Cord-Cutting Leads ESPN To Target On-Air Personalities In Massive Layoffs
AUDIE CORNISH, HOST:
It's a brutal day at ESPN. The sports television giant has been handing out pink slips to dozens of on-air personalities. As many as a hundred layoffs are expected. And this comes two years after the company laid off 350 off-air employees. ESPN has traditionally been a profit-generating machine for its parent company Disney but the network has lost millions of subscribers the past few years, as cable's cord-cutting trend has cut directly into the company's bottom line.
To learn more about this, we turn to John Ourand of the Sports Business Journal. Welcome to the program.
JOHN OURAND: Thank you, Audie.
CORNISH: So tell us a little bit more about the financial bind that led to today's layoffs.
OURAND: Well, it's not only the subscriber loss which is huge and it's really affecting all cable channels. ESPN used to be in close to a hundred million houses and now it's in less than 87 million homes according to Nielsen. And ESPN gets about $7 per subscriber per month. And so that loss ends up being a lot of money. But combined with that - losses, ESPN has been paying more and more and more for sports rights.
They just started a multibillion dollar NBA agreement in the fall and they have to now pay that. And so the finances that used to work when they were in a hundred million homes, they don't work as well anymore.
CORNISH: Meanwhile, more than a quarter of U.S. households apparently don't subscribe to cable or satellite services. It's a percentage that has been on the rise in recent years. Has ESPN prepared itself for this world where there are fewer people subscribing to cable packages?
OURAND: I think that's what they're trying to do today. So they're trying to - what they call rightsizing, which is an awful corporate word for letting go of good executives and good talent. And they're just trying to be leaner and move forward in the digital future.
CORNISH: So what does that look like for consumers?
OURAND: Later this year, ESPN is going to launch an over-the-top service. That means that you don't need to have - be a cable subscriber to get it. And you'll be able to stream games to your computer. It's not going to be the best games. Those are still going to be on the cable ESPN because they still want to support the cable industry because that's what pays the bills for them.
CORNISH: So is this a little bit like what HBO has done, offering a parallel streaming app?
OURAND: Exactly. And it's what all the networks are now looking into doing 'cause they are realizing the need to go directly to the consumer 'cause consumers, especially younger consumers, are not consuming cable.
CORNISH: Now, the two groups hardest hit by the cuts so far are the reporters. For instance, Ed Werder, who covered the NFL for 17 years for ESPN, frankly, just about anyone who's connected to the NHL. But so far, it seems like the talking-head-types are safe. What does this tell you about where they're taking the programming?
OURAND: So ESPN is viewing their programming in two different ways. One is the live games. And then the second thing that they're doing is SportsCenter is a highlight show that has been a staple of ESPN since ESPN launched. But the problem is people see their highlights in real time almost on their smartphones. So the need for a highlight show like SportsCenter doesn't work as well.
So what they're trying to do now is that they're producing these SportsCenters around specific personalities. They have Scott Van Pelt around midnight. They have Jemele Hill at 6 o'clock. And so they're really counting on the fact that these personalities are going to be able to drive ratings in a way that traditional highlight shows don't do anymore.
CORNISH: The situation sounds bad because they just made so much money but they still make a lot of money. I mean, you talked about cable carriers paying upwards of $7 for every customer who gets ESPN in a bundle.
OURAND: Yeah. Don't cry for ESPN, Audie, absolutely not. They are still profitable. And they still bring in a lot of money. The problem is they just don't bring as much money as they did before and that's something that's concerning.
CORNISH: John Ourand. He writes for the Sports Business Journal. Thank you so much for speaking with us.
OURAND: Thank you, Audie.
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