Tuesday, March 7, 2017

Cord-cutting is just starting to make a cultural difference

I've made the point here and on Facebook that if consumers are really going to take back their media, they have to address the issue of funding. That's starting to happen, as sports blogger Clay Travis reports with regard to ESPN.
Two years ago ESPN cut several hundred behind the scenes jobs to save hundreds of millions of dollars in yearly costs. Since that time ESPN's subscriber losses have accelerated, averaging over three million lost subscribers a year. Now new jobs cuts are coming, only this time you're likely to know some of the casualties -- Outkick has heard from a variety of different sources that ESPN is cutting up to $100 million in on-air salaries.

Yep, on air. This means you're going to know many of the people leaving the network.

The cuts will come via buyouts and expiring contracts that won't be renewed and when those layoffs start becoming apparent many will recognize that what Outkick has been writing for a couple of years now -- ESPN is in a world of trouble and doesn't know how to stem a rapidly collapsing business model.
Why is ESPN in decline? Because people like you and me are taking away its funding stream by getting rid of cable.

Travis continues:
Over the past several years ESPN has lost over 13 million cable and satellite subscribers. Given that each subscriber pays ESPN in the neighborhood of $7 a month for the network, that's over a billion dollars a year in lost revenue that will never be recouped. And those losses aren't stopping. Indeed, every single day in 2017 ESPN is losing 10,000 subscribers or more.

That's why I projected that ESPN is on pace to start losing money by 2021.

At the same time that ESPN has been hemorrhaging subscribers, the network has also been paying incredible sums of money for live sports rights. In fact, ESPN will pay out $7.3 billion for sports rights in 2017, that's more than any company in America will pay for media content.
Travis seems to think the decline is why ESPN has veered all the more left in recent years -- to maintain its social "relevance." But I agree with Power Line's Paul Mirengoff -- ESPN has veered leftward because they're leftists. If anything, the politics has hastened ESPN's demise.

From Mirengoff:
Alienating half or more of your audience with left-wing clap-trap and non-stop obsessing over race is hardly a sound plan for maintaining market share. In the words of Michael Jordan, Republicans buy sneakers too.
This decline will start to be felt by the major sports leagues. Mirengoff writes:
The NBA, another left-leaning organization, may be first to feel the pain. ESPN gave it what Travis calls “the worst TV contract in the history of sports.” (Skipper is said to be a good friend of NBA commissioner Adam Silver.) It was “a deal so lucrative for the NBA that every cable and satellite subscriber in the country, the vast majority of whom will never watch an NBA game, is paying over $30 a year for the NBA.” In case you were wondering, “that’s how Mike Conley can make over $30 million a year.”
Now ESPN is the first to start feeling real pain from cord-cutting because it claims the biggest share of the cable bill. As Travis explains:
Yes, the decline in cable and satellite subscribers will hurt all channels, but the loss of millions of subscribers to CNN matters much less because CNN makes much less in subscriber revenue than ESPN. What's more, CNN doesn't have the fixed costs on content 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 TV shows, but ESPN's entire business is predicated on the billions they owe for sports rights every year into the foreseeable future.
Nonetheless, it's my contention that networks like CNN and Fox News will begin to feel as big a crunch as ESPN as cord-cutting significantly escalates. This will push more content online, making it subject to a more honest marketplace in which people pay for what they use. That can only be a good thing for the quality and accountability of media.

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