This week, ESPN laid off more than 100 employees, almost all of them TV personalities, radio hosts, and writers. It had been widely reported that cuts were coming, but in the end, the company cut double the number initially expected.
The cuts played out very publicly, given the intense scrutiny and fascination with the “worldwide leader in sports.” ESPN employees, both at headquarters in Bristol, Conn., and all over the country, took it hard, sharing their sadness on the air and in tweets and Facebook posts.
And the pain isn’t over yet.
ESPN is making serious changes to its entire content strategy and its programming, and that could easily mean more layoffs again before the end of 2017. It will be stressful and sad for many employees, but it has to happen. And it could end being good for the health of the company.
You don’t need to read between the lines of the company’s public statements very much to see that ESPN is initiating an effort to completely reinvent itself. The company has had worse layoffs than this before: it cut 300 people just two years ago. But this time, because the cuts were people that the public recognizes, it felt more brutal, and it also reveals more about the company’s future.
ESPN is adapting to the realities facing all media companies: consumers only want to consume the content they want, and increasingly they want to consume it on a phone, computer, or tablet, not a television, and they don’t want to pay to get something they don’t want. You would think these maxims are obvious by now, but much of the cable industry is built on the opposite—bundling channels together for a fat monthly fee. Yahoo Finance Editor-in-Chief Andy Serwer put it well on our live show this week: “Because they’ve been part of the bundle, a lot of people have been paying for ESPN who don’t want to watch it. That’s not a great business model, people paying for something they don’t want.”
In Disney’s Q1 2017 earnings in February (it will report Q2 earnings May 9) it reported that operating income for its cable networks division, which includes ESPN, fell 11% to $900 million. Why? The company didn’t mince words: “The decrease in operating income was due to a decrease at ESPN… Operating income at our other cable networks was essentially flat.” In other words: ESPN, increasingly, is the dark cloud in Disney’s quarterly earnings reports.
But don’t mistake this: ESPN is profitable. It makes a lot of money. It’s simply making less money than it did in the past. Why? Cord-cutting. Or, to put it in financial terms: rising programming costs, falling subscription revenue. (And FS1 faces the same problem.)
To adapt, ESPN is overhauling all of its content. One year from now, ESPN will look like a dramatically different network.
Versatile talent—think multi-platform
The buzzword of choice amid ESPN’s cuts was “versatility.” In a memo to all employees that was simultaneously posted online, ESPN President John Skipper said that the network’s content strategy “still needs to go further, faster… and as always, must be efficient and nimble.” Pay attention to this in particular (bolding ours): “Dynamic change demands an increased focus on versatility and value, and as a result, we have been engaged in the challenging process of determining the talent—anchors, analysts, reporters, writers and those who handle play-by-play—necessary to meet those demands.”
A comment to Yahoo Finance from a high-ranking source at ESPN echoed the same narrative: “We are focusing on people that can be versatile and appear cross-platform. If you’re making X, are you justifying that salary? It’s all about versatility.”
In other words: ESPN “talent” (a label it uses for TV, radio, and writers) cannot be specialists anymore. If you look at the people who have been cut, many of them (though not all) were single-sport (i.e. NHL, or college football, and nothing else) or single-platform (i.e. a writer who rarely does TV and radio).
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There were certainly exceptions to that rule—a few well-respected veterans who do it all were still cut, which stunned fans and fellow media—but for the most part, it’s clear that ESPN is putting a premium on polymaths. (Adam Schefter, who gets NFL scoops and tweets like crazy and goes on ESPN’s TV and radio airwaves daily, and recently added NBA to his coverage area, is an example; Adnan Virk, who hosts baseball and college football shows and goes on radio and has his own movie-buff podcast, is another example.)
And this makes sense, because ESPN, more and more, appears likely to deemphasize any one sport in favor of a broad, multifaceted, multi-platform approach.
Digital, digital, digital
What does that really mean? It means ESPN is finally waking up to cord-cutting, and it is about to go more digital than it has up until now. Yes, ESPN has an online streaming platform, WatchESPN (that includes ESPN3, its streaming network that has existed in some form since as far back as 2005). But WatchESPN is only for ESPN cable subscribers. You must authenticate with a cable login.
But going more digital also means going more social. ESPN is already a powerhouse on social media—especially its flagship SportsCenter brand, which, for all the hue and cry over falling ratings, boasts more followers on Twitter (32 million) and Instagram (9 million) than the main ESPN brand itself. But the network, insiders say, is going to start putting more clips from its shows on Twitter and Facebook, correcting what has been, many say, an unorganized social strategy. It has already, over the last year, been posting far more highlights to Instagram.
Speaking of SportsCenter, which airs seven times each day on ESPN, the show’s ratings fell in the first quarter of this year (December 26—March 26), compared to last year, at three of the four evening time slots: 6pm, 11pm, and 1am. Only midnight with host Scott Van Pelt was not down, and that slot was merely flat year over year.
ESPN is now rethinking SportsCenter, focusing it around personalities and discussion—not at the cost of highlights and scores, necessarily, but what was traditionally a highlights show is now looking more like a variety show. In addition to heavily promoting the midnight SportsCenter with Van Pelt, in February it gave the 6pm SportsCenter slot to Jemele Hill and Michael Smith, previously the co-hosts of the talk show “His and Hers.” ESPN says SC6 is finding a diverse audience: 41% black, and its reach among black viewers ages 18-34 has increased 15% year over year since Hill and Smith took over.
ESPN’s programming heads (the seven names listed on this public statement) gave specific shout-outs, on the day of the cuts, to only these programs: SportsCenter at midnight with Van Pelt; SportsCenter at 6pm with Hill and Smith; radio show Mike & Mike (but Mike Greenberg is getting his own TV show, and Mike Golic will get a new co-host); and First Take.
That gives you a stark idea of what kinds of TV personalities ESPN values most right now: Van Pelt, Hill, and Smith (anchors who bring their own flair, humor, and pop culture references to spice up SportsCenter’s past formula); Greenberg and Golic (radio veterans with devoted listeners); and Stephen A. Smith (inflammatory opinionator whose hot takes fuel online chatter on social media). They are all personalities. Of course, not all viewers like all of those personalities (a staggering proportion of the comments on our initial story about the layoffs were complaints about Smith and Hill), but ESPN feels they are the future.
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John Skipper, in his employee memo, wrote that the network is “melding distinct, personality-driven SportsCenter TV editions and digital-only efforts.”
What might “digital-only efforts” look like? It’s no secret. ESPN spelled it out: “The debut of more digital-only content socially and on our App… On the horizon is more live news video and enhanced video and audio streaming.”
So: ESPN followers will see more online videos—not just highlights from games, and not just short clips from its shows, but also videos produced specifically for the web, and not just pre-recorded videos, but also live video. ESPN online may start to look a lot more like Yahoo, Bleacher Report, SB Nation, Huffington Post, and the scores of other sites that already run daily live sports video content. (In related news, Twitter plans to stream live video 24/7, and Amazon just spent $50 million to stream 10 Thursday Night Football games next NFL season.) ESPN has too long treated the Web as an additive realm; look for it to make digital the priority.
And finally—finally!—going more digital will mean ESPN comes out with an OTT (over the top) streaming subscription option, a la HBO Now. We know this is coming, and we know who will build it: MLBAM Tech, the recently spun-off video business of Major League Baseball, which Disney invested $1 billion in last August. When Disney announced that investment, it made its plans clear: it will build “a new ESPN-branded multi-sport subscription streaming service.” That will be a major step in winning back millennial sports fans who don’t want to pay for a cable bundle.
Shrinking baseball, hockey, and college sports
Two of the beats most gutted by the cuts: hockey and baseball. Three of ESPN’s most prominent hockey writers got cut, and it came amidst the Stanley Cup Playoffs, a stark sign of how low hockey ranks for ESPN (or how low ESPN believes it ranks for sports fans).
And then there’s baseball. ESPN cut a slew of star baseball reporters and on-air analysts, including Jayson Stark, Dallas Braden and Doug Glanville. It also quietly announced that it will slim down Baseball Tonight, its long-running baseball talk show, to just one night per week, as a lead-in to Sunday Night Baseball. In its place, ESPN has cut a partnership with MLB Network (owned by Major League Baseball) to show “Intentional Talk” on ESPN five nights per week, year-round.
This was a huge announcement, with huge implications, that has been under-covered amid the larger story of the company-wide layoffs.
ESPN has basically gutted its baseball programming, and instead will farm it out to MLB.
An ESPN spokesperson says this “is a unique deal, nothing further under consideration.” But don’t be surprised if ESPN goes the same way with other major sports. It could outsource some of its NFL programming to NFL Network, and NBA programming to NBA TV.
How could ESPN take an axe to one of its longest-running shows, a television staple for baseball fans? Mike Oz at Yahoo Sports explains it nicely: Baseball Tonight’s success came “before Twitter would show you every angle of Chris Coghlan jumping over Yadier Molina within minutes of it happening (and meme-adapted versions of the play right after that). It was before mobile apps and team-specific push alerts. Before live streaming.”
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ESPN also closed its Charlotte, N.C., production headquarters of ESPNU and cut 10 people there. ESPNU studio operations will move home to Bristol, likely at reduced capacity, from the looks of it. Pair that with the fact that many of the talent cuts were college football analysts, like former NFL quarterback Danny Kanell, who had been with ESPN for 8 years. ESPN may begin to place less of an emphasis on college sports.
What all of this signifies is a complete strategic shift at the “worldwide leader in sports,” not just the same nicks and cuts it has made every couple of years. It doesn’t necessarily mean less sports coverage, but it certainly means more talk, debate (look at the success of “First Take”), and entertainment.
If you don’t like the sound of that, remember that the ‘E’ in ESPN has always stood for “entertainment.” It’s the Entertainment and Sports Programming Network, and it’s about to reinvent itself.
No one knows for sure, except maybe John Skipper, which ESPN shows will be gone in a year and which ones will be alive but different. But it’s obvious that every show will change. The only certainty in Bristol for the next year or two: dramatic change.
Daniel Roberts is the sports business writer at Yahoo Finance. Follow him on Twitter at @readDanwrite.