It has been widely understood for a while now that ESPN would lay people off in 2017, and Richard Deitsch has some of the details. Via Sports Illustrated:
SI has learned that ESPN will have significant cost-cutting over the next four months on its talent side (people in front of the camera or audio/digital screen). Multiple sources said ESPN has been tasked with paring tens of millions of staff salary from its payroll, including staffers many viewers and readers will recognize. Those with contracts coming up would be particularly vulnerable, sources said. The company is also expected to buyout some existing contracts, which is something rare for ESPN historically beyond a few NFL talents. The cuts are expected to be completed by June.
ESPN’s last major layoff was in October 2015, cutting somewhere north of 300 employees, mostly behind-the-scenes people. Not much more cutting can be done there before hitting bone, so it makes sense that these layoffs will be focused on “talent.”
ESPN has long believed that the ESPN brand was more important to creating stars than the stars themselves, and has largely been proven right, as the majority of those who have left Bristol have achieved less fame elsewhere. That belief has only been bolstered in the last year, with Fox Sports poaching ESPN leftovers—and winning legitimate bidding wars for Colin Cowherd and Skip Bayless—only to see Fox’s Suicide Squad barely dent the ratings. (Much more worrying is that Fox Sports poached the rights to broadcast the next two World Cups, a growth property, for what is a comically low price in retrospect.)
The most immediate causes of the layoffs are clear. Over the last several years rights fees have skyrocketed, with ESPN now paying over $3.3 billion annually just to broadcast the NFL and NBA. Simultaneously, ESPN’s subscriber count and viewership—the fabled dual revenue stream that has made it the most envied television company in the country—have tumbled. While the loss of 12 million subscribers over five years is mostly due to generalized cord cutting, and not subscribers specifically dropping ESPN, it doesn’t really matter: It still amounts to losing almost a billion dollars annually. The status quo is unsustainable, and with rights fees already locked in for several years, salaries are one of the biggest areas available to cut expenses.
For the last year or so, ESPN has been a drag on Disney’s stock price, after two straight decades of buoying it. In the fourth quarter of 2016 Disney posted lower-than-expected revenue numbers, blamed in large part on a rise in programming costs and a drop in advertising revenues at ESPN. It’s worth wondering if layoffs are a way of signaling to Wall Street that ESPN and Disney will do everything necessary, even if it is uncomfortable and unpopular, to cut costs and restore profit margins.
But layoffs of camera-facing employees raises a deeper, more existential question: What is ESPN’s identity if it is no longer a world-conquering behemoth? ESPN has built its brand on there never being a credible alternative—on you never having to change the channel, spin the radio dial, or go to another website—and by being the biggest mover in any field it decides to enter. The worldwide leader won’t be overtaken any time soon, but they are slowly, perceptibly, sliding back to the rest of the pack.
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