Since ESPN’s decision in May 2015 not to renew his contract, Bill Simmons has frequently been quite vocal in his criticisms of the company. That continued Wednesday in his appearance at Recode’s Code Conference, where Simmons spoke to Julia Boorstin on stage for 11 minutes, and managed to not only claim that it was his choice to exit ESPN, but that company president John Skipper has struggled on the business side, that ESPN’s current issues could have been solved with different leadership and a few different moves like a Silicon Valley office, and that tech companies will control live sports rights within five years. Those comments rankled many in the tech and media world, and stirred up some reaction, especially when it came to his criticisms of Skipper and his claims about tech companies.
It’s the comments about Skipper and ESPN’s current subscriber issues that are perhaps the most newsworthy here, and those start around the 6:50 mark. Boorstin says “I have to ask about ESPN. We just saw another round of layoffs. What would your advice be to John Skipper right now?” Simmons responds “That’s a loaded question. It’s interesting, I almost have too much inside information on it, because I was there and I was privy to a lot of conversations and information. I really think the genesis of it, people talk a lot about the NFL deal, the NBA deal, and stuff like that, ‘They’re so expensive, they didn’t realize the cord-cutters are coming.’ That’s technically true, but those NFL and NBA deals are the most important assets they have. They would do those deals 100 times out of 100.”
Simmons then continues “For me, it’s more of a leadership thing. When I was there, especially from ’09 to 2013, ESPN was just an awesome place to work, and really cared about content, and doing stuff, and creating quality stuff. And the biggest reason for that was Skipper, because he was in charge of the content. [George] Bodenheimer, who’s a legend, he was in charge of the business. And they worked together, George handled all the business stuff, and he didn’t care about content. Skipper took George’s job, but he never replaced himself, and what he tried to do was basically a bullpen by committee with six, seven, eight inner-circle people kind of trying to do his job. And he was great at his job. And you know, if you’re a baseball fan, when you lose your closer and the team says, ‘Hey, we have all these set-up guys, they’re going to be the closer, like, it never works.’ And I think that’s what they did.”
Simmons then continued with comments about ESPN not anticipating cord-cutting.
“They didn’t see a lot of this coming. They didn’t see the cord-cutting coming. I know for a fact, I was there. Summer of 2014, they had bet that the subs would go a certain way, and they just didn’t. (Points down) They went this way. And they just weren’t ready for it. And a lot of the decisions they made were based on the subs staying at a certain level.”
He then went into comments about ESPN needing to be a tech company with a Silicon Valley office.
“I also think the other mistake that they made was they had to realize they were a technology company. They always thought of themselves as a broadcasting network. But where the world is going, you have to be a technology company. And the ones that are winning out are Facebook, and Twitter, and Amazon, and Hulu, all these places. ESPN should have been in that mix. But they’re in Bristol, they’re over here. It’s harder for them to get technology guys and girls. I think they should have invested in a Silicon Valley office, I think that was their biggest mistake.”
Boorstin then brought up Disney’s investment in BAM Tech and plans for an ESPN over-the-top service, and Simmons said “But think about what you just said there. They spent like $350 million on BAM just to get a share. They could have just created BAM. Disney made like $7 billion on revenue in 2013. They could have been at the forefront with some of this stuff. And instead they’re trying to belatedly kind of catch up, because of the decisions they’ve made.”
That first paragraph of Simmons’ comments on rights fees is accurate (and much more so than comments from some other media analysts, like the one who argued ESPN could drop the NFL and keep its current subscribers and subscriber rate), but there’s a lot wrong with the second paragraph and beyond. Let’s look at those second-paragraph comments on Skipper to start.
For one thing, Skipper replaced Bodenheimer in 2011. For another thing, this suggests that ESPN’s problems stem from poor content being created since Skipper moved up and didn’t fill his old role with a single individual. Some of ESPN’s content decisions since then can be questioned, for sure, and not all of them have worked out, but that doesn’t have a lot to do with the main issue of declining subscribers. Most of those subscribers are exiting traditional cable bundles as a whole, not just getting rid of ESPN (which isn’t possible on the majority of packages). That’s why the “ESPN is failing because it’s super-liberal” claims don’t really work, especially in the context of declining subscribers. If you ditch traditional cable entirely, you’re ditching channels like Fox News as well as ESPN, and it would be easy to throw out the strawman argument the other way and say “People are cord-cutting because Fox News is too conservative.” (Which also is not the case.)
To his credit, Simmons doesn’t explicitly bring politics into it, but citing content as the first issue with ESPN appears silly. In order for that to be true when it comes to subscriber loss, there would have to be a theoretical studio show out there that would convince large numbers of cord-cutters to stay with cable. If high-profile live sports aren’t going to keep them, it seems unlikely anything on the studio side would, given the ratings discrepancies between studio shows and live games.
Where you can bring up content decisions is when it comes to dropping ratings. There are a few problematic things that ESPN has done there, perhaps most notably moving First Take from ESPN2 to ESPN to (at least partly) take on Undisputed. As SportsTVRatings noted recently, that’s had a substantial negative effect on ESPN’s total viewership, slightly helping First Take at the cost of damaging SportsCenter and the rest of ESPN2’s regular programming slate. However, as that piece also notes, many things people criticize ESPN for (SC6 in particular) really aren’t underperforming relative to overall subscriber and ratings declines. And there aren’t many content decisions apart from the First Take one that really seem to have hurt ESPN overall when you already factor in the subscriber loss.
It should also be noted that Simmons’ baseball analogy is quite flawed, especially by the latest analytics. For years and years, smart minds have discussed how overrated the idea of a single closer is and how much teams are willing to overpay for closers whose performances aren’t necessarily repeatable. It was a key concept in Billy Beane’s initial strategies with the Oakland Athletics, heavily discussed in Moneyball, and discussed plenty of further times by the analytics community (including this 2010 post on ESPN by FanGraphs’ Erik Manning, and this post earlier this year by FanGraphs’ Jeff Zimmerman on just how few closers have kept that role all season) since then. So if Skipper really was declining to name a closer the way Simmons says he is, that would probably be a good thing.
Beyond that, Simmons may have a point about ESPN not expecting cord-cutting or subscriber losses to hit the levels they did. That’s easy to point out in hindsight, though, and it’s harder to pinpoint what they should have done instead. And it’s not clear what a Silicon Valley office would have done to solve things. Yes, that might have helped ESPN attract some further tech experts, but at a high cost (compare Silicon Valley rents to those in Bristol, to say nothing of the difficulties of running a key department a long way from your main campus), and ESPN actually has managed to bring in lots of big tech names over the years despite their location. At best, this probably would have been revenue-neutral; they might have made some further gains in tech, but at a significant cost.
It also should be pointed out that you can’t just say “ESPN should have developed BAM Tech in-house.” Some companies have tried to do their own streaming tech, and it usually hasn’t worked all that well. Others, like Turner, have bought BAM competitors like iStreamPlanet. But BAM does what they do so well that tons of unaffiliated companies use and have used their services, such as Fox for last year’s Super Bowl. You can’t always just build a robust streaming platform on your own, as Gavin Belson found out in Season Two of Silicon Valley. And the BAM Tech deal has been one of the better things Disney has done recently by most estimates.
Simmons does hit on one key point after that when asked about ESPN’s OTT service. He says “It’s fine. ESPN’s not going under. It’s funny to watch people try to pour dirt on them. So they’re going to make $6 billion instead of $8 billion? They’ll be fine. I think the issue for them is that their cable deals are so good that there’s no way they will ever replicate that. Everybody in here five years ago was paying $7, $6 for ESPN whether they watched it or not. And now people have flipped the equation. They’re like ‘I’m going to pay for Netflix, I don’t want cable.'” He’s right there that they’ll never get revenue from everyone who’s abandoned cable, but it’s worth pointing out that ESPN has said their digital deals are just as lucrative for them, so if you sign up for a streaming service that includes ESPN, you’re providing the company just as much revenue as you would as a cable subscriber.
And Simmons’ closing remarks about Amazon and Facebook getting into sports are also a bit flawed. He says “I think it’s going to be Amazon, Netflix, Google, Facebook deciding everything, including what we’re wearing, in like five years. They’ll buy the sports rights. Look at what Netflix did with stand-up comedy. They’re like, ‘Hey, we like stand-up comedy, we’re just buying it. We’re getting every single comedian.’ And they just did it. And eventually they’re just going to look at the NBA or the NFL and just be like ‘We’re buying it. We want everything. And that will be it and it will be over.”
Simmons is right that these companies have a lot of money, but there’s no evidence to date that they’re interested in buying entire exclusive marquee rights packages; the biggest deal so far has been Amazon buying non-exclusive streaming rights to Thursday Night Football. Non-exclusive rights might actually be a lot better for tech companies; they let them pick up broadcasts for far less than they’d pay for exclusive, and lets them avoid paying broadcast talent or production costs. For example, CBS and NBC pay a combined $450 million annually for TNF in rights fees alone, to say nothing of what it costs to produce those games or pay people to call them. Amazon’s $50 million for streaming rights may be 10 times what Twitter paid last year, but it’s just over 10 per cent of that broadcast fee, and it’s still low even if you factor in the supposed $30 million in promotional packages and when you consider that Amazon isn’t paying production costs.
It’s similar with the deals to stream MLB and other games on the likes of Facebook and Twitter. Those are non-exclusive broadcasts with no in-house production, and are priced accordingly. We’ll see if tech companies ever get to the point where they want to pay premiums for exclusive broadcasts, and where they want to pay talent and production crews. At the moment, that isn’t really the situation. And it’s almost impossible for Simmons’ suggestion of these companies controlling everything in five years to come true, as most rights are locked up by broadcast companies up well into the next decade. Unless tech companies are going to buy broadcast companies outright, that seems unlikely.
The standup comedy analogy in particular is flawed too, as there are clear advantages for Netflix in owning that space. For one thing, those specials generally have low production costs; it’s filming one man or woman talking on a stage for an hour or so, which is much simpler and cheaper than filming a NFL game. For another, those specials are endlessly repeatable and can be watched at any time, unlike with sports which are easily spoiled if you’re not watching live. (And that’s a huge reason traditional broadcasters will pay so much for them; they’re DVR-proof, and as such are some of the most valuable TV programming left.) There’s no long tail of views there for Netflix. And it’s going to be hard to say that tech companies Simmons praised earlier like Twitter and Hulu are “winning,” as they have plenty of issues of their own. While they and others are wading into sports rights at the moment, they’re also not full competitors to traditional networks there yet, and they may never be.
The last thing we should comment on here is Simmons trying to change the narrative about his ESPN departure. That occurs near the start of this at 2:05 (after some comments about The Ringer’s new partnership with Vox, which keeps them from having to sell their own advertising and lets them focus on content; hilariously, that appears to be painting Simmons with the same “content, not business” brush he later throws at Skipper), with Simmons saying “I was not fired, I don’t know how that started that I got fired, they decided not to renew my contract, but I already knew I was leaving.” That seems to be a long way from the “blindsided” and “it was fucking shitty” comments Simmons made in 2015 and 2016 respectively, and from Skipper confirming that he let Simmons go with no notice. Perhaps Simmons was already ready to leave, and there were obviously rising tensions at that point, but this feels very high school, along the lines of “I dumped you! You didn’t dump me!”
Overall, this is a lot of Simmons pontificating without a lot of substance. He has some valid points, especially when it comes to ESPN not being aggressive enough to monetize unconventional revenue streams like podcasts and when it comes to their overall financial stability and the strength of their NFL and NBA deals, but there’s a lot of hot air and outrageous predictions (such as Amazon and Netflix controlling sports rights in five years) in here too. His history with the company and with Skipper should be considered as well, and it’s interesting that he regularly gets these kinds of platforms despite how low his site’s traffic numbers are relative to the competition. At the least, he gave everyone a lot to talk about, even if most of it wasn’t terribly substantial.