ESPN Forced to Compete in Digital Landscape
ESPN has long been the preferred TV network for sports fans; it is where enthusiasts can watch games, learn the scores of important matchups and listen to expert analysis on various aspects of the sports world. In addition to being a valuable resource for fans, it is also a significant part of Disney’s business empire. In fact, according to The Economist, “ESPN generates some $4 billion in cash for its parent each year, over two-fifths of Disney’s profits.”
Despite ESPN’s lucrative nature, however, it isn’t invulnerable. It must adapt as an increasing number of people change the way they watch TV. Learning about ESPN’s shifting situation can provide valuable insight to anyone who is pursuing a sport management degree online.
ESPN and Other Cable Networks Are Losing Subscriptions
According to The Economist, ESPN subscriptions have declined by more than 12 million since the network reached its peak of over 100 million subscribers in 2011. ESPN is not the only network that is suffering, though. A statistic cited in Time Magazine brought out that in 2015, the total number of pay TV subscribers dropped by 1.1 million, which was four times the decrease that occurred in 2014.
A forecast from SNL Kagan cited in the Time article expects the trend of falling TV subscriptions to continue. However, broadband internet subscriptions are expected to gradually increase over the coming years. Citing data from SNL Kagan, the Time article stated, “broadband subscriptions are being projected to increase by 8 million over the next decade, reaching 71 million by 2026.”
As more people choose the internet over cable TV, they are turning to online streaming services to watch their favorite shows and movies. According to Statista, the number of Netflix subscribers surpassed 50 million for the first time in the early part of 2017. Other streaming services, such as Hulu and Amazon Prime, are also thriving.
In order to stay relevant and competitive in an increasingly digital landscape, ESPN is adapting its business strategy.
Live Sports Helps Maintain Subscribers
ESPN live-streams many sporting events through its website. This allows people to keep up with their teams throughout the day via smartphones, tablets and other connective devices. However, accessing this content still requires people to have a TV subscription to ESPN through a major provider.
Every year, ESPN spends large amounts of money on the rights to sporting events. According to The Economist, ESPN pays over $7 billion per year for the rights to broadcast sporting events; nearly $2 billion of that goes toward the rights to broadcast 17 National Football League games.
The appeal of live sports motivates fans to maintain their TV subscriptions. However, ESPN is facing digital competition in this area as well. Citing information from The Wall Street Journal, a December 2016 article from The Motley Fool stated, “Amazon has held talks…with the National Basketball Association (NBA); Major League Baseball (MLB); National Football League (NFL); Major League Soccer (MLS); and other soccer, lacrosse and surfing leagues for the rights to carry live games.”
At least some of Amazon’s talks proved successful. In April 2017, the National Football League announced that the 10 Thursday Night Football games would be available for live streaming through Amazon Prime. However, Amazon did not gain exclusive rights to the games; they will still be broadcast on major TV networks such as CBS and NBC.
ESPN’s Plans to Adapt
According to The Economist, “[ESPN] plans to begin selling a direct-to-consumer ESPN-branded internet service that will supplement the TV channel.” The network already has its WatchESPN app, which allows consumers to watch live sporting events if they have a subscription to ESPN via a cable service or if they pay for internet service through certain broadband providers. WatchESPN is also free to college students who use an on-campus computer to access the service.
ESPN is also a part of some low-priced TV services that are emerging across the digital landscape. According to The Economist, YouTube will soon be launching a live TV service, joining the ranks of other companies that offer relatively low-cost TV packages. Many of these packages include ESPN, and ESPN makes the same amount of money from these online subscriptions as it does from traditional cable subscriptions.
ESPN hasn’t announced any plans to lower its subscription fees, but doing so may eventually become necessary in order to gain more viewers. ESPN is the most expensive basic cable channel—costing consumers nearly $8 per month, according to The Atlantic. The Atlantic, citing information from SportsBusiness Journal, noted, “when ESPN was negotiating its contracts with cable companies, it pushed for higher fees at the expense of ensuring that it was reaching as many cable subscribers as possible.”
In April 2017, ESPN laid off 100 of its employees, sparking speculation that the network was in the beginning of its death throes. However, as The Atlantic pointed out, “as long as Americans enjoy sports—and as long as individual sports leagues see a financial benefit in selling access to an entertainment company rather than selling straight to consumers—there is every reason to expect ESPN will continue to be an extremely valuable network.”
ESPN may not always be dominant in its industry, but it is likely to stay relevant and significant. In fact, despite a slow-down in business, the network is not in crisis. According to The Atlantic, its total number of employees increased by 500 in a recent 18-month period.
ESPN has long captivated fans through lively analysis and live sports, but for the first time, it is being forced to compete in a digitally dominated world. With cable subscriptions on the decline, The Worldwide Leader in Sports, as ESPN calls itself, must continue to implement new strategies to maintain its audience.
Anyone who wishes to have a career in sport marketing should understand where and how people view sports. If you want to gain further insight into the exciting world of sport management and marketing, consider pursuing an Adelphi University Online Master of Science in Sport Management.