Why ESPN Cut The Herd

ESPN is cutting ties with popular personalities.    Three years ago, ESPN was unbeatable.  The Sports Network had the rights to every major sports league and a stable of homegrown popular stars.  ESPN was unbeatable.  Until the unthinkable happened, ESPN started losing subscribers.  The four letter network may be about sports, but it’s just like any other business.  It must watch the bottom line.

Here’s how it works.  ESPN charges satellite and cable companies the highest fees to carry their networks.  Fox Sports and Wall Street Journal reports that the cable giant lost 7.2 million subscribers in the last four years and 3 million subscribers last year.  That’s a big loss considering ESPN is paid $6.61 per subscriber to 94.5 million homes.  The math equals 7.5 billion dollars per year.

At the height of its subscriber base, Bristol could afford rights fees to NASCAR, NFL, NBA, MLB, and others.  The company successfully partnered to create the highly profitable SEC Network and the Longhorn Network.  Everything was rolling until that one unthinkable event occurred; folks began cancelling their cable/satellite contracts.  Most attribute the disruption to the popularity of popular streaming services Netflix and Hulu.

Disney, ESPN’s parent company, has mandated that President John Skipper cut 100 million dollars next year and 250 million dollars in 2017 according to the Hollywood Reporter.

Adding to the costs was the decision to renew the NBA’s television rights for a staggering 1.4 billion dollars per year versus the current 485 million dollars per year fee.  The new nine-year deal will begin in 2017, according to SB Nation.

Unfortunately, the four letter network cannot print money like the federal government.  Like all of us, Disney must follow a budget.  So who or what do you cut?  ESPN decided that Mike and Mike did not have to move to New York, which saved them 40 million dollars in rent.  The NASCAR contract wasn’t renewed.

Popular personalities Bill Simmons, Keith Olbermann and now Colin Cowherd have been allowed to leave the network.   The move will save the network 10 million dollars this year according to the Business Insider.  While saving money for the bottom line, ESPN has gutted its radio operation which at one time was the strength of their entire multi-platform strategy.  Not anymore,  the radio operation is Mike and Mike and a bunch of jabronis.

Colin Cowherd’s approach is unique and buzz-worthy.  He makes news whether debating Michigan Football Coach Jim Harbaugh or Phylis from Mulga, Alabama.  Recently Scott Van Pelt left radio to pursue a more prominent role in television.  This leaves the radio network without a consistent draw throughout the day.  Ryan Russillo is too busy debating movies and rap music in middays, and Dan Lebatard hasn’t caught on in afternoons.  The suits in Bristol believe that people will tune in just for the brand.  They forget that people create the brands!

ESPN’s cost cutting creates a welcomed opportunity to its competitors.  Fox Sports is close to signing Cowherd and possibly Bill Simmons.  We could see Olbermann appear on CBS Sports or NBC Sports.  Both created radio and cable networks to compete directly with ESPN.

The four letter network will continue to succeed.  However, they’ve now opened the door for others to cut into their popularity.