Why hugely profitable ESPN is laying off workers
The cost of sports programming is soaring, making Disney's cash cow a little less beefy.
A tipster to Deadspin pegs the job cuts at about 400. The network acknowledged "difficult" changes across the company Tuesday but would not confirm any specific layoff numbers. This is the first staff reduction at the channel since 2009, according to the blog.
Like its broadcast counterparts, ESPN has been socked with skyrocketing costs for sports programming. Last year, the channel, along with News Corp.'s (NWS) Fox and Time Warner's (TWX) TBS, spent $12.4 billion for the broadcast rights for Major League Baseball from 2014 to 2021, an agreement that will double MLB's annual payout. In 2011, ESPN signed a $15 billion deal with the NFL for "Monday Night Football" that goes through 2021. The deal equals $1.9 billion a year, a 73% increase over the old contract.
For Disney, ESPN is the gift that keeps on giving. In the most recent quarter, Disney's Media Networks business, which includes the sports channel, earned $1.72 billion in operating income on $3.45 billion in revenue. The network charges cable and satellite operators $5 per household per month, the most of any channel. TV providers have grumbled about the fees for years, which ESPN has justified with ratings that continually rank at or near the top. Sports also are attractive to advertisers, since they are still watched live and continue to draw huge audiences.
ESPN is facing increased competition from CBS (CBS) and Comcast's (CMCSA) NBC, which have their own sports networks, and Fox, which is planning to launch one. There are also calls from Sen. John McCain, R-Ariz., to allow consumers to buy only the cable channels they want instead of being able to buy only tiers of channels.
Higher costs, rising competition and changing market conditions prove that the "worldwide leader in sports" has a tough road ahead as people who aren't sports fans wonder why they should be charged for ESPN.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr
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TV Sports reporting has gotten so bad, it's better to cut the sound off on your set as opposed to hear what these guys say. ESPN Radio is only good for updates. How can all you do is sports yet they know little to nothing about sports. I loved the time Mark Cuban came on First Take and literally blasted Steve and Skip into submission. They were clearly out of their league and know very little about sports. Mark reminded them of that fact.
Used to watch Sportscenter all the time, now I would rather watch reruns of Gilligans Isle. It has the journaliism standards of People magazine and panders to certain sports figures. If Stephen A Smith is the best they can do as an analyst they may want to use some of the characters from the Magic Kingdom.
Please get rid of:
Screamin' A Smith
S.A.S. would only cry "racism" if he was laid off.
He is a fool and a loudmouth and his damn forehead gets bigger and bigger every year........hahaha
"Skyrocketing costs" are not outlined in the article. Perhaps it is NOT the employees who are a part of that, since all we see on the street is wage shrinkage back to the early 1990's levels. Obviously, cost-cutting is not being analyzed very well at ESPN.
We can only assume that the other networks are outbidding ESPN for rights to programming. Yes, the schools and other sellers will get their money for awhile... then the networks will start dropping off like flies. No bailouts, please!
Our speculative economy is driven by tax breaks and who's getting out of paying what, and it's the death of us. We're stuck in a cycle of monopolism/bust, with no end in sight. I don't think the networks are going to survive very well, dump the stocks while you can!
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