Is ESPN at the Lowest Point in Its Roller Coaster?
One thing to be said, sports are entertaining. And that is the main factor in why people love them. You can experience a level of passion while watching sports that cannot be matched anywhere. Friends will frequently make a point of gathering to watch sports, especially games with a lot riding on them. You will understand the tradition of watching sports with buddies if you regularly watch the Super Bowl or the Playoffs.
Over the past few years, there’s been a tectonic transformation in the way sports are consumed by the audience. With cord-cutting becoming widespread, people of all different generations are turning to streaming platforms to get their sports fixed.
That’s basically the driving force of the streaming war that’s taken place for a while. Plenty of companies now have affiliated streaming services of their own, a family tree that comes with its own variety of challenges. In that setting, Entertainment and Sports Programming Network, better known as ESPN, appears as the worldwide leader in sports network – the top global, multi-platform sports entertainment firm with over 50 business units and the most comprehensive library of sporting assets.
The worldwide leader in sports launched in 1979 as 30,000 viewers tuned in to watch the premiere episode of SportsCenter, which was followed by a slow-pitch softball game. The channel has become the go-to stop for all sports coverage. Even so, it’s too early to celebrate all the triumphs since the title “streaming leader” might not be suitable for ESPN anymore.
Subscribers’ losses, criticisms on the expensive cost and the dominance of new players in the game have brought people to put a misgiving on the position of ESPN in the market. Many analysts anticipated that cord-cutting was going to be a threat to ESPN. Now, the big question is whether streaming is going to save ESPN’s business in this economy. Let’s read on.
Is ESPN No Longer at the Forefront of the Sports Streaming War?
Undoubtedly, ESPN has had a pretty big influence on many sports fans under the age of 40. We all hurried home to see the evening’s sports news on SportsCenter. Afterwards, we went to ESPN.com to read more timely news, but these days we merely open an app to get real-time updates.
When ESPN was created in 1979, the founders had a fundamental realization that changed everything. Who wouldn’t want 24-hour sports? It was a concept whose time had come back then, with the cable business boom just around the corner.
Sports were in high demand at the time, and ESPN’s timing couldn’t have been more ideal. From that point on until 2011, ESPN saw rapid growth and peaked with over 100 million members. Given the hundreds of millions of televisions present in America, this is to be expected.
ESPN’s success was so remarkable that it leveraged a number of overseas channels to extend its reach to other regions of the world. It is not surprising that ESPN had amassed so many customers given the wide range of sports it offered, from football and the NFL(National Football League) to the NHL(National Hockey League) and even the MLS(Major League Soccer).
This is very different from the current situation, in which ESPN has struggled and is losing customers at an alarming rate. What happened to ESPN is the apparent question raised by all of this.
With almost 75 million total subscribers at the end of 2021, ESPN lost eight million cable and satellite subscribers. The eight million members lost—roughly 22,000 people a day on average—represented 10% of ESPN’s total subscriber base and hastened the network’s catastrophic collapse from more than 100 million subscribers just over ten years earlier.
Across all ESPN network properties, the loss of nearly eight million subscribers will lose the network almost $1 billion a year in recurring revenue. Even though it represented the greatest yearly subscriber loss in ESPN history, the data, which was disclosed by the business itself just before Thanksgiving in late November of 2021, went mostly unnoticed by the mainstream media.
Disney’s annual report, which was published in November 2021, made the effects of cord-cutting more visible than ever. With 76 million U.S. households, ESPN has decreased by another 10%. They had 84 million in fiscal 2020, a significant decline from ESPN’s record of 100 million homes attained more than ten years ago.
There were reductions on ESPN’s other networks as well. For instance, ESPNU lost 11 million viewing households and dropped to 51 million homes in 2020. In fiscal 2021, ESPN News had only 59 million households, down from 62 million in fiscal 2020. Finally, ESPN has already made the decision to discontinue ESPN Classic in January 2022. This program has been in a protracted period of decline as a result of the new digital landscape.
Entered 2022, both Disney Channel and ESPN each lost 2 million subscribers this fiscal year, The Walt Disney Co. reported November 2022. The two cable networks are the largest for the media corporation, with 74 million customers, according to a report Disney made with the Securities and Exchange Commission.
The decline in subscribers is a reflection of the media sector’s challenges in retaining clients and meeting consumer demands in the streaming era. Nevertheless, this is not the first time that ESPN experienced a downturn in its long history. In fact, many warning signs have been showing up along ESPN’s streaming period, but instead of taking the issue seriously, the Disney empire seemed to ignore it.
The Rude Awakening Ring for Years
When Nielsen revealed its subscriber base for November 2016, which was the worst in ESPN’s history as a cable company—the global leader in sports lost 621,000 cable subscribers—the company’s losses were foreseen years in advance.
According to Nielsen estimates, that is the most subscribers ESPN has ever lost in a single month. For the company, it represents a frightening and disturbing trend, an acceleration of subscriber loss that doubles the average losses over the two years prior to 2016, when ESPN had been losing somewhere in the neighborhood of 300,000 subscribers a month.
The television sports network ESPN has been Disney’s money maker for much of this century, bringing in more money from US subscribers each year than the studio makes from its blockbuster “Star Wars,” “Marvel,” and “Pixar” movies combined.
Yet, over the past six years prior to 2017, fewer and fewer people have been paying for ESPN: from a peak of 100 million homes in 2011, to less than 88 million in 2017, and in 2021, ESPN lost some eight million subscribers, a 10 percent decrease. It’s reasonable to say that the network’s subscriber base has been declining.
The decline in overall pay-television subscriptions, or “cord-cutting,” is a major factor in this decline. The average pay-TV bill in America has increased to more than $100 a month in only a decade, nearly doubling as the number of channels available to homes has increased.
The high prices ESPN is able to charge pay TV providers for its services have long been a reflection of its significance in the cable package. But that revenue decreases with each customer that cuts the cord.
Since the amount spent on TV subscriptions has decreased, ESPN has been under financial strain. In the most recent agreement with the league, the rights cost for “NFL Monday Night Football,” which was already the most expensive of the league’s packages, jumped by over 30%.
Customers and potential customers have been turned off by this. While non-sports lovers can satisfy their addiction on Netflix and Amazon, sports fanatics can obtain free highlights on social media. According to research firm Kagan, ESPN is by far the most expensive channel in the package; the network receives $7.86 per subscriber, while no other basic cable channel charges even $2.
Ever since Disney obtained ABC and ESPN, those channels have had an energy boost of politically biases, which are turning off subscribers that just want to see sports and not news analysis.
The popular sports network gradually shifted away from its core business—sports—to social justice, racism, and, yes, some sports news as Disney began its downhill path towards “wokeness.”
In order to oppose the leftward shift of Disney, many of its long-time viewers—those who do not want politics or social justice injected into entertainment—have been calling their cable providers to cancel Disney services, including ESPN.
The storm is anticipated to get bigger and bigger, but the owners of the sports network seem to immune to the changes. At least, that’s what they hope the future to be. When the statistics keep pulling ESPN to the end of its era, Disney – on the other hand, keep an optimistic viewpoint about the future of the network.
Disney’s Take on the Storm– Bullish or Conservative?
At 2021’s Communacopia conference held by Goldman Sachs, Disney former CEO Bob Chapek was inquired about the importance of ESPN and sports broadcasting to his company’s streaming strategy. His response seemed like a throwaway line.
“The number one most-viewed thing every year tends to be sports, something like nine out of 10 of the top viewership events in television are sporting events,” Chapek said in a virtual session in September 2021. “Who knows what the future will bring, but it’s certainly an important part of our consumer offerings at the Walt Disney company.”
Chapek’s generic response about the future for one of Disney’s most important items influenced no follow-up questions or headlines. But Chapek was trying to address an imminent danger confront the media industry, and a concern that may one day shake the foundation of Disney’s media empire, which involves some of the most beneficial studios and film franchises in the world along with the dominant network for live sports.
Even some experts have questioned whether Disney should separate ESPN in order to give Chapek more time to concentrate on streaming. The businesses no longer belong together due to “strategic misalignment” between the parent firm and ESPN, according to an ex-Disney official who just left the company and wished to remain anonymous. Wall Street doesn’t look kindly on diminishing assets, the ex-executive claimed. A company’s stock multiple will suffer if it is connected to the old bundle, according to the CEO.
Recently, the question seemed to be answered by Walt Disney Co. Chief Executive Bob Iger. He announced a “major transformation” for the entertainment media giant in February 2023. Although this movement somehow cleared the way Disney deals with ESPN – but it’s raising a familiar question from Wall Street: What will happen to ESPN?
Iger was clear that, despite clamoring from some investors, he has no plans to get rid of ESPN, the best-known sports media brand in the business, either by selling it or through a spinoff.
Even so, leading ESPN into the future won’t be simple, as the company still must navigate the stresses of continued cord-cutting and increasing fees for the rights to air live sports.
According to Iger, ESPN will continue to be a part of the business “as long as it continues to be profitable and it too needs to find a way that basically enables it to continue to give the type of results that we’d like it to deliver,” he said in a February 2023 interview with CNBC. He denied rumors of an ESPN sale on a teleconference with analysts on the same month, while he acknowledged that such possibilities had been looked at while he was overseas.
The current setting is exaggerating the problems since consumers start to reevaluate their subscriptions amid the cost-of-living crisis, media companies looking to make their streaming platforms more appealing have been prepared to go head-to-head with their competitors. In fact, ESPN is not the only in the run, there are other becoming giants taking over the industry.
Other Hunters Starts to Take Over the Pie
The difficulty is only anticipated to grow as wealthy tech behemoths like Amazon, Apple, and Google enter the sports market to bolster their streaming companies.
With “Thursday Night Football,” Amazon proved to be a respectable NFL partner. Every regular-season Major League Soccer game and an exclusive Friday night bundle of Major League Baseball games are available on Apple. The NFL’s Sunday Ticket subscription, which offers customers access to games outside of their home markets, has a new home on Google’s YouTube.
The beginning of the NFL and Champions League seasons helped Paramount+ attract 4.6 million global subscribers in Q3 2022, as sports remained a major subscriber driver. Actually, Paramount+ scored a major victory by maintaining its position in the top division of European club soccer.
The tournament is regarded as the service’s crowning achievement, and the firm reportedly prevailed over fierce competition from Amazon, as well as interest from NBC, ESPN, Apple, Fox, Warner Bros. Discovery, and DAZN.
Peacock may have the NFL, Olympic Games and the Premier League on its programming slate, but it does not plan to needlessly overload the platform with sports content. Stockpiling content merely for the sake of it would “hit a point of diminishing returns,” according to Jon Miller, head of programming at NBC Sports, who said as much on SportsPro’s StreamTime Podcast in the spring.
Another giant is NBC, the firm finds value in exclusivity since it enables them to bundle those rights into something more alluring to viewers and marketers, especially those in the OTT space.
Those are some giants in the game right now. Looking at their plans and revenues, we can see that ESPN is losing its crown. However, is the “ESPN death” statement true or it just the temporary hype in public. The press is dominated by forecasts about the end of the ESPN empire and should Disney spin it off. The future is hard to tell, but we can look at the problems from many angles to have a more objective viewpoint.
Should We Buy the “Death of ESPN” Hype?
Although there are still many critics, many analysts are hopeful that Iger’s pragmatic approach will guide Disney’s handling of ESPN.
Analyst Michael Nathanson stated, “We urge Disney to embrace that realistic viewpoint and deftly manage their investments in future sports licenses, staffing, and overhead to reflect that bearishness.”
According to a report by Morgan Stanley analyst Benjamin Swinburne, Disney’s choice to disclose each of ESPN’s financial results shows that Iger and Pitaro are certain that ESPN’s influence goes beyond the realm of traditional TV.
If cable is no longer able to supply the critical mass it needed for success, ESPN executives have long felt the linear channel might succeed as a direct-to-consumer streaming product – the company now has 25 million customers paying for the ESPN+ service.
Pitaro also now controls ESPN+, which was earlier under a controversial split that oversaw all distribution and streaming operations. Via its digital domains and social media, ESPN attracted 108 million monthly users, many of whom were younger individuals who did not watch traditional TV.
Disney is likely of the opinion that ESPN’s financial future is brighter than the market currently believes since it has presented ESPN as a stand-alone firm, inclusive of all of its digital assets, including ESPN+, Swinburne said.
ESPN has already shown caution in its negotiations for sports rights. The business decided against signing a new contract with Major League Soccer, which is now blocked by Apple TV+’s barrier.
As ESPN engages in discussions with the NBA about rights renewal, it will be put to the test (its current deal is up after the 2024-25 season). Amazon and other digital firms are anticipated to fiercely fight for the package.
Yet ESPN will be able to control its costs moving ahead because many of the big sports’ rights deals, such as those for the NFL, Major League Baseball, the NHL, and college football, are secured for at least the next ten years.
Live sporting events continue to be the best source of large audiences for advertisers looking to target if a company is in the traditional TV business. The ratings for ESPN increased 8% overall and 14% during prime-time last year, while the rest of linear television continued to experience a steady decrease.
Many statistics show the positive and negative points in the performance of ESPN. There is not much optimism about the future of this media giant. Even so, to conclude that the network is coming to its end is too soon to say. Let’s see how ESPN play in the game that’s getting hotter.