Have bloated college sports TV contracts become pie in the sky fantasy?
Can ESPN keep shelling out millions for rights to broadcast big sporting events after major defections from cable and satellite providers?
Is the sport giant reeling as its subscriber base shrinks and how will this affect BYU, the Pac-12, Big 12 and other sports franchises who count on cable coin?
It's a real issue, as documented by numerous news outlets, including the Wall Street Journal. ESPN’s income is shrinking while its obligations have never cost more.
“This is viewed as a negative, a growing problem,” said veteran sports TV consultant Bryan Seeley, who lives in Davis County. “The expense of providing all this programming is not keeping up with the revenue it generates, especially in the TV ads compared with Internet streaming ads.”
It is triggered by a growing army of “cord cutters,” who cancel cable and satellite services in favor of on-demand Internet streaming devices like Apple TV, Roku and Chromecast for programming from the likes of Netflix, Hulu, Amazon ... and even ESPN.
The ESPN bubble, some say, is about to burst. It has promised billions to the NBA, college sports, the NFL and other sports leagues. This has allowed athletes huge salaries, teams historic profits and conferences bragging rights over big deals — all based on money yet to be collected by rights buyer ESPN. And the revenue is not coming in at the rate estimated when all those huge contracts were announced with glee.
Industry experts say ESPN must cut $400 million in 24 months after it lost seven million subscribers over the past four years. The sports giant could lose two to three million more subscribers in the next year as viewers are cancelling their bundled packages with cable and satellite companies. ESPN must ante up about $6 billion a year for rights it bought with revenue that’s declining.
This is slashing ESPN's subscriber base by about 10 percent a year, according to the WSJ.
I saw this in my own house this spring the day my wife pointed to a DirectTV and Internet bundle of $200 a month and declared: Do something about this. Quickly, to maintain connubial household bliss, I reduced my TV bundle to bare bones for the summer, about half the cost.
My son cancelled Comcast cable years ago. He views all his TV programs on his Xbox and is thinking of streaming ESPN on Sling TV with some other programming for about $20 a month. Netflix costs him about $9 a month and he orders TV shows and movies over Vudu and Amazon Prime. He skids by under $50 a month.
“Companies rise and fall with amazing rapidity today and there's a quiet panic in place at ESPN that most fans haven't realized yet. Neither have the sports leagues,” wrote Clay Travis of rival Fox Sports.
ESPN’s reaction to falling revenue in recent weeks is telling. It cancelled expensive contracts with sportswriters Bill Simmons, Keith Olbermann and other talent and closed an expensive New York City studio.
How does this affect folks locally?
Utah’s athletic director Dr. Chris Hill already expressed disappointment this spring that its Pac-12 TV revenue was less than anticipated. It isn’t the $30 million or even $25 million figure thrown around when announced. BYU’s athletic budget, like Utah’s, is directly tied to big TV contracts involving ESPN.
Any monetary retraction by ESPN due to unmet projections in revenue could impact folks locally, although that is speculative at this point.
It could impact college conferences like the Big Ten, due to renegotiate its TV contracts the soonest, and that could have a domino effect.
Big 12 presidents, arguing amongst themselves whether to expand, might be pushed to add two to four teams if that league’s TV partners decide an expanded inventory would drive viewership higher.
If the Big Ten lured away current members like it did with Nebraska for the same reason, the Big 12 could vote to grow. BYU has been mentioned as a Big 12 candidate since 2010.
KSL-TV anchor Dave McCann has worked in several major TV markets and sees ESPN's value is huge and could remain so for years.
“In my opinion, there are only two components to television that don’t come with a scripted finish – breaking news and live sports. ESPN has cornered the market on live sports, buying up key interests in all the sports that interest us, including BYU, Utah and Utah State football and basketball games. While competing entities fantasize about their demise, ESPN looks like they are shoring up its borders. Much like a home owner, trimming its budget will put ESPN in a stronger position to keep what it has. It doesn’t necessarily mean that a yard sale and foreclosure are on the horizon.
Said McCann, “ESPN has revolutionized the way we ingest and digest sports. The outsiders (NBC, CBS, FOX) get a little here and a little there, but almost all of today’s major events, including the build-up, the actual event and the aftermath are on the ESPN family of networks, including ABC. Will it stay like that forever? Who knows? But for right now, if you are BYU and BYUtv, there is still no better partner than ESPN.” ESPN must do something to meet its obligations to dozens of bowl game franchises and guaranteed payment to the NFL, NBA, Major League Baseball, the College Playoff, the SEC, Pac 12, Big Ten, Big 12 and ACC.
Nobody likes big bills to pay with dwindling expendable income and penny- pinching budgets.
It can get serious.
It is in my household.
Dick Harmon, Deseret News sports columnist, can be found on Twitter as Harmonwrites and can be contacted at [email protected].