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The Rise and Fall of ESPN (1 Viewer)

OTOH, regional sports channels can continue to exist in a relatively competition-free environment. For example, ROOT Sports Pittsburgh has both the Pirates and Penguins and taps into FOX (IIRC) for college football and basketball coverage. Mix in poker, interview shows, coaches shows, local HS sports, and whatnot and you have a great local alternative to ESPN. They don't have a highlight show, but don't need one.
The Pirates' contract with Root expires after the 2019 season.  It's one of the next local baseball deals that comes up for bid.  It'll be interesting to see whether the rights fees continue to escalate because the economics of the sport relies on this.

 
The Pirates' contract with Root expires after the 2019 season.  It's one of the next local baseball deals that comes up for bid.  It'll be interesting to see whether the rights fees continue to escalate because the economics of the sport relies on this.
It will be interesting. Given ROOT is the only game in town and the Pirates are meh in terms of local interest right now, I wonder if this would be the true test case.

 
I do wonder how much blame ESPN ultimately takes for driving cable prices through the roof, either directly or indirectly. Maybe we don't give them enough blame. 
Maybe not. I haven't ever seen any good data on all of the major networks cable rev/sub over time.

I am sure it exists.

 
Maybe not. I haven't ever seen any good data on all of the major networks cable rev/sub over time.

I am sure it exists.
I can't vouch for accuracy but here are some numbers.  ESPN's carriage fees dwarf those of their competitors. 

There have been local disputes between carriers and regional sports networks in NY, LA and Houston that have left viewers unable to watch baseball games but I'm not aware of any major cable companies getting into a carriage war with ESPN.

 
I can't vouch for accuracy but here are some numbers.  ESPN's carriage fees dwarf those of their competitors. 

There have been local disputes between carriers and regional sports networks in NY, LA and Houston that have left viewers unable to watch baseball games but I'm not aware of any major cable companies getting into a carriage war with ESPN.
Yeah, I meant time series data, not snapshot.

It would give us a good idea of how much ESPN has contributed to the overall inflation in cable pricing. 

 
I can't vouch for accuracy but here are some numbers.  ESPN's carriage fees dwarf those of their competitors. 

There have been local disputes between carriers and regional sports networks in NY, LA and Houston that have left viewers unable to watch baseball games but I'm not aware of any major cable companies getting into a carriage war with ESPN.
Not yet. But I read somewhere yesterday that the carriers are gonna start offering entertainment (non-sports) skinny bundles.

 
A la carte pricing will be a game changer.  I don't see how it can be revenue neutral for the carriers but competitors like Sling and PS Vue are driving the shift. 

 
The daily hour-long NFL Live show is always on at the gym.  It is the freaking offseason. They're just arguing about pointless stuff from either last season or doing rankings of the upcoming season.
Its the middle of the day at like 12.30. what else is on any channel that time of day? (I kinda like that show actually)

 
The "fall" of ESPN is way overstated. They are making a smaller profit than they used to. Their competitors will die off way before them. 

 
A la carte pricing will be a game changer.  I don't see how it can be revenue neutral for the carriers but competitors like Sling and PS Vue are driving the shift. 
Massive technological shifts can kill monopolies. 

The cable companies would be in a lot more trouble if they didn't also own the bulk of the broadband distribution channel, as you pointed out earlier.

 
Maybe not. I haven't ever seen any good data on all of the major networks cable rev/sub over time.

I am sure it exists.
From this article: http://www.businessinsider.com/cable-satellite-tv-sub-fees-espn-networks-2017-3

"ESPN now charges $7.21 per subscriber, by far the most expensive cable network, and up 54% from what they were charging in 2011, when it cost $4.69 per subscriber. And that is just for ESPN's main network."

54% increase in 6 years. 

 
The "fall" of ESPN is way overstated. They are making a smaller profit than they used to. Their competitors will die off way before them. 
ESPN is be trapped in a vicious cycle that is far from over. 

The "cord-cutting" trend isn't anywhere near finished. So they will continue to lose subs to that dynamic. At some point, probably before too long, the cable companies will push back on their per sub pricing. Then they have lower pricing on top of lower subs. Meanwhile, they are locked in to paying content fees that are stratospheric.

Eventually the other shoe will drop, in the form of un-bundling. 

As the network that receives by far the highest per sub fee from the cable companies, they have the most to lose.

 
From this article: http://www.businessinsider.com/cable-satellite-tv-sub-fees-espn-networks-2017-3

"ESPN now charges $7.21 per subscriber, by far the most expensive cable network, and up 54% from what they were charging in 2011, when it cost $4.69 per subscriber. And that is just for ESPN's main network."

54% increase in 6 years. 
The rate of inflation in Cable and Sat TV overall for that time period is just under 20%. So there is no question ESPN has been a big contributor to it, but again, I don't think it is the whole story.

That inflation rate is per the Personal Consumption Expenditures data that is tracked by the US Bureau of Economic Analysis. I have seen some other data that suggests it understates the rate of increase in cable bills pretty significantly:

Once a year, Leichtman Research Group releases the results of its survey of TV households, including what people actually pay. Every year is a new record. Bills rose 39% from 2011 to 2015, almost eight times the rate of inflation.

Last year, the total for cable TV rose above $99 a month on average, and it's up another 4% to $103.10 this year, the firm reported on Friday

 
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ESPN is be trapped in a vicious cycle that is far from over. 

The "cord-cutting" trend isn't anywhere near finished. So they will continue to lose subs to that dynamic. At some point, probably before too long, the cable companies will push back on their per sub pricing. Then they have lower pricing on top of lower subs. Meanwhile, they are locked in to paying content fees that are stratospheric.

Eventually the other shoe will drop, in the form of un-bundling. 

As the network that receives by far the highest per sub fee from the cable companies, they have the most to lose.
And they will respond by increasing pricing for those who actually use/want the service, and cutting deals with more of the skinny bundle services. Will it net out? Of course not. But my point was people are acting like ESPN is about to die. They are still a behemoth printing a ton of money, with a media giant backing them up. 

 
But my point was people are acting like ESPN is about to die. They are still a behemoth printing a ton of money, with a media giant backing them up. 
Well, ESPN certainly isn't going anywhere. But their financial results are likely to remain under pressure for quite a while.

 
And they will respond by increasing pricing for those who actually use/want the service, and cutting deals with more of the skinny bundle services. Will it net out? Of course not. But my point was people are acting like ESPN is about to die. They are still a behemoth printing a ton of money, with a media giant backing them up. 
ESPN isn't just facing a problem with their business model of bundling.

They are also facing a problem with competition bidding for the content increasing astronomically. Tech companies like Twitter, Facebook and Google are now bidding for the same content ESPN, FOX, CBS and NBC are. And none of those companies actually own any sports content. They're just reselling it. When all these multi-year contracts with the pro-sports leagues and college conferences expire, they could easily just say screw the resellers and just sell direct. Eventually people won't need a sports channel anymore than they need a Blockbuster. 

 
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Maybe a bit not precisely Germane but part of what espn faces. 

I had an issue with my DVR last year, cable company sapped some shows with sentimental value. At the same time north jersey lost the YES network. I call to complain, frankly looking for a little break on a bill or something. Mind you I was a single guy paying over 200 bucks a month for the whole package. They were so unresponsive to any of my issues (including that they kept the same cable rate when they ceased paying YES) that I cancelled spur of the moment. I work in media, I still buy a newspaper or 3 most day's and they were so awful at customer service I bailed. Went with sling and I haven't missed a beat. I was going to be a customer for a long time and their crappy Attitude pushed me out and now I'll NEVER go back. 

The only thing I miss is gameday but now I'll swing by my parents and eat breakfast and watch there. Find the Monday night game in the gym or in the bar. All else they offer is not must have to me

 
Politician Spock said:
ESPN isn't just facing a problem with their business model of bundling.

They are also facing a problem with competition bidding for the content increasing astronomically. Tech companies like Twitter, Facebook and Google are now bidding for the same content ESPN, FOX, CBS and NBC are. And none of those companies actually own any sports content. They're just reselling it. When all these multi-year contracts with the pro-sports leagues and college conferences expire, they could easily just say screw the resellers and just sell direct. Eventually people won't need a sports channel anymore than they need a Blockbuster. 
I don't see any option for ESPN not to continue to pay market rates for live sports broadcast rights.  Without live sports as its tent pole, there's nothing to retain their audience, particularly in a post-bundle market.  Their only hope is that the rights fees stabilize or decline. 

 
Eephus said:
The Internet
Right.  This is the obvious correct answer. 

As a kid, Sportscenter was my only way to see highlights or get scores prior to the morning paper.  Now, I can get them on my phone in literally seconds.  Also, I can access podcasts geared towards more specific areas I'm interested in.  ESPN didn't necessary fall by its own undoing, it just provides a service that is now no longer really needed.  Kinda like Blockbuster video. 

 
Politician Spock said:
ESPN isn't just facing a problem with their business model of bundling.

They are also facing a problem with competition bidding for the content increasing astronomically. Tech companies like Twitter, Facebook and Google are now bidding for the same content ESPN, FOX, CBS and NBC are. And none of those companies actually own any sports content. They're just reselling it. When all these multi-year contracts with the pro-sports leagues and college conferences expire, they could easily just say screw the resellers and just sell direct. Eventually people won't need a sports channel anymore than they need a Blockbuster. 
Agree, but right now those companies are bidding on/acquiring the rights to provide the secondary distribution of the content. Taking what ESPN, NBC, etc is already distributing and just pushing it across their channel also. Even Amazon's new deal isn't anything exclusive.

Google or Amazon completely building up their infrastructure in order to produce live sports content is a completely different endeavor. Probably easier for them to just buy one of these other companies once they inevitably fail.

 
Building production facilities (or purchasing services from an existing producer) is small potatoes compared to the rights fees.

The leagues and teams are smart to build up the tech companies as potential long term competitors to the cable networks.  The economics of sports leagues are driven by broadcast contracts.  The people on the top are just as vulnerable if the pyramid collapses.

The money the NFL got from Twitter to stream the Thursday games was trivial but the implicit threat to Bristol and Hollywood wasn't.

 
I don't see any option for ESPN not to continue to pay market rates for live sports broadcast rights.  Without live sports as its tent pole, there's nothing to retain their audience, particularly in a post-bundle market.  Their only hope is that the rights fees stabilize or decline. 
Hence why ESPN is in a "stuck between a rock and a hard place" scenario, perhaps on a historic level. It's impossible for them to keep their existing revenue with people who have been paying for ESPN but never watching it finding ways to no longer pay for it. And on the other side, the market rates for live sports is going to significantly rise with so many new players able to deliver the game to viewers. Add the fact that those that own the content could just deliver it direct to consumers, and all I can say is owning ESPN would really suck right now. 

 
RedmondLonghorn said:
The "cord-cutting" trend isn't anywhere near finished. So they will continue to lose subs to that dynamic.
I think, as we said earlier, it will be fair to say that ESPN will be losing revenue, but with ESPN in every base package on the various streaming services, I think when all is said and done in the next 5-10 years, they will have as many households as they do today when combining old and new technologies.

As you mentioned though, they won't be able to retain the extremely high rate of revenue per household that they have enjoyed to this point.

 
I think, as we said earlier, it will be fair to say that ESPN will be losing revenue, but with ESPN in every base package on the various streaming services, I think when all is said and done in the next 5-10 years, they will have as many households as they do today when combining old and new technologies.

As you mentioned though, they won't be able to retain the extremely high rate of revenue per household that they have enjoyed to this point.
Cord cutters that pay $20+ subscriptions to streaming services are a small subset of cord cutters. Most cord cutters spend $10 or less per month on content they watch. This is why, despite ESPN being in every streaming package, ESPN is still losing subscribers. 

 
Cord cutters that pay $20+ subscriptions to streaming services are a small subset of cord cutters.
My theory is that they won't be small in the future.  I believe that the amount of households using old technology still dominates the amount of households using new technology in large numbers.  Many of those older technology households, when they eventually switch in the coming years, are going to be looking for like for like services to what they have now, just at a cheaper price, IMO.

One thing history has taught us, technology wise, is that what early adopters choose is not always what becomes the industry standard.  

I believe the industry standard will be smaller, but still fairly large, cable/sat like channel streaming packages at much more reasonable costs (at least until they invariably rise as well once the majority have switched).

We won't know the final answer for quite a while though so any other guess is as good as mine.

 
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My theory is that they won't be small in the future.  I believe that the amount of households using old technology still dominates the amount of households using new technology in large numbers.  Many of those older technology households, when they eventually switch in the coming years, are going to be looking for like for like services to what they have now, just at a cheaper price, IMO.

One thing history has taught us, technology wise, is that what early adopters choose is not always what becomes the industry standard.  

I believe the industry standard will be smaller, but still fairly large, cable/sat like channel streaming packages at much more reasonable costs (at least until they invariably rise as well once the majority have switched).

We won't know the final answer for quite a while though so any other guess is as good as mine.
A significant chunk of cord cutters are what are called "cord nevers". They never had something that they want "like for like" services in the future. If they never had ESPN, they won't want it in the future. ESPN's biggest problem is not appealing to cord nevers. 

More info on how cord nevers are different: http://www.adweek.com/tv-video/this-study-reveals-how-cord-cutters-and-cord-nevers-tv-preferences-differ/

 
A significant chunk of cord cutters are what are called "cord nevers". They never had something that they want "like for like" services in the future. If they never had ESPN, they won't want it in the future. ESPN's biggest problem is not appealing to cord nevers. 

More info on how cord nevers are different: http://www.adweek.com/tv-video/this-study-reveals-how-cord-cutters-and-cord-nevers-tv-preferences-differ/
we are  talking about two different sets of people.  I am not talking about the current cord cutters.  I am talking about the 90 milllion households that still have yet to switch.  They are the group that will define the industry standard, not the group that is currently already cut/never had.

 
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we are  talking about two different sets of people.  I am not talking about the current cord cutters.  I am talking about the 90 milllion households that still have yet to switch.  They are the group that will define the industry standard, not the group that is currently already cut.
The ones that have yet to switch are current ESPN subscribers. They are made up of people who have watched it and want to continue watching it after the switch, have watched it but won't miss it after the switch, and people who never watched and won't miss it after the switch. How much of that group ESPN keeps as subscribers depends on how many of the games they are able to outbid from a growing number of providers. Their non-game content is pretty worthless. 

 
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I don't go to ESPN.com for the most part because any potential useful information is behind the stupid pay insider wall.  So I go elsewhere to get the information I'm seeking.  Disney is greedy.  ABC is greedy.  ESPN is greedy.  

 
we are  talking about two different sets of people.  I am not talking about the current cord cutters.  I am talking about the 90 milllion households that still have yet to switch.  They are the group that will define the industry standard, not the group that is currently already cut/never had.
In a debundled, a la carte world ESPN revenues would be much lower than they are, even now. 

ESPN currently gets ~$85/year for every subscriber in a cable package that it is included with, whether they watch or not. I don't know what percentage of that number are heavy ESPN viewers who would pay a premium for ESPN on its own, but I would strongly suspect it is well less than half.

There is zero chance that they could raise prices enough for the change to be revenue neutral.

ESPN's subscriber fee revenue base is going to be much smaller in 10 years than it is now.

 
Streaming sites and satellite radio.  There are umpteen shows now on every medium.  I don't need to hear the same story 8 times. 

 
I recognize at 44 I'm falling out of being the target demographic, but I won't watch ESPN because of Stephen A. Smith and Skip Bayless. I don't watch Countdown anymore. Chris Berman held on too long and NFL Network product is much better as long as Deion and Irvin aren't paired on the panel. I like my PTI and I'll watch my live sports, but that's it.

 
it certainly is but I personally believe it is temporary.  Once the tipping point comes in the next ~5 years when the majority of Americans streams instead of Sat\cable, I think slowly the prices are going to increase for streaming.

I watched this happen in the 90's when DBS came on the scene and blew cable out of the water for pricing, but eventually as DBS got bigger and bigger, things normalized.  I believe this will happen with streaming.

Of course that does not help ESPN in the mean time, which is why they need to be more expense aware until this time period passes.
That's why I like Sling's route of offering two different packages. They are finding out just how much their customers are willing to pay for ESPN. 

Which reminds me, I need to make sure to switch to the non-ESPN package as soon as the NBA Finals start.

 
I was a faithful ESPN watcher for a long time. Barely watched it in ten years. 
ESPN (and the NFL is heading down this path) are obsessed with getting new viewers/fans...locally these people are labeled pink hats...they tend to not be your "real" sports fans and usually are the type that jump on and off a bandwagon very quickly...as they tilt their content to get them I feel they are losing the hardcore fan...there is so much schtick on some of these shows it is ridiculous...I have felt for awhile there is an opening in the sports entertainment world for a channel that goes back to the roots of what made ESPN great in its early days...

 
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Right.  This is the obvious correct answer. 

As a kid, Sportscenter was my only way to see highlights or get scores prior to the morning paper.  Now, I can get them on my phone in literally seconds.  Also, I can access podcasts geared towards more specific areas I'm interested in.  ESPN didn't necessary fall by its own undoing, it just provides a service that is now no longer really needed.  Kinda like Blockbuster video. 
I guess I'm in the minority. I'm 40. I would happily watch an actual sportscenter (or the MLB network equivalent) to have highlights curated for me so I don't have to go and search them all out. With, you know, highlights and maybe a little analysis of the actual games. WithOUT any Stephen A type segments stuck in the middle of the show. 

 

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