We’ve all seen the potshots taken at ESPN’s business model of late, but what if Mickey’s not exactly wrong about what it’s doing? From a bottom line standpoint, here is how an 800-pound gorilla thinks:
“You have to build a deeper moat,” he often said when discussing competition. In Skipper’s folksy Southern style, that meant keeping ESPN’s enemies at bay. It meant identifying the rights ESPN wanted — the NFL, NBA, MLB, MLS, college sports, tennis — and paying a dollar more than anyone else to get them.
And while you may think in an era of decline cable subscribers, that’s a dumb strategy, the numbers disagree with you.
Distributors started creating low-cost packages as a retention method to keep their customers from cutting the cord. Many of those packages do not include ESPN, a move that surprised many cable veterans who assumed that the network’s contracts would not allow cable operators to keep ESPN off those packages. Standard cable contracts mandate that channels have to be in a certain percentage of homes — called “minimum penetration thresholds.”
Around 15 years ago, though, ESPN took those clauses out of its deals in exchange for convincing distributors to pay a higher license fee. Several distribution executives describe the move as a good one for ESPN at the time, as it made sure that the channel not only had the highest affiliate fee in the business, but its annual increases were bigger than other channels’ entire fee.
In 2016, for example, distributors paid ESPN $7.24 per subscriber per month, according to Kagan. In 2017, that fee increased to $7.89, an increase of 65 cents. Only 13 channels make more than 65 cents per subscriber per month, including four Disney-owned channels — ESPN, Disney Channel ($1.49), ESPN2 (98 cents) and SEC Network (72 cents).
Even though ESPN’s distribution is smaller, the network still is making more in affiliate revenue thanks to those increases. ESPN executives insist they like that trade-off, and distribution executives even privately agree that the 15-year old arrangement has been good for ESPN.
If the value in a live sports network is the control of live sports, then what Mickey has been doing with the layoffs and its rights bidding makes some sense, despite what such insightful figures like Jason Whitlock and Clay Travis insist otherwise.
One of ESPN’s top executives accused Fox Sports of advocating what he called a false notion that the network operates with a liberal bias.
“The whole narrative is a false one that was seeded and perpetuated primarily by a direct business competitor,” said Burke Magnus, ESPN’s executive vice president of programming and scheduling. “We have no political agenda whatsoever.”
Fox Sports has given voice to many of the accusations of ESPN’s liberal bias. For example, Fox Sports 1’s afternoon studio show co-host, Jason Whitlock, wrote a May 7 editorial for The Wall Street Journal in which he accused ESPN of adhering to a “strict obedience to progressive political correctness.”
Whitlock is a former ESPN employee who spent two stints with the Bristol-based company before leaving for Fox. Fox Sports and The Wall Street Journal share a corporate parent in News Corp.
Another Fox Sports personality who continually questions ESPN’s business model has also taken on the ESPN-as-liberal topic several times. In an April post on his Outkick The Coverage blog, Fox Sports personality Clay Travis wrote, “ESPN made the mistake of trying to make liberal social media losers happy and as a result lost millions of viewers.”
Again, is losing millions of viewers more important to ESPN than maintaining revenues? That hardly seems likely.
The topper to all this is that the WWL isn’t the only live sports outlet that’s let reporting talent go lately in a search for the right kind of balance as the broadcast world copes with a changing market.
Fox Sports will eliminate about 20 writing and editing positions in Los Angeles and replace them with a similar number of jobs in video production, editing and promotion. Executives told staff in meetings Monday after outlining the new strategy in a memo obtained by Bloomberg. Affected employees will be encouraged to apply for the new posts.
The owner of Fox News and the Fox broadcast network has decided that paying writers to cover sporting events, pen columns or grade teams’ NBA draft moves is best left to ESPN and other news-focused sports sites. Fox is opting to divert those resources into producing online video that complements on-air shows, can be packaged into advertising sales across the web and TV, and has the potential to go viral on social media.
News outlets of all shapes and sizes are making a transition from the written word to video.
Nothing wrong with that; it’s just another indication that the networks are feeling their way around the best way to help the bottom line in a digital, video-based era. I mean, this is some kind of echo:
… But this is only the culmination of months-long efforts by Horowitz to shift digital’s focus away from covering news and towards promoting FS1’s on-air personalities. In fact, writers sent to the Super Bowl in February were told once they arrived that they wouldn’t be writing for FoxSports.com, but would be ghostwriting copy for on-air talent instead. Digital executives like Pesavento and Mike Foss (both previously For The Win) have been pushed out as well, top writers like Bruce Feldman have been posting pieces on Facebook instead of on Fox’s site, and FoxSports.com has become more and more about what their debate show personalities say on-air…
If both sides are doing it, there’s nothing political about that. But letting Clay Travis, who’s had a longstanding weak grasp of economic issues, gin up righteous indignation is a great way to attract the rubes, I suppose. Maybe Travis can get Feldman to ghostwrite some college football pieces for him.
In any event, watch those subscription fees, peeps. They matter a lot more than Caitlyn Jenner and Curt Schilling.