ESPN on Wednesday began another round of layoffs, this one aimed at on-air personalities, perhaps the starkest sign yet of the financial reckoning playing out in sports broadcasting as cord-cutting proliferates.
ESPN is by far the biggest and most powerful entity in the industry, and it also may feel the sting more as viewers turn away from traditional ways of consuming live sports.
The network has lost more than 10 million subscribers over the past several years. At the same time, the cost of broadcasting major sports has continued to rise. ESPN committed to a 10-year, $15.2 billion deal with the NFL in 2011; a nine-year, $12 billion deal with the NBA; and a $7.3 billion deal for the college football playoffs, among many others.
“ESPN was wrapped in Teflon for many years, but big payouts for rights fees plus significant losses in their subscriber base were like punches to the gut and head, and now the company is trying to make sure they are strong enough to fight in the future,” said James Andrew Miller, who wrote a book on ESPN and has contributed to The New York Times.
“They’ve decided one way to do this is to change their approach to content and rely more heavily on digital; this has enabled them to let go of a big chunk of their talent base.”
In October 2015, ESPN laid off about 300 people, most of whom were not on camera.
The network has been periodically culling its staff as it adapts to changing consumer habits — fans increasingly watch video clips on their smartphones at the expense of traditional highlight shows like “SportsCenter” — and searches for ways to cut costs. It is locked into long-term contracts for programming rights with various sports leagues, which means savings must primarily come from a reduced staff.
In a letter to employees Wednesday, ESPN’s president, John Skipper, acknowledged the “difficult decisions” ahead and suggested what the network was looking for as it reshaped itself in the coming days.
“Dynamic change demands and increased focus on versatility and value, and as a result, we have been engaged in the challenging process of determining the talent — anchors, analysts, reporters, writers and those who handle play-by-play — necessary to meet those demands,” Skipper said in the statement.
In the most recent quarter, Disney’s cable networks division reported $864 million in operating income, an 11 percent drop from the same period a year ago, with ESPN the reason for the entire decline, Disney said at the time. The company blamed higher NBA and NFL programming costs and lower ad sales for the weak results.
Earlier this month, Amazon paid $50 million for streaming rights to 10 of the NFL’s Thursday night games for the 2017 season — or five times more than what Twitter paid a season ago, according to SportsBusiness Journal, which also reported that Facebook and YouTube bid on the package.
The ESPN layoffs come as Disney accelerates efforts to introduce an ESPN-branded subscription streaming service. The offering, expected this year and made possible by Disney’s $1 billion purchase in 2016 of part of BamTech, Major League Baseball’s streaming division, will include coverage of sports like hockey, tennis, cricket and college sports — mostly rights that are already owned by ESPN but not televised.
“You have to be willing to either create or experience some distribution as we migrate from what has been a more traditionally distributed world to a more nontraditional distribution world,” Robert A. Iger, Disney’s chief executive, told analysts on a conference call in February. “And some of that we’re going to end up doing to ourselves, meaning that we understand there is disruption, but we believe we have to be a disrupter too.”
Disney has long relied on ESPN’s steadily climbing cable subscriber fees as a profit engine. But cable networks across the board have been losing viewers to online media, which has slowed growth, and Wall Street has responded unfavorably.
Despite assurances by Iger that ESPN remains strong, investors and analysts have remained concerned about upheaval in the television business. Viewership via satellite and cable services is declining as streaming options proliferate, and ESPN, the naysayers contend, is particularly exposed to a slowdown because Disney has locked itself into lavish, long-term payments for sports rights. In a sign that Disney had done a good job preparing investors for the layoffs, shares climbed slightly inWednesday morning trading.
Here are some of the ESPN employees who have made statements on social media so far: Ed Werder, NFL reporter; Jayson Stark, baseball writer; Trent Dilfer, NFL analyst; Dana O’Neil, college basketball reporter; Eamonn Brennan, college basketball reporter; Danny Kanell, “Russillo and Kanell” radio host; Jane McManus, writer; Jeremy Crabtree, college football reporter; Brett McMurphy, college football reporter; Brian Bennett, Big 10 reporter; Doug Padilla, baseball writer; Max Olson, college football reporter; C.L. Brown, college basketball reporter; Mike Goodman, soccer writer; Johnette Howard, columnist; Austin Ward, Big Ten football reporter; Joe McDonald, hockey writer; Pierre LeBrun, hockey writer; Scott Burnside, NHL columnist; Jesse Temple, Big Ten football reporter; Jim Bowden, baseball analyst; Mark Saxon, baseball reporter; Brett McMurphy, college football reporter; Paul Kuharsky, Tennessee Titans writer; Derek Tyson, SEC recruiting analyst; Jean-Jacques Taylor, ESPNDallas; and Brendan Fitzgerald, ESPNU host.