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More trouble ahead at ESPN

Mark Garrison Sep 23, 2015
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ESPN’s in a lousy place.

The grand champion of sports TV is losing millions of subscribers, even while it is on the hook to pay billions to sports leagues for the rights to air games. That math doesn’t cut it on Wall Street, giving rise to recent talk that the network, owned by Disney, is gearing up to lay off hundreds of employees to trim costs.

Those cuts would come on the heels of a talent drain at the network. In recent months, ESPN has lost some of its pricey, high-profile sportscasters, including Bill Simmons and Keith Olbermann.

John Brillhart knows a lot about ESPN’s problems. He runs his own business outside Minneapolis.

“I’m a cord-cutting consultant,” Brillhart said. “And what I do is I help people get rid of cable or satellite and use other options to watch television.”

The idea that cable uninstaller is a hot new career track says a lot about why ESPN’s corporate overlords are tightening belts. Cord-cutting customers are devastating.

“Consumers are looking for content in other places,” said Brett Sappington, who directs research at Parks Associates. “So if your revenues are based significantly off of cable TV, then you get hit pretty hard by that.”

Even if you hate sports and don’t even know what channel ESPN is on, the network gets your money if you have cable.

“All of them are paying over $6 a month to get the network,” said Brad Adgate, with Horizon Media.

That’s a hefty number compared to what other channels charge cable companies. But big rates don’t help if cable subscribers keep disappearing. ESPN has astounding bills to pay the NFL, NBA and others.

“They have contractual obligations to meet these rising sports rights, and so the only way to cut cost is they have to cut other costs that aren’t the sports-rights costs, so they’re cutting people,” said Laura Martin, a senior analyst at Needham & Company.

Things will only get nastier for ESPN’s legacy cable business. It’s a company built on collecting six bucks a month from every cable-subscribing household, sports fans and non-fans alike. That’s a selling point for Brillhart, the cord-cutting entrepreneur.

“A primary consumer of mine is customers that don’t necessarily watch sports,” he said.

 

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