ESPN has had a massive growth trajectory for years and years now. That is how, in part, they’ve been able to afford and rationalize the massive TV deals being signed in sports of late. The issue, of course, is that consumer behaviors are starting to change, at least ever so slightly.
Awful Announcing’s Dave Warner had one of my favorite articles on this subject back in July. The problem for ESPN hasn’t been that people are running away from cable in boatloads and that the company is a sinking ship. No, it’s all about expectations. ESPN was growing by double-digits every year. Now, its subscription base has stalled and declined ever so slightly. That’s the difference.
One of my favorite ESPN stories actually comes from my MBA program here at the University of Oregon. During our annual New York City trip, we’ll visit with alumni and friends over at The Worldwide Leader. Back on the 2013 trip, one ESPN executive polled the room of 20-something MBA students and asked how many had an expanded cable TV subscription or satellite of some kind. The room was a near 50/50 split.
The ESPN executive replied in this way: “Don’t worry. When all of you are older, own a house, and start to have kids, you will buy cable. That’s just the way the world works.” By the 2015 trip, and certainly by our trip earlier this year, the tone had changed drastically. ESPN is starting to realize that cable is not a certainty for all consumers and not even sports consumers. And it’s all a matter of how quickly the evolution will occur.
We live in an era of password-sharing and small price amounts. Yes, sports is unique because it is one thing that must be consumed live. For over 90 percent of sports consumers, there’s absolutely no value in going back to watch the game once you’ve learned the result. And with social media today, it’s almost impossible to ignore results as they are happening. So yes, sports is somewhat an anomaly in the overall TV world. But that doesn’t mean it is completely immune to these issues.
One of the most fascinating facts I’ve learned recently is this: Of the 90 million-plus subscribers to ESPN, only about 15-20 percent actually ever watch the channel. That’s because of the way cable bundling works, where non-sports fans are also required to purchase ESPN if they’d like to buy any other premium channels. With ESPN alone requiring $6.61 per month right now (and likely to increase substantially in the future), this is a gigantic chunk of lost revenue if TV packaging ever changes.
Big news broke earlier this week when AT&T (which also owns DirecTV) announced that it will be offering some type of over-the-top Internet TV package by the end of this year. The details of how this will exactly work are still to be determined, but the possible ramifications for how it will affect ESPN, the various sports leagues, and other sports media companies are massive. “Over-the-top” has been viewed as the way of the future for a while now. It’s just been so daunting to align the needs of all of these different constituents to find some type of reasonable solution for all of them.
Personally, I subscribe to an expanded sports TV package through Comcast here in Eugene, Oregon. I do it because both of my roommates are also massive sports fans and we’re in a sports-themed MBA program out here. If I lived alone, would I still do it? If I lived in Northeast Ohio, when I could easily head over to another friend’s house or my parent’s house to watch Cleveland sports games, would I still do it? If there was an over-the-top option where I could find a way to pay for the missing football games I don’t currently own a separate subscription to?
This is certainly the future and we’re not certain yet how fast things will change. But one line has been stuck in my head from a separate New York City visit. One speaker, with a background in venture capital and technology, said this: “Media companies always rise faster and crash harder than you’d first imagine.” This was more in reference to how Facebook, Twitter, and Snapchat have emerged over the years. But it’s another reminder that there’s no good way just yet to project the next 5-10 years for ESPN.
— A brief life update: I’ll be gone from Oregon from March 9-April 3 traveling from Boston to Dublin to Madrid to Israel. My MBA program calendar somehow contains a three-week spring break, so I’m taking advantage of it with a quarter-life crisis vacation. I’ve also been fairly sentimental of late about this month marking my 7-year WFNY anniversary and about an Akron Beacon Journal article about me from 2007.
— The low Oscar ratings likely have nothing to do with the actual content of this year’s politically controversial Oscars, writes David Sims of The Atlantic. Whether the ratings matter or not, you should always have in the back of your head that TV ratings are antiquated and usually pretty bad. Never read into them too much.
— A huge congratulations goes out to Ken Babby, owner of the Akron RubberDucks and Jacksonville Suns, for being named to this year’s Sports Business Journal “40 under 40” class. It’s also crazy to consider that Ken bought the Akron team in October 2012. It’s already been three and a half years. But he’s done so, so much for the Akron community and that team. I’m very excited to see what’s next for him as the full-time owner in Jacksonville now, too.
— Vasu Kulkarni, founder of the innovative sports technology company Krossovr, wrote about Stephen Curry last week. It was actually after the Orlando game, not the Oklahoma City game, where Kulkarni realized that there’s a non-zero possibility Steph could actually be the new Greatest of All Time. He’s doing things that were considered impossible for generations.
— A couple stories in the ticketing world: Disney is installing “surge pricing” at its parks this year. That means prices will be different based on low-demand, regular, or high-demand times of the year. The Brooklyn Nets also are slashing ticket prices by 24 percent for the 2016-17 season. I worked in ticket pricing for the Charlotte Hornets last summer, so this is a topic that is more and more on my mind these days.
— Finally, I really, really enjoyed this Nicole Silverberg of GQ open letter to other fellow millennials writing open letters. Not everything in here has to be sports-related, right?