Disney's (DIS) ESPN is trading highlights for personalities.
The country's largest sports network took over a Times Square theater Tuesday morning, bringing out a bevy of famous athletes and a new generation of on-air personalities tasked with breathing new life into a network forced to adapt to subscriber losses and slowing ad sales.
Before a throng of ad buyers and media executives, ESPN CEO John Skipper declared that the network was making changes to programming and distribution in light of subscriber losses and a sluggish advertising market for cable TV. Joined onstage by on-air personality Mike Greenberg and SportsCenter anchor Scott Van Pelt as well as tennis star Serena Williams and basketball great Paul Pierce, Skipper said ESPN still offers ad buyers unparalleled access to mass audiences despite industry challenges.
"Sports engenders optimism," Skipper said. "Fans, players, coaches and teams begin every season with hope, so it follows that we at ESPN are optimists. Of course, the current environment forces us to be realists as well as optimists. ESPN is responding to change, and we are making changes from the most dramatic position of strength."
Indeed, few would doubt that ESPN remains the largest U.S. media company focused on sports. For evidence, Skipper said ESPN's TV networks, its websites and apps reached 210 million U.S. residents per month last fall, a new record for Disney's largest business unit. Its digital platforms, he added, reach 100 million people per month.
Yet over the past year, ESPN has been jolted by an acceleration of cord-cutting. During the first quarter, ESPN's subscriber losses totaled about 50 basis points, or 0.5%, the company said last week. That may seem small, but for an operation as large as ESPN, that's a worrisome hit to revenue. The network has shrunk by 12 million subscribers since 2011, and most alarming, it lost 621,000 subscribers in October alone.
Rather than doubling down on its TV networks, ESPN is focusing on its digital platforms, ESPN.com and its popular apps, which average about 3 million video views per day.
"We're committed to being where fans are," SportsCenter president Rob King told TheStreet. "And we know where they are. In that minute or two when someone pulls out our app, we can be as relevant as we need to be. That's what's driving this."Toward that end, ESPN is elevating the profile of SportsCenter Right Now, the breaking-news version of its signature show to emphasize news and news updates, especially on mobile devices. SportsCenter Right Now will be a constant feature of daytime programming and also run during halftimes of sporting events, both on ESPN and at ABC, the broadcast network also owned by Disney.
The full rollout of SportsCenter Right Now will begin in late August, and some content will be produced only for digital platforms, King added.
Skipper is also rebooting the traditional SportsCenter with a series of lineup changes. Kenny Mayne will anchor the 11 p.m. Eastern show from the network's sprawling studios in Bristol, Conn., joined elsewhere by Steve Levy and John Anderson. All three recently signed contract extensions.
Sage Steele is another host who recently re-signed with the network and will head up SportsCenter from 7 a.m. to 10 a.m. Monday through Thursday. The duo of Michael Smith and Jemele Hill will continue to hold the 6 p.m. shift.
ESPN is betting a focus on on-air personalities will help to rekindle interest in a network that has steadily lost subscribers in recent quarters, albeit in lockstep with the rest of the cable TV industry.
The reshuffling and rebranding comes three weeks after ESPN laid off about 10% of its roughly 1,000 on-air personalities, radio hosts, writers and producers -- in short, its most high-profile and, in many cases, highest-paid employees. The culling of that flock went unmentioned during the proceedings.
ESPN will be launching a subscription-based direct-to-consumer platform later this year, though it won't carry games drawing on its more expensive sports rights, i.e. the NBA, NFL or Major League Baseball. The online platform could be a precursor to ESPN moving more of its content to a direct-to-consumer internet platform, eliminating the need to share subscriber revenue with cable TV providers. But that's probably premature. ESPN won't be able to replicate its industry-high subscriber fees anytime soon.
While the rest of the cable TV industry also has had to make adjustments to the fracturing of the traditional cable bundle, ESPN's changes are far more apparent because the money is so large. ESPN receives roughly $7.86 per subscriber per month, according to SNL Kagan; the second-most expensive cable TV network is Time Warner's (TWX) TNT as a comparatively modest $2.09.
Subscriber losses, therefore, require cost cutting given than ESPN is locked in for more than $7 billion in sports broadcast rights contracts per year through 2022. Disney's media networks group, which includes ESPN and ABC, posted a 3% decline in operating income in the company's fiscal second quarter.
Unlike 10 years ago, ESPN must contend with 21st Century Fox's (FOXA) Fox Sports 1, beefed-up offerings at Comcast's (CMCSA) NBCSN and various regional sports networks, as well as sports-focused websites led by SBNation, Bleacher Report and Barstool Sports. Subscription-based platforms such as FuboTV and FloSports also have emerged to offer fans a chance to watch sports that get less air time at ESPN.
If the first quarter is any indication, the number of people cutting the cord on traditional pay-TV is likely to continue to grow. Media analyst firm MoffettNathanson said last month that an estimated 762,000 subscribers terminated their cable or satellite TV service in the first quarter, five times higher than during the same period a year ago. The annualized subscriber decline of 2.4% was the largest ever.
For ESPN, those are worrying numbers, and reason enough to bring out some personalities.
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