http://finance.yahoo.com/news/theres-serious-cost-cutting-going-142652796.html
There were comments in a few other posts about ESPN and the financial strength of their business. Link to a good article from Friday that talks about the cost cutting ESPN is going through, at the directive of parent company Disney, to cut $100M in cost in 2016 and $250M in 2017.
It's reported ESPN has lost 3.2 million subscribers in a little over a year. To put this into financial context that's between $230M and $700M per year. ESPN charges cable/satellite providers the most of any TV network. ESPN alone is ~$6 per month and if you have the sports tier package with all the ESPN channels is closer to $18 a month. Of note, that Longhorn Network you so frequently watch is $.50 a month to your cable operator and more like $.75 to $1 a month to you - there is $12 wasted a year!
What's causing this? Number of reason, but namely the number of consumer completely cutting cable/satellite and moving to online streaming only (think Hulu, Netflix, etc), also called Over The Top (OTT). So ESPN is now contemplating a stand alone OTT offering, just like if you wanted to buy Netflix or Hulu. Problem is, those cost anywhere from $8-$10 a month on average and ESPN would have to charge in the $30 range to equal what they get from cable today.
Doesn't take an accountant (or Clairatt) to figure out they are in big trouble. Programming costs have increased exponentially (their NBA TV deal that kicks in in 2016-2017 is 3X what they currently pay) and subscriber revenues are going down. Ad revenues follow the downward trend: fewer households = few eyeballs = lower ad rates.
So this will be fun to see play out in 5-8 years from now when the currently TV deals are up. My 2 cents - this is a bubble just like what we saw with Internet Stocks in 2000 -- valuations beyond what the market can bear and a correction follows. In this case the downstream affect is teams and leagues who'll have to take a haircut in the future. College teams will go from $25M a year in TV money down to $20M or $15M. Ticket prices will go up to counter and donors will get hit harder than ever to increase their donations.
Fun times!
There were comments in a few other posts about ESPN and the financial strength of their business. Link to a good article from Friday that talks about the cost cutting ESPN is going through, at the directive of parent company Disney, to cut $100M in cost in 2016 and $250M in 2017.
It's reported ESPN has lost 3.2 million subscribers in a little over a year. To put this into financial context that's between $230M and $700M per year. ESPN charges cable/satellite providers the most of any TV network. ESPN alone is ~$6 per month and if you have the sports tier package with all the ESPN channels is closer to $18 a month. Of note, that Longhorn Network you so frequently watch is $.50 a month to your cable operator and more like $.75 to $1 a month to you - there is $12 wasted a year!
What's causing this? Number of reason, but namely the number of consumer completely cutting cable/satellite and moving to online streaming only (think Hulu, Netflix, etc), also called Over The Top (OTT). So ESPN is now contemplating a stand alone OTT offering, just like if you wanted to buy Netflix or Hulu. Problem is, those cost anywhere from $8-$10 a month on average and ESPN would have to charge in the $30 range to equal what they get from cable today.
Doesn't take an accountant (or Clairatt) to figure out they are in big trouble. Programming costs have increased exponentially (their NBA TV deal that kicks in in 2016-2017 is 3X what they currently pay) and subscriber revenues are going down. Ad revenues follow the downward trend: fewer households = few eyeballs = lower ad rates.
So this will be fun to see play out in 5-8 years from now when the currently TV deals are up. My 2 cents - this is a bubble just like what we saw with Internet Stocks in 2000 -- valuations beyond what the market can bear and a correction follows. In this case the downstream affect is teams and leagues who'll have to take a haircut in the future. College teams will go from $25M a year in TV money down to $20M or $15M. Ticket prices will go up to counter and donors will get hit harder than ever to increase their donations.
Fun times!
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