These two facts coupled together – ESPN cuts costs while losing subscribers – has triggered a wave of coverage speculating these are the first signs of eventual financial doom. With headlines such as “Is ESPN a giant bubble about to burst?” and, more colorfully, “The numbers behind ESPN’s grim meathook future,” these stories basically argue the nationwide trend of people ditching cable will further sap ESPN of income while the network still owes gobs of money to sports leagues to broadcast their games.
With apologies to our colleagues in sports media – we’re all engaging in crystal-ball journalism here based on incomplete financial glimpses of media conglomerates – there’s just as strong an argument to be made that ESPN is better positioned than any of its competitors to handle a market transition from cable bundle to a la carte streamed television.
Here are a few reasons why:
1. ESPN is the most-watched cable station in America.
This is a footnote in recent coverage, but it bears repeating: ESPN is America’s top-rated cable network.
Yes, ESPN, like all cable networks, has seen its subscriber base slide, dropping more than 3.2 million in a little more than a year, according to the Wall Street Journal. And yes, ESPN charges cable companies, and therefore consumers, far more than any other channel: $6.61 per subscriber, according to data collected by SNL Kagan, more than four times what the next most expensive channel charges (TNT, at $1.65 per subscriber). But ESPN commands that price because of the 90-some million cable subscribers in America, more watch ESPN than any other network.
In a post-cable, unbundled world, however, ESPN would have to charge way more than $6.61 monthly per subscriber, because the network would lose income from the millions of non-sports fan cable subscribers who wouldn’t buy ESPN. A recent survey found only 35.7 percent of people would pay for ESPN if they could pick their own cable lineups, fueling estimates the network would have to charge $20 to $30 monthly in an unbundled world.
ESPN doubters argue sticker shock would scare away so many sports fans the network would be in serious trouble. While it is true ESPN would have to strike a delicate balance in pricing a standalone product affordable enough to attract some cord-cutters while not so cheap it prompts droves of sports fans to cancel their cable subscriptions, that doesn’t mean the “World Wide Leader” is in any more trouble than any other cable network in a rapidly changing industry.
Michael Nathanson, senior research analyst at MoffettNathanson, estimates ESPN would actually have to charge about $36 monthly in an unbundled world, but he thinks the network would still get more than enough customers. The sports networks really threatened by a move away from cable, according to Nathanson, are ESPN’s competitors Fox Sports 1 and NBC Sports, both on a recent list he compiled of the 10 most expensive cable channels not among the most viewed.
“If everyone gets weaker, the bottom end of the market would get weaker, and (Fox Sports 1 and NBC Sports) therefore would probably have less conviction to get into bidding wars with ESPN … for these sports rights,” said Nathanson.
Which brings us to our next point.
2. If sports television rights are a bubble, we’re not seeing signs of a burst yet.
A central premise to the argument ESPN is in big trouble is that sports rights fees, which have gone up astronomically over the last decade, are a bubble. Just like a homeowner who bought an overpriced house in 2007 before real estate values plummeted, the argument goes, ESPN could soon be underwater on the billions it owes the NFL, MLB, NBA, and various college leagues to televise their games.
(Any guess at exactly how much ESPN spends on rights fees is just that – a guess – but a recent Fox Sports story estimated ESPN’s annual tab at $6 billion.)
The problem with this argument is we’re not seeing many signs of a slide in the actual value of these rights. There have been signs of leveling off for local television rights – stations launched by pro sports teams in Houston, Kansas City and Charlotte have struggled – but every time a national sports league puts its product on the market, it makes more money than it did before. Live sporting events continue to be more DVR-proof than any other kind of programming, and broadcasters desperate for captive audiences continue to shell out more money to sports leagues.
Most recently, the NFL got a reported $300 million from CBS for its Thursday night package for the upcoming season, up from $275 million the year before. Last fall, ESPN and TNT agreed to nearly triple their annual payments to the NBA – from $930 million to $2.66 billion per year – in order to renew their contract through 2025.
One major caveat: we don’t know how much the networks actually profit from these events. We get glimpses in reports of TV ad prices for big games, but we never get post-game profit or loss reports. But if broadcasting companies are losing money on live sporting events, they’re certainly not acting like it. The English Premier League is currently seeking an American broadcaster,according to Sports Business Journal. Expected to submit bids: ESPN, Fox, and NBC.
And while ESPN spends a lot of money on sports rights, it still generates a profit, year after year, of between 20 and 30 percent of its expenses, according to SNL Kagan analyst Scott Robson. Its fledgling competitors have not. NBC Sports, which launched in 2012, turned a profit for the first time in 2014. Fox Sports 1, launched in 2013, should turn a profit for the first time in 2016, according to Robson. (ESPN, Fox and NBC all declined to comment.)
3. These budgets cuts really aren’t that significant, relative to ESPN’s size.
The departures of Bill Simmons, Keith Olbermann and Colin Cowherd have come when, according to The Hollywood Reporter, ESPN has been told to trim $100 million from its 2016 budget and $250 million from the 2017 budget.
ESPN disputes these numbers, but let’s say they’re accurate. Yes, $100 million is a lot of money. But when your annual budget is in the neighborhood of $6 billion (and probably more) $100 million represents less than 2 percent of the overall pie. And ESPN is far from the only cable network looking to trim.
“This is an industry-wide trend,” said cable industry analyst Nathanson. “We’ve had five straight quarters of less than expected television advertising … and you’ve seen a bunch of companies all go through cost-cutting.”
ESPN has a long track record of letting high-priced talent leave. ESPN does not have a long track record of letting competitors corner the market on live sporting events. The network has recently relinquished rights to some events – the British Open, U.S. Open golf and, according to a Monday Sports Business Journal story, the French Open – but with ESPN locked into deals with America’s major sports leagues for the rest of this decade, the sports cable landscape should stay relatively stable until the early 2020s.
In 2021, ESPN’s contracts with the NFL, ACC, Australian Open, and Big 12 expire. In 2022, ESPN’s deal with Major League Baseball is up. Which brings us to our most speculative point.
4. The biggest threat to ESPN is not other cable sports channels; it’s the leagues themselves.
Cable sports channels exist because there’s more inventory of sporting events than there is airtime on the Big Four broadcasters (ABC, CBS, NBC and Fox), and there are many events that won’t draw large enough audiences to merit airspace on those stations. The leagues themselves have started taking some of that inventory for themselves, though, by airing events on their own stations.
The biggest threat to ESPN, and its competitors, is a scenario develops in which sports leagues can make more money televising their games themselves than they do now selling their television rights to the highest bidder. That day could come, analysts think, but not this decade.
“I think the NFL’s people are the smartest people in the room. If it made more sense for them to go direct to consumer, they would do it tomorrow,” said Rich Greenfield, media and tech analyst at BTIG. “They are laying the groundwork to go direct to consumer over time, but that is a 2020-plus event.”
In the meantime, analysts see ESPN as the best-positioned cable station to monetize America’s sports fans, no matter which medium fans use to watch sports.
Last Monday, on CNBC’s Squawk Box, Walt Disney CEO Bob Iger said he could see ESPN offering a direct-to-consumer product like HBO Go, but it wouldn’t happen in the next five years.
Later the same day, Anthony DiClemente, an industry analyst with Nomura, also appeared on Squawk Box. He was asked about ESPN’s prospects in an unbundled world.
“ESPN has the quality and has the following to go direct to consumer,” DiClemente said. “Ultimately, if the bundle breaks apart, Disney and ESPN are well-positioned because you have such demand for ESPN’s sports … the No. 1 sports brand in the country and in the world.”
Credit to the Washington Post who originally published this article
Warriors Fans Throw Objects At Charles Barkley On Inside the NBA Set
“Barkley yelled back at the crowd but never actually left the set.”
Charles Barkley is no stranger to being the object of fans’ ire. The cities of San Antonio and Cleveland have a history of being the butt of the Round Mound of Rebound’s jokes. Thursday night in San Francisco, fans of the Warriors took things to a different level, throwing objects at Barkley on the Inside the NBA set.
The TNT studio show was broadcasting live from outside the Chase Center. The crowd chanted “Chuck, you suck!” at Barkley before the game. After Golden State clinched a birth in the NBA Finals, things got physical.
Fans threw things at the set, including a rolled-up t-shirt, which hit Charles Barkley in the back of the head. That resulted in Barkley leaving his seat and bowing up to the audience.
“Come on Chuck!” Ernie Johnson pleaded as Kenny Smith repeatedly said “Sit down Chuck.”
Barkley yelled back at the crowd but never actually left the set.
Now that the Western Conference Finals are over, TNT’s NBA schedule has concluded. That doesn’t mean Charles Barkley won’t return to San Francisco for the NBA Finals, but it is highly unlikely given the reception he has received there.
Barkley spent most of the postseason telling Golden State fans they were annoying and need to shut up and saying the city of San Francisco has “dirty ass streets”.
Jon Miller To Call MLB Sunday Leadoff Game On Peacock
“According to a press release, Jason Benetti has a scheduling conflict.”
Legendary play-by-play man Jon Miller will be returning to the national broadcast booth on Sunday. He will call the San Francisco Giants vs. Cincinnati Reds game for Peacock. He’ll be joined in the booth by Barry Larkin and Shawn Estes.
According to a press release, Jason Benetti has a scheduling conflict. Benetti, the regular play-by-play voice of Peacock’s MLB Sunday Leadoff, is also the television voice of the Chicago White Sox. NBC Sports Chicago has prioritized this weekend’s series between the White Sox and Cubs, making Benetti unavailable to the national broadcast.
Miller has been calling Giants games since 1997 and previously shared the Sunday Night Baseball booth on ESPN with hall of famer Joe Morgan.
The broadcast, called MLB Sunday Leadoff, will begin at 11 a.m. with pregame coverage hosted by Ahmed Fareed. The game broadcast begins at 11:30 a.m.
The game will take place in an exclusive two-hour broadcast window prior to the start of the rest of the league’s day of games.
Amazon Eyeing Pat McAfee For Thursday Night Football Megacast
“No deal is done yet. A source tells McCarthy that it hinges on McAfee’s very busy schedule, but a Megacast is appealing to the former punter.’
First it was the Mannings. Now it’s McAfee. Michael McCarthy of Front Office Sports reports that Pat McAfee could be at the center of an alternate broadcast of Thursday Night Football on Amazon in the 2022 season.
No deal is done yet. A source tells McCarthy that it hinges on McAfee’s very busy schedule, but a Megacast is appealing to the former punter.
Rumors of Amazon’s interest in McAfee began to bubble up last month. While he never directly addressed them, he did make mention on his show that he was “up to something” and insinuated that Amazon wasn’t the only company he was talking to.
McAfee has said on his show in the past that he wants to be part of an NFL broadcast. However, he is firm in that it would not be in the broadcast booth.
“I can’t call games. Not yet,” McAfee said on a show in February. “Have to be done with this show to call games. Because that’s like a 3-day, 4-day thing.”
In addition to his daily show, McAfee is also committed to the WWE. He is on the road for Smackdown every Friday.
There is no word on exactly what a Pat McAfee-centered broadcast would look like. When reports first came out regarding discussions with McAfee, Ryan Glasspiegel of The New York Post reported that moving The Pat McAfee Show to Amazon was on the table. If that happens, it would make sense to use his entire crew on the Thursday Night Football presentation.