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by BoiledCabbage 3336 days ago
I've posted this elsewhere, but it's relevant here too. The problem that's affecting ESPN is the same problem that's affecting newspapers and the same root cause that's behind reality TV, and buzzfeed and the like. The issue is the advertising model and the cost of creating content.

A number of people here complain about ESPN swapping to talking heads and opinions. The reason for doing this is because it's significantly cheaper to have people give opinions (everyone has an opinion) than the costs of doing journalism. ESPN isn't swapping to these shows because they have worse ratings, comparatively they get higher ratings.

Everyone talking about he glory days of the 90s and ESPN. That time is in the past. People turn to the internet for sports updates and scores, as well as highlight reels.

Ultimately, it's a failure in the "advertising model" of paying for content. As long as content creators are paid a roughly flat fee per viewer, their only incentives are to get more viewers and cut costs. Previously the market was inefficient enough to sustain it, but now that there are alternatives the inevitable is happening in all areas of content creation. Moving to cheap to produce, easy to digest low substance, high viewership content.

Imaging you were running a restaurant, and you couldn't charge a customer per meal. You only received a small flat rate for the number of customers who ate there. You're not going to run a top end steak house where your payment doesn't even cover the materials. You're gonna run a mcdonalds. Get as many people in there for as cheap as possible. You have no choice, the money doesn't support an intimate fine dining experience.

The that the same thing happening in all aspects of content creation. The market is becoming efficient, and the only way to survive is low cost production. Fast-food of content.

3 comments

You really missed the point, the article nailed it and your analogy is entirely wrong. ESPN got a flat fee per user + the ability to advertise to them. That gave them a huge financial incentive to overspend on the best content they could get to build the greatest sports "steakhouse" of all time and they did it. They spent up the wazoo on content. But the bottom is dropping out of the model because of cord cutters so now they have change and adapt to not getting flat fees for much longer.
"Because of cord cutters" seems awfully accusatory here. The real confounding factor from the article is that ESPN was being subsidized by fees from customers who don't watch the channel, but still were paying high bundled fees compared to other channels.

This is shifting to them receiving fees from those interested in their programming, which seems much more reasonable in concept.

It's not that cord-cutters are a bad thing, but isn't that the crux of ESPN's financial woes? Nearly everyone and their mama had cable about a decade ago. No matter if you were a 4 person family, living off campus where utilities were covered, or in the military - people had cable. If you were fancy, you had satellite programming. Then cord-cutting happened.

It is the fault of cord-cutters, because they aren't subsidizing the cost of ESPN for people who want to watch ESPN. Then ESPN could not pivot quickly enough to stop the bleeding. So yeah, ESPN is getting money from people who are interested in sports, but it is because cord-cutters had enough.

That is definitely a huge part of it. And it's not just cord cutters. Many cable stations now don't include sports channels in the basic package. So many people who pay for cable no longer pay for ESPN.

Another factor is that the Internet is a better source for sports news. Highlights are on YouTube. Twitter feeds post links to analysis from all over the web. Nobody needs to watch sports center for news anymore.

I'll explain it less confrontationaly than you did. First, the argument you presented actually is evidence for what I wrote.

> But the bottom is dropping out of the model because of cord cutters

As I wrote, the market across the board is becoming efficient. This is restating my point. Previously the only option was for cable, now there are other options for consumption. This is increased market efficiency.

> so now they have change and adapt to not getting flat fees for much longer.

Yes they have to change from their previous fee structure, but there are many things they could've changed to that would've supported quality programming. Instead ESPN changed to an advertising model, which doesn't support it. (Ex. Why does HBO get showered with awards year after year? And how do they monetize viewers?).

To understand the difference, imagine a directed graph with a transition between two nodes. You're too focused on the node it's leaving - instead I'd recommend focusing on the node it's arriving at (efficient market advertising model). Regardless of where you come from, if that's where you end up you will quickly produce fast-food content or you'll go under.

ESPNs problem from before is not that they had a subscription model. It's that they had a bundled subscription model. It was bundeled with Cable, and they were making money from people who never watched them. Their revenue was inflated. Rather than trim and find the true medium, they're throwing it all away and going advertising.

Sports can absolutely be supported via expensive subscription (see NFL Game Pass, NFL Sunday Ticket, MLB Packages, ...). Up to $400 / year for it. But ESPN is going a different route. One that will unfortunately turn them into the MTV of sports. But they won't be the only one.

The article should have gone further then — as ESPN suffers, so will the NFL, NBA, etc. They're not going to be able to get astronomical payouts for their content. Soon we'll start to see the owners of the teams losing millions.

Ripple-effect can be a bitch.

This is an intriguing line of thought. Have you expounded on it more elsewhere?