ESPN Is Screwed
With subscriber numbers falling and rights fees rising, the “worldwide leader in sports” is set to reach a point where revenue is lower than costs. By 2021, not only will ESPN be screwed but the entire sports industry could suffer.
On October 28th, Nielsen released its numbers for the month — stating that ESPN lost over 600,000 subscribers during October. While Disney (which owns ESPN) is now disputing these figures and Nielsen has retracted the results, the report still illustrates the overall downward trend of the channel. Even without the 600,000 number, ESPN has been losing an average of 300,000 subscribers a month over the last couple years. Combined with their high fixed costs, this means they are fucked.
In 2017, ESPN will spend over $7.3 billion on sports rights payments — including $1.9 billion just for the NFL’s Monday Night Football. This is more than any other company. In addition, they are over triple the price of the next most expensive channel. Because of its exclusive content (the games that they pay such high fees for) promised to cable and satellite providers, ESPN costs subscribers $6.60 a month. The next most expensive is TNT at $1.65. Given these steep prices and the increase in streaming options, it makes sense that the channel will run out of revenue by 2021.
ESPN’s profits depend on the cable/satellite bundle. The $6.60 is charged for any subscriber that happens to have ESPN in their package, regardless of whether or not they watch games. As this model sucks for the consumer, subscribers have expectedly jumped ship. Sports TV Ratings notes that there are also old subscribers dying off and a younger generation that does not pay for cable or satellite. As the number of subscribers continues to fall and sports rights costs rise, there will be a point where revenue is lower than fees. Based on a generous model (per the disputed subscription numbers), this will be in 2021. Clay Travis predicts that ESPN’s failed business plan will pop the sports bubble, meaning that team revenue and player salaries will also fall. This may open the door to leagues legalizing gambling.
What’s good for the consumer (namely, not having to pay for channels they don’t watch) could lead to some morally ambiguous ground. Opening sports gambling could cause a seedy underground of professional sports. Maybe one in which players and coaches are on the payroll of gamblers — especially with contracts predicted to fall.