The Decline of ESPN...What Happened?

[Music] ESPN is the network for sports you might be able to argue this statement based on some of their more recent content but they're built on the concept of being all sports all the time there's also NBC Sports Fox Sports and some others but ESPN was the first and they're the biggest and to be honest none of these others can even provide much competition they began in 1979 when they aired the first episode of SportsCenter and have quickly grown from there they soon started airing the NFL Draft other sporting events came out with ESPN radio an entire second channel called espn2 today there's ESPN 3 ESPN news ESPNU ESPN Classic ESPN Deportes they've grown pretty big but in the last few years they've had some trouble views have been Shakey's subscriptions have gone down there's been mass firings they've been heavily criticized and not just by the president people generally seem to dislike them more than ever before so let's try to figure out the reason behind all of this remember five to 10 years ago when you miss the big game and you wanted to know the score or maybe you just wanted to see how all the games went at the end of the night one if anything big happened my go-to place was ESPN I would turn it on and watch that little scroll at the bottom of the screen to learn about what happened that night sometimes it said something like Kobe Bryant scores fifty five points or the Red Sox game went to 14 innings when I saw that I kept the channel on because I expected them to talk about it it was probably coming up on that list of topics they would put on the side but I don't do this anymore I would hope nobody does this because it's not a good way to get sports scores I recommend downloading the league's app or go to their website all the scores you need will be right there and if you see something interesting more details about it are usually just a click away if you don't want to do that just go to google and type in the score you're looking for or ask Siri at all times I'm 10 seconds away from knowing the score to any game on earth and 15 seconds away from seeing all the details most of the people turning on ES pn2 simply learn the scores and see some highlights are gone and that was a really easy way to attract viewers just showing box scores and a few clips from the game that's minimal effort right there today they're required to offer something a little more they have to interpret the facts give opinions make predictions they can no longer just say the Red Sox won in 14 innings they have to theorize why they won what they did better than the other team if they think the coaches made the right decisions who on the team needs to step up next time what this win means for their playoff chances if they have a shot at the title this year and it would interpersonal evering all this is respected and funny and charismatic not to say they weren't doing all this before but now it's essential because they're fighting to attract these viewers simply put day-to-day sports coverage has much more competition than ever before people used to go to ESPN for it now they're just going to the internet for it and when did this transition happen for me right around 2011 but for some people it was well before that during the years ESPN was still on the rise all of this contributes to that falling number but there's a much bigger reason behind it less people are paying for cable ESPN subscriptions go down because overall cable and satellite subscriptions have gone down the ones to blame for this are Netflix and YouTube and anywhere else people are getting their entertainment for entertainment platforms the general model involves generating revenue from either subscriptions or advertisements think of YouTube you watch ads on here all the time that's how YouTube makes money but they also make money through their YouTube read subscriptions if you pay for it you won't see the ads ESPN generates money the exact same way they make money from the commercials they run and from their subscription fees and when I say subscription fees I'm talking about the money you pay on your cable bill see ESPN is the most expensive basic cable channel out there if you have ESPN you're paying over seven dollars a month for it and that's whether you watch it or not if you have all those other ESPN channels you're paying over $9 a month for it most other cable channels cost like a dollar or two so if you don't watch ESPN you may want to talk to your cable provider and try to find a package without ESPN it'll probably save you money and that's what people have done they've either caught on to the high price of the network and switched to something else or gotten rid of their cable package altogether this is the biggest and most directories and their subscriptions have been going down but this is a much bigger issue for ESPN than it may seem all the ads they run meaning on their network on the internet and magazines combined for about a third of their revenue the other two-thirds come from subscriptions meaning they're relying heavily on these subscriptions every time someone cancels their cable or switches to a package without ESPN they lose seven to nine dollars every month going back to their subscriptions graph over the past six years they've lost thirteen million subscriptions I think you can start to see how this would cause their revenue to go down by hundreds of millions of dollars but you may be shocked to learn that their revenue hasn't been going down let me tell you how and why first I'll tell you how in 2011 they had a hundred million subscribers but they were only charging four dollars and 69 cents per subscriber doing some quick math four dollars and 69 cents per month times 12 months times 100 million subscribers means they earn five point six three billion dollars in subscription revenue in 2011 now let's look at 2017 Business Insider gives the specific number of seven point two one dollars per subscription multiply that times twelve times the eighty seven point two two million subscribers gives us seven point five five billion in subscription revenue so basically they've been compensating for the lost subscribers by jacking up the subscription price does this seem like a good idea to you for one they're already losing subscribers like crazy wouldn't you think increasing the price would motivate even more people to leave if anything they should be lowering the price to try to get more people to stay and for to what kind of a business model is this anyway the number of subscribers is probably going to continue decreasing there's no evidence to say otherwise and if that happens when does it end in five years we'll all the people with cable be paying twelve dollars a month for ESPN how much will they be paying in ten to twenty years eventually is it just going to be one guy paying a billion dollars a month for his ESPN subscription if the subscribers keep going down and the price keeps going up that's where it's headed a plan like this is not sustainable it's like if everyone stopped going to Walmart so they decided to raise their prices to compensate for their lost customers it's a dumb business plan so why are they doing it the answer is that they have to do it they need the revenue to cover their expenses ESPN has a lot of contracts with sports leagues that allow them to air their games these contracts force them to pay billions of dollars each year they pay a couple billion dollars to air college football and basketball a couple billion to the NFL 1.4 billion goes to the NBA 700 million for baseball the contracts for just this year add up to over 8 billion dollars and we'll do some quick math again their subscription revenue that we calculated was seven point five five billion so that means just to cover these contracts they'll need all of their subscription revenue which remember is only that high because they jacked up the price in addition to half a billion from their ad revenue so the remainder of their ad revenue has to cover all the costs ESPN encounters it starts to make sense why they laid off so many people they can't cancel their contracts some are already in place for years and plus if they stopped airing the sports we're back to the first issue of struggling to deliver content that just can't be found on the Internet but in order to keep the live sports it's draining their money and forcing them to raise their subscription costs they're stuck in the middle of their dumb business plan of raising subscription costs when subscriptions are falling quicker than ever I don't have an answer for what ESPN should do I always hear talk about them expanding their online presence but if they're just streaming games online why would the league's even bother with them they could just stream them themselves things like the NBA League Pass are already doing this and I'm guessing that's the way of the future for all sports leagues there are days of attracting viewers that just want to know the scores and highlights are mostly over I don't have much faith in their sports commentating type show since again the Internet is free and offers similar content at first glance it looks like focusing more and live sports is the way to go but then when you look deeper you learn it's killing them to do that to me the best thing they have going for them is their specials things like an exclusive interview with LeBron James or their 30 for 30 series but as I said those are specials you can't base a network around them as far as their recent political direction people don't seem to want it but I really don't think it has much to do with these declining subscriptions the decline started way before that it may have an impact overall as far as the people's perception of the network or their attitude toward it but has anyone watching this cancelled or changed their entire cable service because they don't like their politics or coverage of politics probably not the impact of something like that would be much more subtle so to answer the question what happened to ESPN you could say they got too political but that's such a small part of it the real issue is that there's just no need for it to exist anymore the scores and highlights have been replaced by websites and apps the commentating and Sports Talk is also being replaced by websites and apps people don't need it so they're getting rid of it and that's causing them to use strategies that aren't sustainable the bottom line is we no longer need a network that gives us 24 hour sports and ESPN has been replaced let me know in the comments if you agree with that statement or do you think they still have something to offer that can't be offered elsewhere do you think they'll make it through this or is it nearing the end for them my guess is unless they make some major changes and find a new way to create value it won't be around for much longer and I don't quite know what those changes would be if you have any suggestions about what they should do to save their network let me hear them as well and anyone from ESPN watching this look at those suggestions because you may need them I'd like to hear what you have to say thank you for watching [Music]

Channel: Company Man

Views: 1,083,541

Rating: 4.815423 out of 5

Keywords: ESPN, NFL, Sports, NBA, MLB, Football, Basketball, Company Decline

Id: bt-4PbhpGYE

Length: 11min 1sec (661 seconds)

Published: Wed Jan 17 2018