled into a friend’s parking lot Friday to return to him something borrowed. He had on Bo’s radio show and it was a re-run, but he didn’t know it. He was listening to me. He was trying to figure out how I was talking to him at the same time as he was listening to me on the radio. I told him it was a re-run and he said, “Well, re-runs can be pretty good.” I told him it was all I was going to watch when I turned on the TV for the entire weekend. I didn’t watch much, but when I did it was a re-run. I love those old Cheers episodes with Coach.
It has shown the willingness to let the likes of Mike Tirico and Brad Nessler go, but it is still paying high-dollar. Jon Gruden makes $4 million for MNF games. Stephen A. Smith is paid more than $4 million for First Take. The real cutbacks are coming from the production ranks, where hundreds of employees have been let go in the last year.