A recently laid-off ESPN source gave us more details about the ESPN job cuts, the first significant staff reduction in four years. First off, it appears these layoffs will stretch over several weeks. There will be more technology and creative services layoffs today. Layoffs in production are coming in a few weeks; remote production layoffs will follow that; and then, some time in the summer, layoffs will hit the Charlotte office. This is how ESPN is going to get those to 300 to 400 job cuts: over several weeks, in excruciatingly slow fashion.
Age and salary are clearly factors. Our source tells us: "Nearly everyone laid off yesterday were long time employees, with at least two of them very close to retirement, and they were NOT offered early retirement. They were laid off like the rest of us."
ESPN has thus far stuck to its initial talking points: We need to do this to get better; we need to do this to pay for things like the U.S. Open or the SEC Network. "They keep reusing the phrase 'trying to remain competitive' ad nauseam," one source told me. Another: "They said this is all cause of the money ESPN invested in its future—SEC Network, new digital center, NFL rights, etc."
So, about that digital center. Construction began in 2011. Move-in date is supposed to be sometime next year. This is where SportsCenter's new home is going to be. The set is huge and gaudy. ESPN showed off a preview of the new set at its upfront presentation last week, which in retrospect looks like a very poorly timed touchdown dance. And one laid-off staffer gave us a whole lot of details about the budget crisis on that front. If ESPN doesn't find money, the network can't debut this set a year from now.
The source told me in an email: "ESPN doesn't have enough money to pay for the equipment and integration resources in this year's budget. If they had to wait until October (the new fiscal year) the building would not be able to debut SportsCenter in June (2014) and the NFL in August (2014)."
What's the budget look like?
Our source said that ESPN "doesn't have enough money to make the necessary down payments on integration services and the core equipment. They've been stressing on how they would find that roughly $11-$15 million (depending on how they prioritize) and this may just be how they came up with that funding."
So what's "integration services" and "core equipment?" TV stuff, essentially. "Integration services" involves the wiring and equipment installation in the facility. "Core equipment" provides the vital infrastructure for the building—routing switchers, intercom systems, two-way radio systems, nuts-and-bolts stuff. There's a two-step plan to build this building.
"Phase 1 is to support the build of the SportsCenter related studios and infrastructure to support an early June 2014 launch of SportsCenter from the new building," our source said. "Phase 2 is to support the remainder of the build, which supports the launch of NFL related shows from the new building in August 2014."
The problem is ESPN doesn't have the money to get this done in time. Our source puts the cost at somewhere in the neighborhood of $11 to $15 million.
Here's our source:
The $11-15 million figure is the cost associated with the equipment, wiring, and implementation services necessary to be paid for BEFORE the end of the fiscal year (the end of September). They need to pay down payments on the equipment in order to order it for delivery after October 1 (the new fiscal year, when they do have money allocated), and down payments to the System Integration companies (for the labor and support to do the wiring and installation, and the detailed design, in many cases)."
At present, they do not have enough money to pay these down payments, and even if they halted all other internal engineering work (engineering is under Technology), they wouldn't be able to raise the many millions necessary through internal means.
Which is why there's a little theory floating around Bristol today. Again from our source:
That's why there might be conjecture that the layoffs may play into some sort of deal between ESPN & Disney - layoff a certain percentage of staff = getting the budget needed for DC2. Obviously the layoffs aren't solely because of this, they are likely also tied to the amount of spend ESPN has been doing recently to tie up sporting events and keep them away from their aggressive competition—NBC, CBS, and Fox.
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