Sea Change in TV Sports Viewing

[bags27]

ESPN Loses 621,000 Subscribers; Worst Month in Company History

The biggest business story in American sports this fall isn't the declining NFL ratings or anything that's happening on the field, court, or ice, it's the collapse in ESPN subscribers, which reflect a larger trend in the collapse of cable subscribers in general.

Yesterday Nielsen announced its subscriber numbers for November 2016 and those numbers were the worst in the history of ESPN's existence as a cable company -- the worldwide leader in sports lost 621,000 cable subscribers. That's the most subscribers ESPN has ever lost in a month according to Nielsen estimates and it represents a terrifying and troubling trend for the company, an acceleration of subscriber loss that represents a doubling of the average losses over the past couple of years, when ESPN has been losing in the neighborhood of 300,000 subscribers a month.

 

[BroadwayVa]

ESPN Loses 621,000 Subscribers; Worst Month in Company History

The biggest business story in American sports this fall isn't the declining NFL ratings or anything that's happening on the field, court, or ice, it's the collapse in ESPN subscribers, which reflect a larger trend in the collapse of cable subscribers in general.

Yesterday Nielsen announced its subscriber numbers for November 2016 and those numbers were the worst in the history of ESPN's existence as a cable company -- the worldwide leader in sports lost 621,000 cable subscribers. That's the most subscribers ESPN has ever lost in a month according to Nielsen estimates and it represents a terrifying and troubling trend for the company, an acceleration of subscriber loss that represents a doubling of the average losses over the past couple of years, when ESPN has been losing in the neighborhood of 300,000 subscribers a month.

Almost 100,000,000 subscribers at 7 dollars per month---I feel terrible for ESPN. I guess paying the AAC for TV rights to WBB must nearly bankrupt ESPN.

Yet if you project this trend and escalate it a bit---the beginning of the end has begun for ESPN and like enterprises. I suspect the founders will limp off into the sunset with billions in their war chests. What will Bristol do?? No clocks, No ESpN, they'll just have to make Compounce bigger.
Muzzy Field will always be there.

 

[BigBird]

ESPN is being hit by multiple socio-economic factors, much as newspapers and radio have also been. One bullet might be survivable, but three or four, not so much. Viewers are shifting to mobile devices, re-allocating media dollars, becoming harder to identify (and hence, reach), and they are aging. For now, at least, the number of competing media outlets continues to soar, adding yet another bullet.

This new competition is coming from sources both likely and unlikely. Anyone can put a "radio" station together on the web. Anyone. I've done it. Each of these stations plays to typically small and parsed audiences, but the cumulative effect is fewer people listening to broadcast radio at all.

Pandora seems to be doing well. And there are other examples. The in-vehicle CD player wasn't seen as a threat to radio, even as it became wildly popular. Not too smart. With wireless connectivity to devices, the marketplace crosshairs fall upon the next victim: SiriusXM. Who needs them, when I have Pandora AND my entire music collection on my Ipod?

Meantime, ESPN is going away from the things that originally made them great. Things like Thursday Night Thunder (racing) which was a good example of low-cost productions of actual sports events that had considerable following. Now, we get a few super-costly sports events, surrounded by hours upon hours of former writers and players jabbering ad nauseum about their opinions. There is a pollution of purpose afoot when you call yourself a sports network, but show fewer and fewer sports events. If there is one thing that TV in general is loathe to do it is to shut up and show the sport (Olympic coverage, anyone?).

Finally, when the FCC created "statuatory basic" as a cable tier, they fired a shot over the bow of the ESPNs of the world. But the message was poorly understood. The first thing cable systems did was to drop ESPN off the bottom tier so that no one would want that cheaper package. Now that same cannon isn't firing warning shots.

 

[UcMiami]

It is an interesting dynamic because the subscriber base shrinking (like with magazines and newspapers before them) is a double hit - advertising revenue is based on eyeballs, so not only do you lose the basic fee of the subscriber, you also lose the value of all of the commercials you are running.

BigBird - one area that ESPN has done a very good job on is ESPN3 - free streaming as long as you are buying ESPN on your cable package. It is a huge incentive for sports fans, one that I make use of probably more than their TV channels because it provides access to so many regional and local broadcasts that are not available elsewhere. They do not get the kind of ad revenue from that, but they certainly are providing a very useful service for a lot of fans. I would not be surprised if they pulled back some of their TV channels to save costs and focused on developing more revenue from the streaming product.

The other aspect of this is that the whole model of sports may have reached its peak - many of the sports rights contracts are in fact money losing propositions for the networks that signed them - they justify the contracts on two counts: projected continued expansion of viewership; and the knock-on viewership for pre and post game programing that is much cheaper to produce. The problem is that we may in fact have reached both saturation point for the expensive contract sports' viewership, at the same time that the breadth of sports including secondary ones is eating into the primary audience. How many hours per week can a person actually watch sports programming and if they are into MMA or X-games or ...., is the time they watch those events causing them to tune out of a few NBA or NFL games each week.

 

[JordyG]

ESPN is being hit by multiple socio-economic factors, much as newspapers and radio have also been. One bullet might be survivable, but three or four, not so much. Viewers are shifting to mobile devices, re-allocating media dollars, becoming harder to identify (and hence, reach), and they are aging. For now, at least, the number of competing media outlets continues to soar, adding yet another bullet.

This new competition is coming from sources both likely and unlikely. Anyone can put a "radio" station together on the web. Anyone. I've done it. Each of these stations plays to typically small and parsed audiences, but the cumulative effect is fewer people listening to broadcast radio at all.

Pandora seems to be doing well. And there are other examples. The in-vehicle CD player wasn't seen as a threat to radio, even as it became wildly popular. Not too smart. With wireless connectivity to devices, the marketplace crosshairs fall upon the next victim: SiriusXM. Who needs them, when I have Pandora AND my entire music collection on my Ipod?

Meantime, ESPN is going away from the things that originally made them great. Things like Thursday Night Thunder (racing) which was a good example of low-cost productions of actual sports events that had considerable following. Now, we get a few super-costly sports events, surrounded by hours upon hours of former writers and players jabbering ad nauseum about their opinions. There is a pollution of purpose afoot when you call yourself a sports network, but show fewer and fewer sports events. If there is one thing that TV in general is loathe to do it is to shut up and show the sport (Olympic coverage, anyone?).

Finally, when the FCC created "statuatory basic" as a cable tier, they fired a shot over the bow of the ESPNs of the world. But the message was poorly understood. The first thing cable systems did was to drop ESPN off the bottom tier so that no one would want that cheaper package. Now that same cannon isn't firing warning shots.

It is an interesting dynamic because the subscriber base shrinking (like with magazines and newspapers before them) is a double hit - advertising revenue is based on eyeballs, so not only do you lose the basic fee of the subscriber, you also lose the value of all of the commercials you are running.

BigBird - one area that ESPN has done a very good job on is ESPN3 - free streaming as long as you are buying ESPN on your cable package. It is a huge incentive for sports fans, one that I make use of probably more than their TV channels because it provides access to so many regional and local broadcasts that are not available elsewhere. They do not get the kind of ad revenue from that, but they certainly are providing a very useful service for a lot of fans. I would not be surprised if they pulled back some of their TV channels to save costs and focused on developing more revenue from the streaming product.

The other aspect of this is that the whole model of sports may have reached its peak - many of the sports rights contracts are in fact money losing propositions for the networks that signed them - they justify the contracts on two counts: projected continued expansion of viewership; and the knock-on viewership for pre and post game programing that is much cheaper to produce. The problem is that we may in fact have reached both saturation point for the expensive contract sports' viewership, at the same time that the breadth of sports including secondary ones is eating into the primary audience. How many hours per week can a person actually watch sports programming and if they are into MMA or X-games or ...., is the time they watch those events causing them to tune out of a few NBA or NFL games each week.

Two cogent, well thought out responses. These are the same problems which network TV faced with the advent of cable. Another issue that ESPN faces is how network TV has feed into the public's desire to view everything as sport: Marriage competitions, job competitions, family competitions, drinking or eating competitions, idea competitions. This too blurs the boundaries and alters the model of what exactly is sport. Again, a reflection of a society that needs to award a chip for every human act. All becomes nothing at all.

 

[BigBird]

BigBird - one area that ESPN has done a very good job on is ESPN3 - free streaming as long as you are buying ESPN on your cable package. It is a huge incentive for sports fans, one that I make use of probably more than their TV channels because it provides access to so many regional and local broadcasts that are not available elsewhere.

True. Same at my man cave. But it should also be noted that these productions are often rented (sic) from other producers, or are produced by the teams (or schools) themselves. This neatly shifts the cost away from ESPN, or allows them to reach additional eyeballs by replaying games -- and their commercial content. Yet another example of a shifting media landscape. And yes, I'd agree that the closest product to the original ESPN is ESPN3. Good point.

 

[huskyd]

Two cogent, well thought out responses. These are the same problems which network TV faced with the advent of cable. Another issue that ESPN faces is how network TV has feed into the public's desire to view everything as sport: Marriage competitions, job competitions, family competitions, drinking or eating competitions, idea competitions. This too blurs the boundaries and alters the model of what exactly is sport. Again, a reflection of a society that needs to award a chip for every human act. All becomes nothing at all.

Whew! I was afraid for a minute that you were going to attack spelling bees and cheerleader contests. But seriously folks, I find myself watching less and less TV in general. I find programs on my computer that I enjoy and turn off TV after the 6PM news. At some point people have revolted from the idea that cable gets to decide what we watch and what we pay for it. After "Lock her up!" "Cut the Cable" is the national chant. Here's a simple concept: let me choose what to watch. I'll be glad to pay for that.

 

[JordyG]

Whew! I was afraid for a minute that you were going to attack spelling bees and cheerleader contests. But seriously folks, I find myself watching less and less TV in general. I find programs on my computer that I enjoy and turn off TV after the 6PM news. At some point people have revolted from the idea that cable gets to decide what we watch and what we pay for it. After "Lock her up!" "Cut the Cable" is the national chant. Here's a simple concept: let me choose what to watch. I'll be glad to pay for that.

With the 4 billion channels I get here in NY not including On Demand to time shift, I get ample choice as to what I want. Now the idea of paying for the 3,999,999,900 I don't want, well, that is perhaps the issue.

 

[BigBird]

...I find myself watching less and less TV in general. I find programs on my computer that I enjoy and turn off TV after the 6PM news. At some point people have revolted from the idea that cable gets to decide what we watch and what we pay for it.... "Cut the Cable" is the national chant...let me choose what to watch. I'll be glad to pay for that.

Understood. You, me, and thousands of others. But eventually, we must arrive at a business model that allows producers of programming content to be systematically and reasonably compensated. That programming that you said you find online was produced by somebody. And that somebody either placed it in the public domain, or it is, in fact, their intellectual property. I understand that you said you are willing to pay. I am too, but the mechanism for that payment is no small detail.

The problem outlined in the OP is that the business model being employed by ESPN (and likely others) simply is not sustainable. So, what next? Possibly moving to lower price point to the end-user and an expanded user base (see: Netflix). But that's far from a sure thing. It has worked somewhat well for the music industry, but recorded music as a product differs in many ways. Start with occupied band width, just for openers.

Ideally, I hope ESPN will survive. Not because of any deep affection that I might have for them, but rather that experience has shown that what follows a giant media collapse is typically an animal worse than the giant it replaced. The only good news I see here is an eventual decline in user costs - maybe.

When I first got satellite TV, I paid a grand for my receiver, and more yet for installation. Now, both are priced very resonably; they're nominally "free," if you accept the sales pitch.
Every time my contract has come up for renewal, I've either receieved more channels, lower cost, or typically both. Most people don't know that they can, and should negotiate with those nice people. My conversation with DirecTV always starts with, "I've received an interesting offer from DISH Network." But I digress.

Consider who is the next animal into the fray if ESPN were to fail or be merged into non-existance. Could it be Fox Sports?

 

[lne001]

I recently acquired a virtual reality device (Oculus Rift) to use on my PC (which had to be significantly upgraded). The effects are amazing. I also know the NFL is fooling around with this technology.

Thus my prediction for the future of off-site sports viewing - within 10-20 years you will watch the game in streaming 3D immersive technology while sitting and talking with your friends in a virtual reality stadium. Hell, they may be able to get you onto the field, court or rink.

 

[KnightBridgeAZ]

Some comments from a traditionalist - by which I mean that in general, I like to watch my sports on the decent sized TV screen, and while I have watched some programming on ESPN3 (on that screen), between all the stations offered on satellite I find no dearth of sports to watch.

But -
- it is less and less necessary to have satellite to see what you want - I get that, even if I still prefer it.
- ESPN does have too many talk shows and too little sports, I suppose, although, to be fair, there is as much on as I can find the time to watch (of course, I only watch football, volleyball, wbb, softball, and some isolated events).
- Yes, other stations are taking the competition thing way too far. Not that I am a fan of how-to cooking shows, but Food Network is a maze of competitions, many of which my wife enjoys and some of which I do.
- Currently, the quality of broadcast sports is generally high (well, the commentating varies, but that's not what I mean). I wonder how much quality there will be in a potential future populated with smaller producers.
- And on football, since it is pertinent, I still enjoy watching but the commercials and rules have made college football games interminable, and the NFL is only hurting itself with a "so called" concussion protocol when you can see players on TV going back in games when it looks like they don't exactly know what week it is.

 

[CocoHusky]

I recently acquired a virtual reality device (Oculus Rift) to use on my PC (which had to be significantly upgraded). The effects are amazing. I also know the NFL is fooling around with this technology.

Thus my prediction for the future of off-site sports viewing - within 10-20 years you will watch the game in streaming 3D immersive technology while sitting and talking with your friends in a virtual reality stadium. Hell, they may be able to get you onto the field, court or rink.

Actually more like 2-3 years or less.
Virtual reality will give an up-close 360-degree viewing experience of the Olympic Games.

 

[CTtransplant]

Sports has been the one area of broadcast television that had been healthy in the past decade, primarily because people do not readily watch sports a day later and fast forward through the commercials. People watch sports live, and therefore the advertising revenue has been strong. ESPN had that field to themselves, but other realized the money was in sports, so we got Fox Ssports, NBC Sports network, etc. The initial affect of this was to push up the price of content, such as the NFL and college football, because the new guys had to compete for programming properties. Now, there is more supply with the same general level of demand.

With so much content, the ad rates are going down. The subscriber fees are being affected by the cord cutters, and the revenues for the sports networks are going down, creating losses in some cases. Overall, the industries costs have also gone up since you now have many more camera men, trucks, announcers and back office staffs. The networks will eventually be unable to pay the large fees they have negotiated for football.

Conferences that are creating enormous footprints with the attendant travel costs for undergraduate athletics in non-revenue sports are going to have to face changing economics. If you thought athletic departments created losses in the past, watch what happens in ten years. Salaries for college coaches will have to come down, and the legions of assistant coaches and trainers will have to shrink.

ESPN was a godsend for college athletics in the last 25 years, but the model cannot sustain the contributions like it did in the past. The times, they are a changin. . .

 

[HoopsFan21]

Conferences that are creating enormous footprints with the attendant travel costs for undergraduate athletics in non-revenue sports are going to have to face changing economics. If you thought athletic departments created losses in the past, watch what happens in ten years. Salaries for college coaches will have to come down, and the legions of assistant coaches and trainers will have to shrink.

This is probably true for all but the top 20-25 athletic departments. I see a step in the middle though, and that is once the TV dollars are no long what they were (the contracts can't keep getting bigger in perpetuity can they?), an uneven revenue model will be introduced. If Ohio State's revenue begins to stagnate, the first place they are going to look is at Purdue's share. If you're a P5 school that more or less hit the historic lottery in all this realignment, you should be very wary of your status as a mere check cashing hanger on program. Right now no one cares about a little slippage in the conference contracts, but once things start getting a little tighter, the schools that have been carrying the water for decades are going to look towards a different compensation model. And, if some schools complain, then I guess we know who truly adds value and who does not. Those 20-25 schools will present an ultimatum of accept a smaller slice of the pie or we're taking our ball and forming a new super-conference where we keep all the money to ourselves. The other athletic departments will simply wither on the vine of hollowed out conferences, but at least they will have good company.