Category Archives: ESPN Is The Devil

When it comes to certainty and the future, there’s death, taxes and…

the never-ending expectation of conference commissioners that the broadcast revenue gusher will keep flowing.

The easy hot take given these circumstances is that the sports media rights bubble will pop, and the money college leagues make from selling the broadcast rights to football and basketball will peak just before the Big Ten, Pac-12 and Big 12 deals expire in the middle of the next decade. The revenue that has fueled huge coaching salaries, a facilities arms race and angst over the size of the cut the majority of the labor force receives will slow or fall. Power 5 athletic directors will have to—gasp—manage money responsibly instead of simply relying on the next media rights bump to cover any overspending.

The reality is more complicated and less certain. Like newspapers before them, ESPN and Fox will grapple with disruption to their business model and ultimately may have to remake themselves if they want to continue to thrive in the new media landscape. But reflexively forecasting doom assumes television networks are the only entities that will bid on sports rights in the future*. That is almost certainly not going to be the case. “I really see a time when there are going to be a lot of players in the marketplace and there are going to be a lot of distribution methods,” Big 12 commissioner Bob Bowlsby said. “The unknown is how much is it all worth? I don’t think there’s anyone who legitimately knows what it’s going to be worth.”

*Don’t get hung up on the television-versus-Internet delivery issue. No, streaming isn’t as reliable on May 8, 2017, as cable or satellite service. Buffering remains a problem. But by May 8, 2023, the differences could be negligible.

Bowlsby is correct. No one knows. Not him. Not Big Ten commissioner Jim Delany. Not SEC commissioner Greg Sankey. Not Apple CEO—and Auburn grad—Tim Cook. The only thing we do know is that there is a limited number of major college football and basketball games available for sale and there is a built-in demand for them. How much that demand is worth depends on how many companies wind up bidding. “I don’t think anyone knows exactly what the landscape will look like or what health ESPN or Fox will have in 2023 when we’re negotiating or how significant a player a Twitter or a Facebook will be,” Pac-12 commissioner Larry Scott said. “My sense is that there will be more competition. There will be more and different types of players. And there will still be very limited and highly valuable sports properties.”

Commissioners and ADs look at tech giants as the white knights that could allow their leagues to keep growing revenues, but the question is whether a Google, an Apple, a Netflix or a Hulu would even want to get into the live sports business. If they did, it would be unwise to assume they would overpay simply because their market capitalizations dwarf those of the players in the marketplace now. The money could stay flat or drop even if the tech companies join the fray, but the leaders of college sports hope the competition for a limited resource might drive up the price. “Long-term, I’m very bullish on the value of premium sports rights,” Scott said. “I see more competitors. And frankly, competitors with bigger market cap than ESPN or Comcast or DirecTV. Some of these companies we’re talking about are huge by comparison. If they decide that sports is a vertical they want to get involved in in a big way, that’s good news for the Pac-12 or the NFL.”

Larry Scott sure knows how to drop words that make him sound like he’s got everything under control.  But notice that the key word in the last sentence of his quote is the first one.  Nothing’s happened yet.

What these guys are banking on, without any concrete evidence that it will come to fruition, is that if more capitalized competition arrives, it’s bound to spend even more money than ESPN and Fox already are, because… well, I’m not exactly sure why.  Maybe Big Jim can explain that to us.

Or these companies might kick the tires on sports rights and decide they don’t need them. Remember, they’re already wildly successful without live sports. This is the gamble Delany took when the Big Ten opted for six-year deals for its Tier 1 and Tier 2 rights. “There’s no doubt we’re in a disruptive environment,” Delany said. “There definitely is money and interest on the sideline. It really hasn’t emerged very much yet, but I’m sure that there is—whether it’s Apple or Google or Hulu or any number of companies.”

Delany is betting that demand for Big Ten football will be so valuable that the revenue from the next deals will outpace these deals. But he also has a hedge; the Big Ten Network’s deal with Fox runs until 2032. On the other end of the spectrum is the ACC, which allowed ESPN to lock up its rights until 2036 in return for getting a conference network that is scheduled to launch in 2019. “If you go shorter, you take out a little more risk,” Delany said. “But you also have a little more upside.”

In other words, these guys don’t have a fucking clue.

ESPN’s recent move to clear out a lot of talented journalists/reporters is more than just serving notice to shareholders that it has a plan to deal with its current numbers crunch.  It’s also a realization that the real value is in live content.  We tune in to watch games; for the most part, we’re indifferent to “The Sports Reporters”.  That’s where Mickey’s expense has to focus, then.

But here’s the thing.  If the WWL continues to pare down its operational expenses by whacking out everything other than sports broadcasts and still finds itself bleeding profit margin, there’s only one conclusion left to draw, and it’s that the overall business model isn’t what it used to be.  If that’s the new normal, to think that a shrewdly operated company like Apple, which makes massive bank as easily as we breath, is going to come in on a white horse and throw stupid money around to pull Larry Scott’s nuts out of the proverbial fire is a pipe dream.

… Every league is feeling it as the cable networks hemorrhage subscribers. An industry that has become accustomed to economic growth now has to grapple with the very real possibility of flat revenue or less revenue in the near future. Of course, the possibility is just as real that some deep-pocketed newcomers could swoop in from Silicon Valley and keep the money flowing. “We could be right, or we could be wrong,” Delany said. “History will tell us.”

Hey, if it blows up in their faces, at least Delany’s already written the epitaph.

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Filed under College Football, ESPN Is The Devil, It's Just Bidness

The SEC Network, where economics just mean more

The SEC Network, like every other jewel in the WWL’s crown, is losing subscribers to the tune of an approximate loss of $70 million in subscriber fee revenue, yet somehow “it is believed to be well within the realm of possibilities” for it to bump its $1.30 in-market subscription fee in future carriage negotiations with cable providers.

Only in America.  No wonder Greg Sankey is serene.

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Filed under ESPN Is The Devil, SEC Football

The ACC’s need for reassurance

There’s so much to love about this.

Experts in scare quotes, for starters.  The absoluteness of “total confirmation”, too.

All that bravado doesn’t mask the fact that Swofford has felt the need to conduct multiple conversations with the suits at ESPN to make sure the ACC Network is still a thing, or that he in turn has had to provide confirmation to his conference members that it’s still a go.

Don’t rush to spend that money, boys.

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Filed under ACC Football, ESPN Is The Devil

The other side of the cord-cutting mountain

Sure, it’s been interesting to focus on ESPN’s trials and tribulations as its subscriber base shrinks, but let’s not lose sight of what Mickey spends a boatload of that money on.

At some point that could force the market to correct itself and the money that grew and grew for each media rights deal could finally come back down to earth. That would have far-reaching implications across sports including potentially in college football. Television money, particularly from ESPN, has dramatically changed the college football landscape over the last decade. It was the engine behind conference realignment, exploding coaching salaries and ostentatious facilities upgrades. It is the defining reason the gulf between the Power 5 and Group of Five keeps growing wider.

The major question is what happens when ESPN and other TV networks decide they don’t want to keep upping the ante each time a rights deal comes up for renewal?

Just look to Conference USA for how that could play out.

No conference has been impacted worse by the ramifications of television money than Conference USA over the last 15 years. In 2005, Louisville, Marquette, Cincinnati and Texas Christian were all members of the conference only to leave for greener pastures in the Big East. That process happened again and again as bigger conferences looked to bolster their attractiveness for TV money by plundering CUSA. UAB and Southern Miss are the last of the founding members still in a conference that now features schools like Texas at El Paso and Texas at San Antonio.

When CUSA’s TV rights deal expired in 2016, the market had dried up. It wasn’t as attractive as it had once been despite adding several schools in large TV markets and television networks weren’t as needy for inventory. Only a few years after aggressively trying to add live sports TV rights for its fledgling FS1, FOX didn’t even bother trying to re-up with Conference USA. While other conferences saw their rights deals skyrocket in previous years, CUSA received millions less. Its schools went from making $1.1 million annually from TV money to a meager $200,000.

Now, admittedly, it’s a long way from Conference USA to the Southeastern Conference, which has the benefit of monetizing the largest impassioned college football fan base in the country, but who knows where things wind up in a few years?  Judging from this comment, certainly not the conference commissioner.

“Even in the midst of cord-cutting, we’ve seen progression in revenue,” said SEC commissioner Greg Sankey. “I think there’s actually more good news there than there is anything that’s problematic for us.”

Remain calm, all is well.

Here’s the thing — guess which conference’s revenue stream is most closely tied to ESPN’s financial well being?  Ding, ding, ding, we have a winner!

If not the Big Ten, the SEC could be in the most stable position. It is already generating huge money from TV — the league listed $420 million in revenue from TV, radio rights in its 2016 filings — and can always bank on a large, passionate fanbase wanting its product. The downside for the SEC is that it doesn’t own a stake in its network — ESPN maintains 100 percent ownership — and instead agreed to split revenue at a rate believed to be less than 50-50 for the conference and its members. The SEC is the Power 5 conference most tied to ESPN given it leveraged ESPN’s distribution model for massive early success rather than maintain ownership but that is still far more beneficial than detrimental at this point. The SEC Network is the strongest of the three conference networks — its average subscriber cost is more than three times the Pac-12’s — and as long as it keeps showing football games, that doesn’t figure to change.

Now, maybe that works out fine over the long run.  As long as we remain crazy about our football, somebody will pay the conference for access to that… but maybe not as much as now.  If the numbers decline, having that middle man starts looking expensive.

Remember what led to the current arrangement — Mike Slive’s initial inept conference television deal that he had to break by expanding the SEC to fourteen members.  It’s not like the SEC’s broadcast contracting has been shrewdly managed; as I’ve analogized before, it’s more like Jed Clampett accidentally stumbling his way into millions.  So to think that Sankey and his bosses are already on this proactively would be totally against type.

Of course, this may wind up being the reserve fund excuse Greg McGarity’s been waiting his whole career to use.  That’s certainly a comfort.

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Filed under ESPN Is The Devil, SEC Football

Putting the “E” back into ESPN

A faithful reader sent me a link to another story about last week’s layoffs at Mickey’s World.  You can argue about the underlying economics and the impact of ESPN’s perceived grasp of liberal politics all you want, but what’s more interesting to me is that the axe fell on the journalism side of the operation, rather than the personality side… which tells me all I need to know about where the WWL intends to go to keep the non-cord cutters tuning in.

From my selfish standpoint, it’s even more reason not to watch.  I probably need to investigate cord-cutting myself.  Who’s taken that step, and how are you still able to watch college (that is, Georgia) football in the fall?  Let me know in the comments.

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When bad things happen to obnoxious people

I know I shouldn’t take any pleasure out of someone else’s personal catastrophe, but it’s worth mentioning that Mark May appears to be out of a job at ESPN.

Okay, maybe a little pleasure… eh, okay…

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At ESPN, cord-cutting leads to another sort of cutting.

It looks like we may be saying bye-bye to some familiar faces.

As more Americans cut the cable cord, ESPN has seen its subscriber numbers drop steadily, forcing Disney to demand cost-cutting from the “worldwide leader in sports.” It’s been widely reported since March that the next big round of ESPN layoffs will hit on-air talent, but now we know more on the timing: the cuts will begin on May 1, sources at ESPN tell Yahoo Finance.

ESPN will part ways with more than 40 people, all of them “talent,” a label that ESPN applies to radio hosts and writers (almost all of whom regularly do video or audio), not just traditional TV personalities. ESPN says it has 1,000 people in the category. Still, you can expect most of the people cut to be faces you’ve seen on TV. In some cases, ESPN may buy people out of existing long-term contracts—as Sports Illustrated points out, that is unusual.

The cuts will mostly be done by May 9, when Disney announces its quarterly earnings, but could extend until May 16, when ESPN presents its annual Upfronts in Manhattan.

As is typical, the spin for this isn’t that Mickey needs to save a few bucks.

In a statement, an ESPN spokesperson said the approaching cuts are about innovating to suit the needs of consumers: “Today’s fans consume content in many different ways and we are in a continuous process of adapting to change and improving what we do. Inevitably that has consequences for how we utilize our talent. We are confident that ESPN will continue to have a roster of talent that is unequaled in sports.”

If you’re trying to be innovative, WWL, you know what’s really innovative?  Silence.  Cost-effective, too.

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UPDATE:  More like 100 are being let go.

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