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I remember it well. Back in the prehistoric year of 1979, cable television was just starting to catch-on around the country.
And then, miracle of miracles, I heard about an all-sports television network which may be coming soon to my cable television carrier.
A special channel called the Entertainment and Sports Network (ESPN) would be bringing me a chance to watch sports 24 hours per day/7 days per week? Sign me up, said this young newlywed guy in Louisiana.
Though ESPN was born in late 1979, the only other reliable sports viewing on cable television at the time was coming from the Madison Square Garden Network (which later became the USA Network). That channel featured sporting events in New York City’s premier indoor mecca. Prior to ESPN, I watched the weekly WWF professional wrestling shows (now WWE) plus in-season college basketball games, hockey, and the Westminster Dog Show from Madison Square Garden.
When ESPN started programming, they had a nightly one-hour show called “SportsCenter” which allowed me a chance to watch televised highlights from football, basketball, baseball, hockey, golf, tennis, and other sports around the country.
Of course, the network needed some “live” sports to broadcast, too. So, they cobbled together any number of low production cost events to put on the air. ESPN had a few basketball games, women’s college softball and volleyball games, tennis matches, cheerleading contests, and even a series of weekday morning exercise programs to stretch the sports day in between the network’s vaunted “SportsCenter” highlights shows.
Sports fans can thank ESPN for the developing the concept of “March Madness” as the network first became involved with the NCAA Men’s basketball tournament beginning in 1980. Before that time, college basketball fans would only see one or two feature games on each night of the tournament as local network affiliates were reluctant to anger viewers by showing a basketball game during weekday afternoons instead of soap operas, game shows, and the news.
ESPN said, “We’ll take those games!” ESPN became even more relevant and “must see TV” for male viewers. In cable television’s infancy, local systems rarely had more than 50 channels available. In case you didn’t know this, some cable channels actually paid your local cable system to carry their channel in order to guarantee their sponsors “x” number of possible viewers in “y” number of markets.
ESPN’s popularity started to soar. But, then again, so did their cost of doing business, too. In those early days, the upstart network’s production costs were minimal as many of the “live” events were small scale productions not requiring them to pay “rights” to broadcast the events. As the network’s popularity grew, viewers demanded a higher quality of sports to watch on television, too. College football became a staple for ESPN in the 1980’s.
In 1984, ESPN’s owners sold the network to ABC Television. Then ABC was purchased by The Walt Disney Corporation in 1996.
ESPN now had access to capital (ie – money) and entered into bidding wars with the traditional networks for rights to cover sports and sporting events. With the high costs of completion, ESPN needed to charge local cable television operators money for the privilege of carrying their sports programming.
ESPN quickly responded and developed ESPN2 (to show more than one feature game at the same time) and ESPN Classic (to provide sports fans with reruns of vintage sports events) to justify the high costs being charged to local cable operators.
For many years, ESPN’s relatively low cost of operation and high revenue from local cable television operators made it the profit darling of the ABC and, later, Disney family of companies.
Alas, all good things must come to an end. ESPN’s expensive contracts to cover major sports such as NCAA college football and the BCS championship series, NBA basketball, Major League Baseball, and NFL Monday Night Football necessitated the network to keep adding new cable television affiliates and/or increase the fees to existing cable operators to carry the networks’ programming.
In recent years, ESPN has charged your local cable television company upwards of $10 per month to bring their sports entertainment channels to your household. As cable television costs have gone up over the years, customers have turned to other options.
Technology has made internet-based television programming available at a fraction of the cost of cable television. In addition, some former subscribers have simply discontinued watching cable television completely.
In 2009, the FCC mandated that local television channels convert their signals to a new digital format. When they did, many local television stations were able to add up to four or five new (and free) local digital sub-channels to give regional viewers even more programming choices (such as classic television reruns on MeTV, classic movies, foreign language programming, and other specialty programs).
Cord cutting has taken a major toll on ESPN. As the network rolled out large financial commitments to cover major sports over periods of up to ten years, ESPN’s revenues have plummeted as cable television viewership has nosedived, too.
ESPN cut over one hundred of its on-air announcers, journalists, and production associates back in 2017. The network was reluctant to make these cost-cutting changes as many didn’t see the proverbial handwriting on the wall.
With soaring costs due to expensive contracts, more competition from upstart networks such as Fox Sports’ FS1, and customers bailing out of cable television by the millions annually, the revenues of ESPN simply don’t justify the continued expenses.
In the span of twenty years, ESPN has gone from the profit darlings at Disney to a huge financial drag on the earnings of Disney’s stockholders.
On Monday of this week, Disney issued a press release advising of a corporate restructuring of its media and entertainment businesses. The release further advised that its new “Media and Entertainment Distribution” organization will also have sole profit and loss accountability for Disney’s media and entertainment businesses.
CNBC’s legendary investments analyst, Jim Cramer, later suggested that Disney may be looking to jettison ESPN soon.
Cramer opined, “There is a belief we’re saturated in sports. ESPN used to be this unbelievable thing, and now it’s just a really expensive thing they are having trouble monetizing. ESPN is no longer the precious place that it once was.”
ESPN had 100 million subscribers in 2010. Just ten years later, only 80 million cable television subscribers are carrying ESPN. With 20 million fewer cable subscribers paying $10/month for ESPN’s services, the network’s revenues have dipped by $200 million per month or $2.4 billion per year.
In a competitive free market, supply and demand will ultimately find a balance. It is apparent that ESPN’s parent company isn’t happy right now.
Ratings don’t lie. The popularity of watching televised sports in America is on a sharp decline in 2020. It doesn’t matter what our personal opinions are as to why sports viewers are staying away. With fewer customers to buy this relatively expensive consumer product, Disney will seek to find a way to get ESPN’s remaining consumers to shoulder more of the costs.
So, will you pay or will you go? Is Disney willing to sell ESPN at a loss just to get rid of it?
For those of us old enough to remember the birth of this 24/7 sports network, ESPN’s time in the limelight of American sports viewers may be nearing an end sooner than you think.