The Decline of ESPN... From $50 BILLION Dollar Empire to Potential DISASTER

listen to the Disney earnings call a couple weeks ago they spent most of the call talking about your business talking about what kind of drag it was on Disney it's a market turnaround from a couple years ago where you had this giant growth engine that was going to go on forever and no one ever talked about was there a problem the SPN was a given that ESPN was was going to grow forever what happened I got a lot of cash I don't mind spinning from the time you were born in the United States it is quite amazing to recognize how much sports will have an impact on your life by the time you reach adulthood whether you liked loved or hated watching sports growing up as a kid it's everlasting presence has been ingrained in American culture for centuries and unlike some of the other customs and traditions when it comes to sports in other parts of the world Americans place incredible value in its entertainment at just about every level of competition even going beyond the pro leagues in the United States the sensitive community that sports brings makes high school and college athletics a spectacle that is not seen anywhere else because while it is great to see an athlete as incredible as LeBron James dunk a basketball on any given night it is also great to catch your alma mater take down your rival school regardless of how good the quality of talent between the two teams may actually be as a result the only one combination of entertainment communal and sentimental value associated with watching sports is not only appealing to the average American consumer it is downright addicting according to nielsen in 2015 alone the collective amount of time spent watching sport TV programming in the United States eclipsed 31 billion hours equivalent to over 3.5 million years just think about it in your life in the last week alone I'm sure you or someone you know has contributed to this total while downing a bug bite or can of coke for all the minors watching up there and see what I just did there in the midst of you watching this video I was able to comfortably place a quick plug for two humongous companies in less than 5 seconds time now with my measly subscriber count uploading this video the few viewers that watch may or may not have been impacted by this powerful promotion yet when you consider this same tactic when applied to over the 31 billion hours I mentioned just earlier it is easy to see how quickly this stuff becomes profitable for the networks that carry sports programming enter ESPN The Godfather of sports entertainment present day and you quite possibly have a 50 billion dollar company well at least that's what they thought four years ago from their early days to their rise and current decline I plan to detail everything regarding ESPN in this video including why they are struggling to grow and how they can bounce back because just like any American business faced with increased competitors and a changing landscape the worldwide leader in sports is now in a battle for its survival although nobody will confuse ESPN with a scrappy startup in 2017 the company came from humble beginnings in 1978 when founders Bill Rasmussen and Edie Egan came up with the idea to start a cable network that delivered 24 hours of non-stop sports entertainment at first the plan was to devote the channel to cover sports solely within the state of Connecticut but when Rasmussen was presented with the possibility of launching the network across the country at a cheaper price via the relatively new technology of satellite communication a new vision of what was possible began to emerge for the lifelong sports fan after purchasing land for $18,000 in Bristol Connecticut for their headquarters they went off to find permanent investors to help bring ESPN to homes all over the United States and as the amount of cable subscribers in the u.s. exponentially grew during this time period the project managed to catch the eye of a Getty oil company executive who saw its potential for big dollars and soundly convinced Getty to purchase a major stake within the company having now been given capital to work with Rasmussen job now consisted of striking deals with sports leagues at which they can air content on the channel in reality though the likelihood of ESPN being able to find an established professional league right out of the gate was slim to none understanding this point himself Rasmussen instead smartly chose to pursue an agreement with none other than the National Collegiate Athletic Association or NCAA for short after first getting a deal done to air all of UConn sports on their network the n-c-double-a and Rasmussen shortly expanded their partnership to allow ESPN to broadcasts a minimum of 230 games per year in 18 different collegiate sports nationwide while not quite the worldwide leader in sports just yet I'm sure Rasmussen had no problem being the worldwide leader in college sports for the time being and after poaching some on-air talent from other networks which included the likes of Bob Lee and Dick Vitale ESPN had the building blocks in place from which they can grow the badgers and the Blue Demons to my left former coach at Rutgers Detroit University and with the Detroit Pistons in the NBA deck fight al well it should be a classic matchup college basketball excitement enthusiasm but even as the company established itself as a legitimate enterprise the money was not exactly pouring in in fact according to former marketing exec Michael Rorty ESPN would have been bankrupt if it wasn't for anheuser-busch giving $1,000,000 in financial support during their early years in short the lack of access to professional sports leagues was keeping ESPN from truly breaking out until one stop shop for sports however once ABC bought an 80% share of ESPN in 1984 the company slowly but surely started to secure agreements with pro leagues probably the one that changed the direction of ESPN forever was the deal to bring the National Football League to the cable channel in 1987 your ticket to Sunday night NFL when the Raiders and Seahawks go ahead included in the partnership was giving ESPN the rights to air Sunday Night Football on a weekly basis during the regular season while the contract only gave partial rights to air NFL games the network was now able to leverage their NFL Sunday night live event with content that supported the once a week program shows like NFL lives Sunday NFL countdown and even NFL Draft segments were created to discuss all the news that was going on in the National Football League although the answer may seem obvious today the question on whether Americans will be willing to watch this type of non live programming was still up in the air the line of thinking was pretty much I can understand why the viewer would want to watch the football game for several hours but will they really also spend time watching men in suits talking about football for several hours too well as you can probably guess the answer was a resounding yes and ESPN started bringing a massive amount of viewers through the 90s and 2000's with this combination of live sports and the much less expensive ability to make their own content along the way some notable events included bringing Major League Baseball the network in 1990 while the NBA actually didn't come on board until 2002 in regards to expanding in the booming cable industry ESPN launched ESPN 2 in 1993 ESPN news in 1996 and ESPNU in 2005 before you knew it the brand of the founders had a vision for ESPN had become a reality far bigger than they had ever imagined to the average sports fan the network represented that can't live without channel for their cable service and by 2011 ESPN surpassed 100 million households that carry the network and was valued at 50 billion in 2014 by all accounts the company was now an empire and they're not seem to be anything they'll be able to slow it down but if we fast forward just three years later this illusion of ESPN's invincibility was exactly that an illusion and the problems facing the network are now starting to compound now before getting into the current problems ESPN is facing I realize I have not yet discussed just how exactly the network makes the majority of its money you see the business model for ESPN is really not rocket science it is actually quite simple although many might think ad revenue is the largest source of income for Disney's cash cow the majority of ESPN's money comes from the cable carriers that cut him a check for carrying their channel in the cable bundle for example let's say the dad of a family of four decides he's going to buy cable package from AT&T for $100 a month while that monthly payment goes straight to AT&T 18t has to give a chunk of that to each channel that's included in the package yet the split between different channels is not an even distribution not even close due to the high demand for live sports programming ESPN was able to command a price towards cable carriers of over 6.4 cents a month far and away the most expensive channel in the bundle for a reference TNT only charged a dollar 48 per cable subscriber in Fox News's only at 90 cents per cable subscriber so with that said how lucrative do you think an arrangement like this is for ESPN well if we do some quick math and multiply 6.4 cents times the 99 million subscribers that carried the sports network and then multiply its well for each month you'll see ESPN hits over 7 billion dollars annually just from subscriber fees alone adding around 2.5 billion dollars more in ad revenue and another couple billion from their sister channels and digital presence you see that ESPN easily crossed the threshold of 10 billion dollars in total annual revenue with around a 40% profit margin meaning they made over 4 billion dollars in profit in one year alone but again this is from the perspective of 2014 and the landscape has a completely different field than just three years ago so without further ado let's get into my personal three biggest reasons as to why ESPN has fallen on hard times number three incredibly expensive TV deals okay it's finally time to discuss ESPN sudden and amazing rising cost for live sports programming one of the biggest reasons as to why ESPN has been making so much damn money in the past is because their expenses on TV deals with professional sports leagues gave them such a juicy spread prior to renewing their contracts with all the major leagues ESPN was paying just under 2.5 billion dollars for rights to air live content from the n-c-double-a in all the top North American professional leagues - the NHL with the model working so well for them throughout the 2000s ESPN decided double down and double down big in the most recent TV deals with the league's knowing their worth to the network ESPN has forked over a fortune in comparison what they were paying before for a combined total of five point three billion dollars literally more than double the amount they were paying before just take a look at this chart NBA of 143 percent in cost and they'll be up 136 percent cost college football playoff up 391 percent in cost I mean these numbers add up quick guys the NFL the league that jump-started the network's rise may also quite possibly be its downfall with an eight year fifteen point two billion dollar deal reached with Roger Goodell and Co in 2011 ESPN is now on the hook for 1.9 billion dollars a year to air just 17 Monday Night Football games and one of the wildcard playoff games in other words ESPN pays the NFL more for just one Monday Night Football game but it will cost HBO to produce the entire final season of Game of Thrones winter is coming now of course it is not always a bad idea to pay more for something that is working but it has to make economic sense over the course of just a few years he is being doubled their biggest expense in the form of these TV contracts and the company is simply not growing at the same rate it Rose those costs thus eating heavily into their profits the worst part of all is that these contracts are fixed and there is no ability to renegotiate until they expire so as the NFL is falling on tough times right now as well ESPN is pretty much in a grin and Barrett situation until 2022 not pretty number two increasing competition from all angles more or less ESPN has been running its own race since the company started credit to them while the traditional broadcast channels like NBC CBS and Fox laughed at their business model way back when he is being laughed back by forming almost a quasi monopoly in the sports media industry and becoming one of the most profitable networks in American history but hey just like when your friend makes a boatload of money you want to get in on the action too unsurprisingly a lot of the reason as to why ESPN has been forced to pay these ridiculous amounts of cash for a live sports content it's because these networks have started to make stronger bids during negotiation for example with ESPN paying 1.4 billion dollars a year for NBA rights Adam Silver mentioned that the league also had discussion with Fox Sports although there is no confirmed offer from Fox on the record the mere threat of the NBA having options apart from ESPN undoubtedly helped drive up the closing price but it's not just the TV contracts that rival networks are challenging the sports giant on original sports programming with on-air talent is another area that has seen a noticeable shift over the past few years no better place to look than Fox Sports 1 even before the major layoffs that ESPN executed earlier in 2017 top personalities from the worldwide leader in sports had already flocked over to fs1 and started competing head-to-head for TV viewers they used to exclusively watch ESPN Skip Bayless for Steven Naismith undisputed verse first take pardon the interruption verse 2 heard with Colin Cowherd regardless of the ratings fs1 being mentioned in the same breath as he s BN is a win every single time for the former and I'm still just getting started when talking about the increased competition I haven't even begun to talk about the growth of websites like barstool sports bleacher report an espy nation that are also contributing to take away customers from the mega brand in fact without even looking at the numbers I can guarantee YouTube alone is having a drastic impact on ESPN ratings when it comes to the climbing interest and their flagship show such as SportsCenter I remember when I was growing up and I'm sure I'm not alone in this but I would tune into SportsCenter every single day and wait throughout the full hour show to see the highlights and commentary for the teams that I rooted for first meeting this season between Cleveland and Miami Dwyane Wade had this to say about himself LeBron and Carmelo Anthony who were all picked in the top five of the 2003 draft this is our lead half let's go ahead and take him in - you know it's not about the winning against LeBron with Carmelo against LeBron doing it's about us you know because we care in the NBA nowadays instead of needing to go through the entire show I can just hit up my guys dock in GD on YouTube to catch the specific highlights I want to see also let's not forget the rise of sports you tubers taking away clout from ESPN for those who don't know I also have an MBA YouTube channel where I share my thoughts and tell stories on the world of basketball now the people's kid doesn't have millions of subscribers but there are thousands of channels out there just like me that when combined have taken away significant market share from ESPN over the last few years in regard to their shows surrounding sports in general think about that for a second that means ESPN's biggest target market the die-hard sports fans are not only starting to change the channel from ESPN the Fox Sports but they're also becoming the competition with various online platforms from which they can create a following if this doesn't worry the leadership at ESPN I don't know what will number one a business model trapped within a business model out of all the endless issues that ESPN has on their plate at the moment there is one dilemma that tops them all forget the competitors forget the politics or perceive liberal bias even forget the crippling TV deals more than anything the biggest threat to ESPN as an enterprise is the current disruption occurring in the cable industry to start let's discuss the network's often talked about subscriber losses like I said earlier ESPN had 100 million subscribers in 2011 and the numbers have dwindled consistently since as of their most recent numbers network has lost about 13 million subscribers to bring their grand total to around 87 to 88 million now I think a lot of people have misinterpreted this drop as primarily response to the Follman networks overall content but this really actually falls in line with the fallen overall cable subscriptions nationwide if we take a look at a graph showing the total amount of general capable subscribers in the United States by year you can see that the decrease in subscriptions is nearly identical to the same decrease ESPN has faced since 2011 as you can see the biggest problem of ESPN isn't about its content but rather that it's profitable business model is strongly correlated a sinking ship that is the cable industry another business model to be more specific what ESPN depends on is the bundling of TV channels together so they're able to demand such an expensive price to the cable providers and while that model has worked great for both cable providers and American families over the years in 2017 the power of the Internet and more importantly the power of streaming content is becoming a force so strong that you would have to anticipate the drop-off in cable subscribers to only get worse from here so the question remains how does ESPN fight back on the current assault of their money-making machine well just like anything in life where there is a roadblock you have to first recognize what you can control and what you cannot control unfortunately there is truthfully nothing ESPN can do to change the overall trend of households cutting the cord across the United States it is simply just the way the industry is evolving having said that it's not like the company's executive to just twiddle their thumbs waiting for their demise instead of putting its focus squarely on delivering high quality content with its cable offering there has to be a strong collective effort to expand into new areas of growth not dependent on the cable business and credit to them it looks like they've already made moves in that regard seeing as how Netflix is killing it right now in the streaming world ESPN and Disney have been working on delivering a new streaming platform to which users can watch sports programming without having a cable plan in theory this would give ESPN a new opportunity to get back old cable subscribers by having them pay a monthly fee this fashion instead before we consider this the lightbulb moment though there are still some clear red flags for starters the streaming package will only carry out of market MLB NHL and MLS games and nothing from the NFL NBA or anything from ESPN's traditional programming not only this we're still not sure how much ESPN will need to charge customers to make the service worthwhile at all but it's definitely a start and a start that shows they're trying to take initiative of what their future holds and who knows if the sports Titan you can offer competitive price while remaining profitable for this first service it could be the avenue they have been looking for to project long-term success for their company so as ESPN sits through another rough quarter with more layoffs reportedly on the way there's still hope to turn this downward trend around that's all I got folks hope you guys enjoyed the video like I said ESPN is still profitable at the moment but you can see there in that danger point where they don't make a move soon they could be down and out before you know it let me hear what you all think is ESPN in serious trouble or do you think they will prevail also would you be willing to pay for an ESPN streaming service if it was priced that say maybe $15 $20 a month would love to hear what you guys think anyways I'm super excited to start churning out different video topics on this channel and look forward to sharing my thoughts on some of the biggest and greatest companies in the world make sure to subscribe and turn on post notifications to know exactly when the next video is uploaded by the way shout out to all the old G's people in the vid coming from the people's kid I appreciate your never-ending support you guys are the best but yeah with that said the journey on this channel has officially begun let's have fun with it I'll catch you guys soon see ya ever

Channel: Kobi Presents

Views: 64,816

Rating: 4.566462 out of 5

Keywords: The Decline of ESPN.. From $50 Billion Dollar Empire to Potential Disaster, The Decline of ESPN, Decline of ESPN, Decline of Cable ESPN, ESPN Subscriber Losses, ESPN Cable Subscriber Losses, The Future of Cable TV, Future of Cable TV, ESPN Struggling, ESPN $50 Billion Dollar Empire, Rise and Fall of ESPN, ESPN Layoffs 2017, Decline of Cable Television, Decline of ESPN... What Happened?

Id: 8DXSHIoJBZI

Length: 20min 37sec (1237 seconds)

Published: Tue Nov 21 2017