How long ago did we first hear the term "cord cutting"? It must have been a decade ago.
Personally, I dumped cable television about 15 years ago. The idea of paying for channels that I never watch did not appeal to me. We are seeing this mindset ingrained in the Millennials. They are not of the television generation. Instead, they turn to internet based solutions.
This is, naturally, a major issue for the companies who profit from those monthly cable subscriptions. The steps away from broadcast television is well underway. In fact, it is accelerating.
As we can see, the number of television households is decreasing while the opposite is increasing.
This is having an impact on other entities also.
The Decline In The "Global Leader In Sports"
ESPN is the long time leader in sports television. This was a title is captured in the 1990s, a little more than a decade after it started. For the last 30 years, it basically operated without competition.
The challenge is that it depends upon a business model that is no longer valid. Many people who are not sports enthusiasts are supplementing those who are. The reason for this is that each cable bill carries a $10 a month hit. This is paid whether the network is viewed or not.
At issue is the fact that ESPN, which is owned by Disney, lost 8 million subscribers in 2021. This amounts to a hit of near a billion dollars in revenues. Of course, this is a yearly loss since people are billed on a monthly basis.
Since cable subscriptions are declining, these subscribers are gone forever.
It is all part of a longer trend. ESPN was in 100 million homes just a decade ago. Now it comes in at 76 million.
Many project this is a number that is likely heading towards the 50 million range.
Unfortunately, their other properties aren't doing so well either.
Other networks in the ESPN portfolio are seeing erosion. ESPNU, which features college sports, fell from 62 million homes in fiscal 2020 to 51 million this past year. ESPN News, also at 62 million a year ago, slipped to 59 million in fiscal 2021. Earlier this fall, ESPN said it would shut down ESPN Classic as of January 1, 2022. The network had been in a long period of decline, with its business model having been disrupted by the internet and social media.
It seems that the cord cutting is only going to eat away at all of ESPN's networks. In fact, they shut down ESPN Classic earlier this year. It is a process likely to continue moving forward.
Of course, being tied to Disney you would think they have a lot of backing but the reality that company is trying to navigate through the new waters. The company is expected to take more than a $1 billion hit in quarter 2 of this year for its streaming service.
Speaking of streaming, that was suppose to be the savior for the cable and satellite industry. It looks, however, that might not be the case.
Streaming, in other words, was supposed to be the life raft that saved the cable and satellite business. The idea was that just as companies like ESPN were about to go under water, ESPN would just step from cable to streaming, which would be a new, reliable boat. The business would be fine.
But increasingly it’s looking like there are two sinking boats instead of one, both cable and streaming are taking on water. And all you’re doing as you attempt to step from one boat to the other is changing your view as you go down.
So what does the future hold?
Mega Tech
Here is where we see the entry of mega-tech companies. Both Apple and Amazon are in the field. The latter is already paying billion in rights for MLB and NFL games. Its presence will only grow as ESPN finds itself short on resources to keep up with the insane bidding that is taking place.
It is also where things can get very interesting.
The question is are people starting to turn their back on some of these sports. It is no secret that the attraction of the Millennials is difficult. One of the reasons why eSPORTs is starting to become so popular is because it provides a much different experience as compared to traditional sports.
Major League Baseball might be the one to start to feel it the most as a lot of their customers are dying off. Another decade might see the ratings drop significantly. After all, the rush for eyeballs is getting fierce.
Whatever happens to the individual sports, the bottom line is ESPN is in a great deal of trouble. Their own issues, ie outdated business model is only going to make it harder to fend off the competition. This is only going to ramp up, especially if Apple and Google decide they want into the game.
These companies can use the sports broadcasts to enhance their other offerings, such as Amazon Prime. This means they can cross pollinate the money spent on the rights to the games.
ESPN cannot do this.
We will likely see them go the way of Blockbuster. Another outdated company.
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