One of the biggest storylines of the year in sports media is the Bristol Squeeze. ESPN is faced with a budget crisis with the walls closing in on both sides. On one side, exponentially increasing rights fees continue to increase the demand on money going out. On the other, the continued trend of cord cutting and people unsubscribing from cable/satellite channels has a negative effect on money coming in. The trouble affecting ESPN’s bottom line is certainly the most significant turbulence that has faced the self-proclaimed worldwide leader in sports in a good number of years. Somehow, John Skipper has to find a way to make a quarter billion dollars in expenses disappear.
Unfortunately, ESPN has decided that part of their need to slash the budget and get their financial house in order is coming with layoffs. A huge number of layoffs. Beginning as early as today, ESPN will cut 350 employees, amounting to over 4% of their workforce. It’s roughly the same number as the last major round of layoffs in Bristol in 2013. This is a marked increase from what was previously thought when this round of layoffs was first reported.
Via Bloomberg News:
Walt Disney Co.’s ESPN sports network, confronting rising programming costs and a loss of viewers, plans to eliminate as many as 350 positions, about 4.3 percent of its workforce, according to people with knowledge of the matter.
The cuts will be announced to employees as early as Wednesday, said the people, who asked not to be identified discussing the matter because it isn’t public.
The action follows Disney’s announcement in August that earnings at its cable networks won’t meet company forecasts as a result of subscriber losses and currency translation. That triggered a selloff in the shares of many media companies. Disney had the second-largest long-term commitment to sports programming at $44.2 billion behind only 21st Century Fox Inc., according to Bloomberg Intelligence. That was before signing a long-term agreement with the NBA.An ESPN spokesman declined to comment. The sports broadcaster, based in Bristol, Connecticut, employs 8,000 people worldwide, according to a company fact sheet.
The news of ESPN’s layoffs had been coming down the pike for sometime (Disney’s stock took a hit thanks to the doom and gloom coming from ESPN) but it’s still a shock to the system to see those high numbers and know that there’s going to be a real human toll that is taken with them. We’ve already seen them cut back in other areas as well with examples like remote production from Bristol, not sending announcers to the arena, and letting multiple multi-million dollar personalities walk through the exit. The network has also seen an impact in its live sports rights portfolio (where the wide majority of these dollars are spent), letting the British Open go to NBC a year early.
The fact that this is all happening to ESPN, a global empire that stretches around the world and has such a monopoly over its competition, is the truly startling aspect. If ESPN is experiencing this kind of pain with all of the revenue that they take in and cable/satellite fees that are five times higher than any other media company… how are those other companies that don’t have the built-in advantages of ESPN going to cope?
With the digital age upon us, we’re in the midst of a transformational time in the media industry. And unless rights fees come down (they never have in spite of the constant speculation of a sports rights bubble) these companies are going to have to do some serious restructuring to succeed in a new era of entertainment. One hopes that it won’t cost any more jobs, though.
UPDATE: ESPN has published a memo sent out by President John Skipper regarding the layoffs. You can see it in its entirety at the link. Here are the key quotes:
Beginning today, we will be enacting a number of organizational changes at ESPN to better support our future goals – a process that will include the elimination of a number of positions, impacting friends and colleagues across the organization.
We carefully considered and deliberated alternatives before making each decision. The people who will be leaving us have been part of ESPN’s success, and they have our respect and appreciation for their contributions. We will be as supportive as we can during this transition, including providing a minimum of 60-days notice, a severance package reflective of their years of service, and outplacement benefits to help them find future employment.
I realize this process will be difficult – for everyone – but we believe the steps we are taking will ultimately create important competitive advantages for our business over the long term. I sincerely appreciate your professionalism and continued support as we move forward to ensure the continued success of ESPN and assure sports fans everywhere the best is yet to come.
If you know more about the situation at ESPN, feel free to contact us at email@example.com.