ESPN Is In Free-Fall

[Tugg Speedman]

The sports bubble is in full collapse.  This will affect everything about sports.



ESPN Loses 621,000 Subscribers; Worst Month In Company History
Things got a ton worse for ESPN this month.
http://www.outkickthecoverage.com/espn-loses-621-000-subscribers-worst-month-in-company-history-102916

Yesterday Nielsen announced its subscriber numbers for November 2016 and those numbers were the worst in the history of ESPN's existence as a cable company -- the worldwide leader in sports lost 621,000 cable subscribers. That's the most subscribers ESPN has ever lost in a month according to Nielsen estimates and it represents a terrifying and troubling trend for the company, an acceleration of subscriber loss that represents a doubling of the average losses over the past couple of years, when ESPN has been losing in the neighborhood of 300,000 subscribers a month.

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ESPN has lost 15 million subscribers in the last 5 years

@badgate
In 2017 ESPN to spend $7.3 billion on content more than any source; then Netflix ($6bn), NBC (4.3bn), CBS ($4bn) & Amazon ($3.2bn)@badgate

[brandx]

The sports bubble is in full collapse.  This will affect everything about sports.



ESPN Loses 621,000 Subscribers; Worst Month In Company History
Things got a ton worse for ESPN this month.
http://www.outkickthecoverage.com/espn-loses-621-000-subscribers-worst-month-in-company-history-102916

Yesterday Nielsen announced its subscriber numbers for November 2016 and those numbers were the worst in the history of ESPN's existence as a cable company -- the worldwide leader in sports lost 621,000 cable subscribers. That's the most subscribers ESPN has ever lost in a month according to Nielsen estimates and it represents a terrifying and troubling trend for the company, an acceleration of subscriber loss that represents a doubling of the average losses over the past couple of years, when ESPN has been losing in the neighborhood of 300,000 subscribers a month.

-----------------

ESPN has lost 15 million subscribers in the last 5 years

@badgate
In 2017 ESPN to spend $7.3 billion on content more than any source; then Netflix ($6bn), NBC (4.3bn), CBS ($4bn) & Amazon ($3.2bn)@badgate

Don't pretend this says anything specific about ESPN. It is much broader than that.

The driving force to all of this is that people are getting rid of cable. That is where ALLof the lost subscribers are coming from. There are too many options out there now. (As a matter of fact, I am ditching cable for Vue)

The headline could just as easily have been "<pick your channel> Loses 621,000 Subscribers; Worst Month In Company History".

Things aren't going to get better without change. Hence, the reason that ESPN announced a couple months back that they will be starting a streaming service. It is very limited starting out, but just getting it started is the big news. Once it is up and running, I expect it will expand quickly and language will be added as new contracts are signed.
 

[Tugg Speedman]

Don't pretend this says anything specific about ESPN. It is much broader than that.

The driving force to all of this is that people are getting rid of cable. That is where ALLof the lost subscribers are coming from. There are too many options out there now. (As a matter of fact, I am ditching cable for Vue)

The headline could just as easily have been "<pick your channel> Loses 621,000 Subscribers; Worst Month In Company History".

Things aren't going to get better without change. Hence, the reason that ESPN announced a couple months back that they will be starting a streaming service. It is very limited starting out, but just getting it started is the big news. Once it is up and running, I expect it will expand quickly and language will be added as new contracts are signed.

I agree with you.  But the thing that was holding cable (sat TV) was live sports.  People subscribed to cable because they wanted ESPN.  That has changed.

And regarding streaming .... see the tweet above.  ESPN is shelling out $7.4 billion for broadcasting rights.  The assumption was 100 million paying $9/Month for the ESPN suite of channels, or $900 million/month.  Streaming is a business of 20 to 30 million at $20/month, or $400 to $600/month.  If this repeated for all sports channels, this spells the end of the current economics of college and professional sports.  (Note I said economics, not the end of sports)

[brandx]

I agree with you.  But the thing that was holding cable (sat TV) was live sports.  People subscribed to cable because they wanted ESPN.  That has changed.

I think the minority of people who have had cable are ESPN viewers.

[Tugg Speedman]

I think the minority of people who have had cable are ESPN viewers.

Probably but it is also the most expensive channel on a cable bill.  That is because it is, and now was, the must have channel.  Disney knew that which is why they could charge more for it than any other channel.

Fact is sports have became so lucrative because 100 million cable subscribers were will to pay $9/month out of their cable bill for all the ESPN channels (versus 75 cents/month for CNN).  Now it's 85 million and falling by 600 thousand a month.

 So in about a month we're going to get the typical thread about nobody is showing up at Marquette games. That's Should be expanded to nobody showing up at organize sporting events anymore nor watching them on TV. And the economics of sports needs to radically change.

[muwarrior69]

My wife and I went to see Sully a month ago at our local AMC 24. Tickets were $13 each (senior discount) and 2 hot dogs and 2 cokes cost $22. So 48 bucks for a matinee. Next time we'll stay home and wait for it on cable. People are paying thousands to see the Cubs in the World series. I guess my point is most folks will pay for whatever floats their boat and for some that is not cable.

[brandx]

Probably but it is also the most expensive channel on a cable bill.  That is because it is, and now was, the must have channel.  Disney knew that which is why they could charge more for it than any other channel.

Fact is sports have became so lucrative because 100 million cable subscribers were will to pay $9/month out of their cable bill for all the ESPN channels (versus 75 cents/month for CNN).  Now it's 85 million and falling by 600 thousand a month.

See, this is where I think you are wrong. The majority do not want ESPN for $9/mo. They are just stuck with it as part of the package. It certainly is part of the reason that is driving cable prices past the tipping point, but people are not shedding cable strictly because of ESPN.

Also, a lot of the people dropping cable would get ESPN if it was available as a standalone product.

[jesmu84]

See, this is where I think you are wrong. The majority do not want ESPN for $9/mo. They are just stuck with it as part of the package. It certainly is part of the reason that is driving cable prices past the tipping point, but people are not shedding cable strictly because of ESPN.

Also, a lot of the people dropping cable would get ESPN if it was available as a standalone product.

Disagree. That cost, as a standalone product, would be ridiculously high.

[Litehouse]

I see this more as the people that don't care about ESPN and don't watch sports are ditching cable.  ESPN is one of the few things causing people to keep their cable.

[brandx]

Disagree. That cost, as a standalone product, would be ridiculously high.

I disagree, Jes.

People are dropping cable because of the overall price for hundreds of channels they never, ever view. Add in the rental of a couple cable boxes and prices are pushing $200 a month. I think a lot of these people would be happy to pay $15 - $20 a month for ESPN if it wasn't coupled with a huge cable bill.

The only live TV shows that I watch are either Sports or News. Why should I purchase 200+ channels just for the privilege to watch a dozen at most?

Smaller streaming packages with 50 - 100 channels - including ESPN and FS1 and NBCSN can be had in the $40 - $50 range. Add in a one-time cost for an antenna for local stations (for NFL and other live sports on the networks) and subscriptions to Netflix, Amazon and Hulu, plus Internet service and you are looking at a price point that is just over 50% of the cost of cable - for much more content that is geared much more specifically to how you actually consume it.

And the Amazon cost is really $0 - since I more than get my money back in free shipping and lower online pricing.

[MU82]

I give Heisey a lot of crap because, by his own admission, he is a smug SOB (hence his nickname, Smuggles) who often plays loose with facts and then disappears when proven wrong.

Having said that, he's been on this ESPN-in-decline thing for quite some time and he was one of several voices who helped me decide to hold off on buying DIS stock.

There is a price at which DIS could become attractive, but we're not very close to that yet. And ESPN is, in fact, bleeding subscribers to the point where it is materially significant.

Smuggles likes to talk in absolutes and loves to exaggerate, but that doesn't mean his general themes are always incorrect.

How's that for a ringing endorsement, Smuggles?

[mu03eng]

I disagree, Jes.

People are dropping cable because of the overall price for hundreds of channels they never, ever view. Add in the rental of a couple cable boxes and prices are pushing $200 a month. I think a lot of these people would be happy to pay $15 - $20 a month for ESPN if it wasn't coupled with a huge cable bill.

The only live TV shows that I watch are either Sports or News. Why should I purchase 200+ channels just for the privilege to watch a dozen at most?

Smaller streaming packages with 50 - 100 channels - including ESPN and FS1 and NBCSN can be had in the $40 - $50 range. Add in a one-time cost for an antenna for local stations (for NFL and other live sports on the networks) and subscriptions to Netflix, Amazon and Hulu, plus Internet service and you are looking at a price point that is just over 50% of the cost of cable - for much more content that is geared much more specifically to how you actually consume it.

And the Amazon cost is really $0 - since I more than get my money back in free shipping and lower online pricing.

I still marvel at how many channels I filter out when I customize my guide (was UVerse now DirectTV). I have a package with 250 channels and I narrow it down to less than 100 and that includes all the variations of the Sunday Ticket package (RedZone, Mixes, individual games, etc). I'd say 50 of the channels are sports related (Fox Sports, ESPN, and NFL network/Ticket).

I'm about as heavy as a television viewer as you'll find and I think there has to be a culling of a lot of the content because there is just too much out there.

[GGGG]

I disagree, Jes.

People are dropping cable because of the overall price for hundreds of channels they never, ever view. Add in the rental of a couple cable boxes and prices are pushing $200 a month. I think a lot of these people would be happy to pay $15 - $20 a month for ESPN if it wasn't coupled with a huge cable bill.

The only live TV shows that I watch are either Sports or News. Why should I purchase 200+ channels just for the privilege to watch a dozen at most?

Smaller streaming packages with 50 - 100 channels - including ESPN and FS1 and NBCSN can be had in the $40 - $50 range. Add in a one-time cost for an antenna for local stations (for NFL and other live sports on the networks) and subscriptions to Netflix, Amazon and Hulu, plus Internet service and you are looking at a price point that is just over 50% of the cost of cable - for much more content that is geared much more specifically to how you actually consume it.

And the Amazon cost is really $0 - since I more than get my money back in free shipping and lower online pricing.

But right now the cost of ESPN is spread out over 90 million subscribers.  What if cable and sattelite moved more into ala carte or smaller bundles?  ESPN would be lucky to get half if its subscribers.  Maybe a third.  The vast majority of the cable channels you are talking about have minimal subscription cost.

Here is an article from a year ago that estimates what a current bundled versus an estimated unbundled cost would look like.  ESPN would be very expensive.

http://www.cnbc.com/2015/05/06/how-much-would-it-cost-to-get-your-favorite-channels-a-la-carte.html

[mu03eng]

I give Heisey a lot of crap because, by his own admission, he is a smug SOB (hence his nickname, Smuggles) who often plays loose with facts and then disappears when proven wrong.

Having said that, he's been on this ESPN-in-decline thing for quite some time and he was one of several voices who helped me decide to hold off on buying DIS stock.

There is a price at which DIS could become attractive, but we're not very close to that yet. And ESPN is, in fact, bleeding subscribers to the point where it is materially significant.

Smuggles likes to talk in absolutes and loves to exaggerate, but that doesn't mean his general themes are always incorrect.

How's that for a ringing endorsement, Smuggles?

I do wonder if at some point ESPN becomes an albatross that Disney has to look to jettison. DIS is close to losing money when they have the two largest media franchises in history (Marvel and Star Wars) thanks to ESPN.

Now, I think ESPN can figure it out as it's more of a cost related issue than a revenue related issue. The short term problem, and why the focus on subscribers, is that ESPN made a big bet a couple of years ago that subscribers would go up for all the content and wizardry they were buying. The subscribers are actually going down, so they need to rework their cost side to fit the market.

I think the thing to keep in mind that sports content is still the dominant monster on the TV landscape, even NFL with flagging ratings blows away anything else so it's not catastrophe in my opinion, it's a matter of recalibrating expectations.

[mu03eng]

But right now the cost of ESPN is spread out over 90 million subscribers.  What if cable and sattelite moved more into ala carte or smaller bundles?  ESPN would be lucky to get half if its subscribers.  Maybe a third.  The vast majority of the cable channels you are talking about have minimal subscription cost.

Here is an article from a year ago that estimates what a current bundled versus an estimated unbundled cost would look like.  ESPN would be very expensive.

http://www.cnbc.com/2015/05/06/how-much-would-it-cost-to-get-your-favorite-channels-a-la-carte.html

I think that analysis might be flawed, ESPN Classic shouldn't be the most expensive channel ala carte. The content for Classic is not that expensive so it's all about the low viewership so clearly ESPN is baring some cost in Classic as opposed to ESPN or ESPN2, etc.

[GGGG]

I do wonder if at some point ESPN becomes an albatross that Disney has to look to jettison. DIS is close to losing money when they have the two largest media franchises in history (Marvel and Star Wars) thanks to ESPN.

Now, I think ESPN can figure it out as it's more of a cost related issue than a revenue related issue. The short term problem, and why the focus on subscribers, is that ESPN made a big bet a couple of years ago that subscribers would go up for all the content and wizardry they were buying. The subscribers are actually going down, so they need to rework their cost side to fit the market.

I think the thing to keep in mind that sports content is still the dominant monster on the TV landscape, even NFL with flagging ratings blows away anything else so it's not catastrophe in my opinion, it's a matter of recalibrating expectations.

But if you look at the article, the vast majority of their costs are fixed.  They are paying $7 billion in 2017 in media rights.  It projects that they will lose money if subscribers ditch at the current rate within five years. 

Now eventually they will get out from under the contracts and will adjust accordingly.  It's the sports leagues that may have to make the long-term adjustments.  If you are an NFL legacy owner, it might be a grand time to look at selling your franchise because I doubt it will be worth as much in a decade. 

[Stronghold]

Dropped cable 6 months ago and love it.  I purchased a digital antenna that gives me free HD network channels ABC, NBC, CBS, and Fox.  That covers most football games, the local news, and my wife can watch Dancing with the Stars and The Bachelor on ABC so she's happy.  In addition to this we use Netflix, Hulu, and HBO Go.  All 3 of those accounts are shared by several parties so there's low (if any) cost involved.  Maybe they will eventually stop us from doing that.  We have more than enough to watch at this point and for the occasional $1.50 we can rent a new Redbox movie.  I currently spend ~$40 a month for internet compared to ~$110 I was spending before for internet + cable.  Saved over $400 in these 6 months and I haven't missed cable.

[ChuckyChip]

Dropped cable 6 months ago and love it.  I purchased a digital antenna that gives me free HD network channels ABC, NBC, CBS, and Fox.  That covers most football games, the local news, and my wife can watch Dancing with the Stars and The Bachelor on ABC so she's happy.  In addition to this we use Netflix, Hulu, and HBO Go.  All 3 of those accounts are shared by several parties so there's low (if any) cost involved.  Maybe they will eventually stop us from doing that.  We have more than enough to watch at this point and for the occasional $1.50 we can rent a new Redbox movie.  I currently spend ~$40 a month for internet compared to ~$110 I was spending before for internet + cable.  Saved over $400 in these 6 months and I haven't missed cable.

Sounds great, but how will you (legally) watch Marquette basketball, which is almost exclusively on FS1, ESPN, and CBS Sports Network?

[Tugg Speedman]

I give Heisey a lot of crap because, by his own admission, he is a smug SOB (hence his nickname, Smuggles) who often plays loose with facts and then disappears when proven wrong.

Having said that, he's been on this ESPN-in-decline thing for quite some time and he was one of several voices who helped me decide to hold off on buying DIS stock.

There is a price at which DIS could become attractive, but we're not very close to that yet. And ESPN is, in fact, bleeding subscribers to the point where it is materially significant.

Smuggles likes to talk in absolutes and loves to exaggerate, but that doesn't mean his general themes are always incorrect.

How's that for a ringing endorsement, Smuggles?

Wow!  I'm honored

[Tugg Speedman]

But right now the cost of ESPN is spread out over 90 million subscribers.  What if cable and sattelite moved more into ala carte or smaller bundles?  ESPN would be lucky to get half if its subscribers.  Maybe a third.  The vast majority of the cable channels you are talking about have minimal subscription cost.

Here is an article from a year ago that estimates what a current bundled versus an estimated unbundled cost would look like.  ESPN would be very expensive.

http://www.cnbc.com/2015/05/06/how-much-would-it-cost-to-get-your-favorite-channels-a-la-carte.html

Bingo!

This is a story about the massive broadcasting rights they have paid (costs) and if they continue to lose subscribers, this is flowing back to the sports leagues (and college conferences) and they will have to learn to do with less.

To use a phrase often said around here, ESPN will be fine as they will eventually adjust their costs (but stop being the money machine for DIS).  But if this continues the sports leagues (and college conferences) will not be fine.  They have never had to do with less.

My guess is Players Associations will not be as understanding and we could see more players strikes over reduced contracts (lower leagues minimums, lower salary caps, etc).

[mu03eng]

Bingo!

This is a story about the massive broadcasting rights they have paid (costs) and if they continue to lose subscribers, this is flowing back to the sports leagues (and college conferences) and they will have to learn to do with less.

To use a phrase often said around here, ESPN will be fine as they will eventually adjust their costs (but stop being the money machine for DIS).  But if this continues the sports leagues (and college conferences) will not be fine.  They have never had to do with less.

My guess is Players Associations will not be as understanding and we could see more players strikes over reduced contracts (lower leagues minimums, lower salary caps, etc).

The leagues may not need to do with less....they just may not get the avalanche of future revenue all expect. Also, keep in mind a lot of ESPN's cost are in non-live sports content like SportsCenter, technology, non-core activity, and personnel.

I don't think contracts keep going up but I heavily doubt the NFL, NBA and Div 1 football/basketball are in for some sort of austerity the next round of negotiations.

[Tugg Speedman]

Something for the Milwaukee crowd ... what did the city do right at the sports bubble peak?  Commit to building an unbelievably expensive basketball arena.

If the sports bubble is in full collapse, and the Bucks and MU do not generate the revenues they think they will, are you ready for more tax hikes to pay it?

[Tugg Speedman]

The leagues may not need to do with less....they just may not get the avalanche of future revenue all expect. Also, keep in mind a lot of ESPN's cost are in non-live sports content like SportsCenter, technology, non-core activity, and personnel.

I don't think contracts keep going up but I heavily doubt the NFL, NBA and Div 1 football/basketball are in for some sort of austerity the next round of negotiations.

$7.4 billion are broadcasting rights.  All of the highlighted parts are not that much of their cost base.

Yes, for the next few years the leagues are ok as they have contracts, but when they come up for renewal, that is when the world changes for them.

[brandx]

But if you look at the article, the vast majority of their costs are fixed.  They are paying $7 billion in 2017 in media rights.  It projects that they will lose money if subscribers ditch at the current rate within five years. 

Now eventually they will get out from under the contracts and will adjust accordingly.  It's the sports leagues that may have to make the long-term adjustments.  If you are an NFL legacy owner, it might be a grand time to look at selling your franchise because I doubt it will be worth as much in a decade.

You are right to a certain extent. But, it is not that simple.

Your link says it would cost $25/mo. for those who only wanted ESPN. But that would be if cable completely disappeared and the only option was standalone. Cable IS going to continue to bleed consumers, yet in 5 years, I would still expect 50 - 60 million people will still have cable for the convenience of having one company meet all their needs. So, with much of the expense still subsidized by these consumers, the price would not have to be near $25/mo. I would think we would see something more in the $15 - $18 range.

We also need to keep in mind that services like Sling, Vue, Amazon, and the new DirectTV slim package will see great growth over the next 5 years and will pickup a good percentage of the consumers who leave cable.

Finally, as new contracts for major sports come up for re-negotiation, we will see streaming services becoming a bigger and bigger player.

[Stronghold]

Sounds great, but how will you (legally) watch Marquette basketball, which is almost exclusively on FS1, ESPN, and CBS Sports Network?

Unfortunately it's one of the drawbacks of cutting cable.  I assume I will end up watching big games I'm interested in at a friends or a bar, and then hope I can stream some of the lower priority games or just have to bite the bullet and miss some of the games.