ESPN lost 3.2 million subscribers in just over a year as viewers shifted from cable to streaming services, according to Nielsen data. But despite the losses, the company is paying record amounts for exclusive rights to sports games and matches.
ESPN is cutting costs in other areas. Star host Keith Olbermann departed on Wednesday, two months after Bill Simmons left, allegedly for financial reasons. Plans like moving the popular “Mike & Mike” show from the ESPN headquarters in Connecticut to the ABC studio in New York City were halted.
But ESPN has also continued to pay for exclusive content. Last year, the company agreed to triple its annual fees from $485 million to about $1.47 billion as part of a renewal deal with the NBA.
Exclusive content like NBA games is key to ESPN’s success. When The Atlantic’s Derek Thompson asked ESPN president John Skipper what he would do if he were the president of ABC, he replied, “Buy exclusive rights to the presidential election.” Exclusive content was one of the main factors in ESPN’s ranking among the One Percent of brands in L2’s Intelligence Report: Media Winners and Losers – a title shared by fellow media giants Apple and Amazon. As most media companies struggle to turn out profitable content, ESPN has a product people are willing to pay for, along with the scale to get significant returns from advertising.
But in the digital age, it’s also important for ESPN to expand beyond TV screens. While its cable TV network still draws an average of 2.4 million prime-time viewers, the company has established a vast online presence. When LeBron James announced last year that he was leaving the Miami Heat, 3.7 million people visited ESPN’s websites and apps in just a few hours – more than the viewership of its popular news show SportsCenter. ESPN’s Push team has also focused on news alerts. In an average week, ESPN delivers roughly 600 million alerts to tens of millions of phones.
The company has been less eager to move into online streaming. Unlike rival networks like HBO and CBS, ESPN has not launched a stand-alone online video service, which could cut into pay-TV profits. To make the equivalent of what it makes from being included in cable bundles from an “over-the-top” offering, the company would need to charge $30 per month. In contrast, HBO Now costs $15 and Netflix costs $8. Yet ESPN’s exclusive content could be enough to get cord-cutters on board.