26 May If ESPN Can Fail, So Can Any Business
As many of you know, ESPN has been in the news recently for laying off around 100 people, including big names, like Ed Werner, Jayson Stark, Marc Stein, and Trent Dilfer. So why has ESPN resorted to laying staff off? What could have possibly gone wrong? Is twenty four hour sports network not what it used to be?
These are important questions. ESPN has made bad decisions within the last few years. A group of long-term deals with the NBA, NFL, NCAA, MLB, and tennis add up to nearly $6 billion per year just to have rights to these games—at a time when revenue from television is falling.
For example, in what may be one of the worst deals in history, the NBA signed a nine-year, $24 billion-dollar deal with ESPN and TNT, with the former paying $1.47 billion per season. This wouldn’t be a bad contract if subscription were going up, or at least maintaining a steady number. Except that it isn’t. Also, this contract expires in 2025. Who knows where we will be in 2025? The next big thing could easily steal the majority of ESPN’s viewers. The cable channel would then be left with this absurd contract with the NBA.
ESPN is still using the same old business model, even though the market has changed radically. Why would people continue to pay for access to this network, when they can now get the same content for free online or through someone else’s cable service? In fact, many ESPN subscribers were never interested in sports to begin with, they just paid for the channel because it was included in virtually every package available. In recent years, though, declining interest has forced cable companies to offer a much cheaper skinny bundle that does not include ESPN. These issues together have resulted in ESPN losing 10 million subscribers since 2013.
The channel has tried new ways to make money, but these have most likely pushed more potential viewers out the door. One of these is ESPN Insider. With this package, you get to read articles from ESPN analysts, for $4.95 per month. The problem is you can get practically the same information from other sources for free. Along the same lines, you can watch highlights on ESPN’s website or app, but only if you watch a 30-second advertisement, first. That’s too long to wait for a video less than three minutes long, especially when you can find the same video elsewhere with no ad to wait through. The bottom line is that ESPN no longer has enough valuable, unique content, so its subscribers keep leaving.
If ESPN can fail, so can any business. Sticking with an old business model in a new kind of market is a deadly combination. Nobody is so big and so successful that they can afford not to adapt to changing times.
Don’t get me wrong, ESPN is still a major business and makes billions of dollars per year. However, it need to start looking towards the future if it wants to remain at the top. While the company may think business won’t change, it already has.