Is ESPN in serious financial trouble?

And how would that affect the sports world as we have come to know it?

The article linked below states that ESPN has lost over 12 million subscribers over the last 6 years and advertising revenue continues to decline. So much so, that combined they are no longer sufficient to pay the bills.

And as Matt Jones stated in a post regarding cord cutters, things may not ever get better in that regard for ESPN.

Disney has demanded a budget cut of $250 million for 2017, after a $100 million cut in 2016. Neither seems to be that significant relative to the rights fees ESPN pays for the NFL, NBA, the SEC, and who knows what else.

Looks as though more high salaried talent will be moving out the door. But even with the departures, I have to think the big tickets, expense wise are the fees paid for broadcast rights to the NFL, NBA, and the SEC that approach $4 billion yearly.

Could ESPN default on rights fees? What happens to universities like Arkansas that have spent millions on upgrades on sports facilities, some of it financed, and very dependent upon the huge payments from the league to discharge that debt.

Is it time to worry yet? … a711898992

ESPN’s business model is shaky. They depended on an endless supply of sports-mad cable/satellite subscribers who had to have their 24/7 sports fix and would demand it from their suppliers, who would turn around and pay $7 per month per person to get it. People are cutting the cord. Some don’t want ESPN or to pay that $7 a month to get it, some want ESPN but don’t want to pay for Bravo or GSN or NatGeo Wild to get their sports. And some just don’t watch enough TV to justify any of it. If I wasn’t a sports freak, I would not have cable now. I don’t watch enough TV to justify what I pay, even though I get my internet from the same source. But I want my Hog games and keep my cable to get them.

Having said that, Jeff Long didn’t get to be one of the best-regarded ADs in the country by being a dummy. He has not gone out and spent SEC Network money willy nilly. Some of it is being transferred elsewhere on campus for academic initiatives, as he told the Trustees when Senator Pryor asked the 32 questions about the stadium project. Some is going to cost of attendance payments and support structure for the athletes, including nutritional needs. And some is just going in the bank. It’s nice to have the money, but if the SECN went away tomorrow, we wouldn’t go bankrupt.

As far as what ESPN is spending for rights fees, the bulk of it is going to the NFL and NBA. Monday Night Football alone is almost $2 billion a year. In 2014-2015, the SEC got TV rights money from CBS and ESPN of $311 million, which was split 15 ways (14 schools and the league office). So that was about $20 million per school. Not insignificant, but not NFL money. ESPN needs to cut costs, but they also need programming, and they get a lot more of it from college sports than from the pros. Default on payments, they lose that, and you’re getting endless reruns of Aussie rules football like they did in the early years. The question no one can answer is, if it came down to brass tacks, do they cut back on the NFL/NBA or cut back on colleges?

I promise you that UA, and every other Power 5 school and conference, is keeping a very close eye on what’s going on in the TV landscape, with ESPN and everyone else. But there are other options. Could Netflix or Amazon or some other entity of that sort emerge as a distribution point for the SEC? We’ll find out eventually, I guess.

My opinion is that ESPN will cut its on-air staff to bare bones to offset the revenue drop before it will touch its rights agreements with the NFL, NBA, MLB, SEC, Big Ten, etc. I think this could affect college sports at some point, but I don’t think it will be for a while.

What I see happening at some point in the future are the power conferences breaking away from the NCAA, or at least from the Group of 5 and forming their own super division. Then they can pool broadcast rights from a handful of major networks (like the NFL does) instead of the power conferences competing with one another for network deals. It will be similar to what the CFA did in the 1980s and early '90s before the SEC and Notre Dame broke away to sign their own agreements.

ESPN will find alternative distribution channels that generate revenue, but between now and then will be painful. States with the highest broadband penetration are the ones with the least interest in broadcast sports, while the lowest penetration is in SEC country.

ESPN will have some nasty battles with cable MSOs and satellite TV providers over its rights fees. Disney might be forced to bundle its larger channel packages into a single rights fee, to stave off erosion.

Cable TV is not going away, either. It will evolve into a streaming media offering. Comcast owns content, Cox owns content, and others will too. Cable could ease the transition, though, by getting more flexible with the cost of cable TV. Their pricing is increasingly uncompetitive.

I could see the SEC taking more meaningful control of the SEC Network in order to fully exploit the brave new world of media which we are entering. It may not make any sense in five years to make ESPN the primary media partner. The SEC Plus stuff may get a bigger share of the games by then, which would make it more marketable to the various and sundry non-cable outfits which are starting to sell programming online.

At the end of the day my suspicion is that this will mean less dollars, but probably not catastrophically lower dollars.

I haven’t had ESPN/cable for 3 years and haven’t regretted it at all.

I do use my parents’ WatchESPN log-in info. A lot of people my age use someone else’s log-in info, whether it be ESPN, Netflix, whatever. Have a cheap European NBA streaming service I use with Chromecast that doesn’t have any blackouts (getting something like this was the key to me dropping cable). Have HBOGo and Netflix, which is about $25 per month combined. Have a Roku app called ChannelPear that lets me watch a variety of live TV channels (don’t use it a ton because it buffers regularly). Have an Amazon Fire Stick that I don’t really use.

Saves me a ton of money. The only times I really wish I had cable are during like the Grammys or Oscars, but I can always go watch those at someone’s house. Sometimes I’d have HGTV on in the background (I like random, cool houses), but there are less distractions and there isn’t a time suck.

ESPN will figure it out. They’ll cut costs like others to live within its means. I do not think they will do anything to jeopardize its relationship with content providers. If I were them, I’d just run games and get rid of all of the hosted opinion shows. I don’t watch them. I just watch games. So the can spend a lot less for talent.

I’m about ready to cut the cord. I’ve figured out Roku and streaming stuff. I just need WIFI in my home to survive. Don’t need cable.

I’d get the login from my parents like Jimmy, but I don’t have any now. I’ll just come over to Jimmy’s house.

What are you going to do if your parents cut the cord?? The reason I ask, is because I ask my 25yr old that, lol. He recently moved to Chicago to work and about 3 times a month he texts for my log-in.

Get it from a friend haha. SlingTV is another alternative. Who knows, at some point ESPN may wind up having a standalone app available for purchase.

I recently inquired of Sling TV but they don’t offer Hallmark movies (for the wife) or my favorite cable news channel. I could save 100 bills per month. Bummer!

SlingTV does indeed have Hallmark channels because I got them for my girlfriend.

Just out of curiousity, how would the staff of Whole Hog Sports feel if I “shared” my log-in with a number of friends?

I know I’m not a saint, but isn’t this stealing?

I agree that ESPN will eventually go the way of HBO and other networks that provide a standalone web service. I’d pay much more than $7/month for that single lineup of ESPN networks.

The questions to which I don’t think anybody knows the answer are:

  1. How many people currently pay for ESPN but wouldn’t if they had to choose it a la carte?

  2. How much does ESPN have to charge to offer sufficient programming to a sufficient audience size?

  3. How elastic is the demand for ESPN? Does demand drop precipitously as price increases or is subscriber loss minimal?

I can answer No. 3. Demand is huge because of the live component. If it weren’t for live events like games and award shows, then cable and satellite would be hurting a lot more than they are now. You can DVR your favorite show or watch it on demand and still be surprised by the ending, but it’s hard to do that with sports. You might see a tweet or get a text about the ending.

As far as pricing, something to remember about ESPN is that it costs $7/month on the cable bill, but its associated channels also cost you. For instance, ESPN2 is close to $2 per subscriber, then SEC Network and ESPNU cost you with a sports package. Plus with ESPN you have to pay $.50 to $1 for Disney properties like Disney Channel, Freeform, etc.

So I think ESPN could charge $10-$15, maybe $20/month for its over-the-top service and people would gladly pay for it to rid themselves of their cable or satellite packages, because the reason they hold on is for the live component.

Good point, Matt. If I could get an a la carte package with all of ABC/Disney’s content, plus NBC, CBS, and Fox then 99% of my family’s TV needs would be satisfied if you threw in Netflix.

If Live Sports left the Comcasts, Uverse’s, Direct TV’s, etc. the cable industry would totally implode. ESPN is the only thing holding millions from bailing out of cable TV entirely. If ESPN and Disney go it alone, it would destroy cable TV totallly. JMVHO.

You’ve got that right. I remember the year New Orleans played Indianapolis in the Super Bowl. I was living in Louisiana at the time, going home from a trip to Arkansas. I had purposely stayed away from the radio and even text messages so I could watch the game which I had recorded on the DVR. But as we got close to Bossier City all of a sudden I saw fireworks going off, and I knew immediately the Saints had won.

A few years ago I did play-by-play for John Brown’s home basketball games in Siloam Springs. JBU had a game on the Saturday after Thanksgiving at 2 p.m. The Auburn-Alabama game started at 2:30. It was the 2013 Iron Bowl, which was a huge game even before the ending. I wanted to watch the entire game without knowing what was going to happen.

So I turned off my cell phone and my laptop before the JBU game began. My wife went with me and we made plans to watch the Iron Bowl on delay. We had all our devices turned off and turned the game on somewhere around 6 o’clock. We fast-forwarded through the commercials and saw the Kick Six play unaware what was going to happen. When I turned on my phone I had several text messages about the ending, sent about three hours earlier. Fortunately there were no fireworks going off in Bentonville that night.

So it’s possible not to know about a big game event like that, but you’re right, it’s tough.

Correct. I’ve said for a long time that sports are the lifeblood of cable TV.

That said, every network has to look out for its best interests. Longterm it looks like ESPN’s best way to survive cord cutting is to offer a pay-per-view streaming service like HBO and Showtime.

Don’t know exactly what this is Matt. But I have a question about ESPN as a stand-alone entity such as the free broadcast networks, however, attainable only as some type monthly subscription service.

Do you think ESPN (Disney) could set up a network totally independent of any cable carrier, charge its $20.00 fee as you proposed earlier in the thread and make it as a stand alone entity? That type set up would be totally acceptable to me.

Of course there is lots about the broadcast/cable industries that I don’t have the slightest clue about. So, costs to do that may be prohibitive.