ESPN Loses A Record 621,000 Subscribers In One Month

Tyler Durden's picture

Last April, HBO effectively marked the death of the cable TV bundle when they decided to launch "HBO Now" and sell their content directly to consumers for $15 per month.  While other "over-the-top" providers have existed for years, this decision was pivotal because it was the first time that any major content provider decided to break with the traditional cable delivery model and go direct to consumer.  Within a year, HBO Now had amassed 1 million subscribers.  Meanwhile, Pay TV households collapsed around the same time as "cord cutting" accelerated.

Per the following data from Barclays' Media and Telecom analyst, Kannan Venkateshwar, the decline of Pay TV households really accelerated in 2Q 15 around the same time that HBO Now was launched. 

Cable TV

 

Meanwhile, the number of broadband-only households also surged.

Cable TV

 

Now, the biggest beneficiary of the cable TV bundle, ESPN, which exploited it's "must have" content for decades to negotiate ever higher rates with cable TV providers while forcing those rates down the throats of consumers by insisting its content be included in all of the channel "bundles", finds itself in the unfamiliar territory of losing millions of subs per year amid surging contents costs.  In fact, according to Outkick The Coverage, ESPN lost over 600,000 subscribers in October alone which is worth over $50mm in annual revenue.

Yesterday Nielsen announced its subscriber numbers for November 2016 and those numbers were the worst in the history of ESPN's existence as a cable company -- the worldwide leader in sports lost 621,000 cable subscribers. That's the most subscribers ESPN has ever lost in a month according to Nielsen estimates and it represents a terrifying and troubling trend for the company, an acceleration of subscriber loss that represents a doubling of the average losses over the past couple of years, when ESPN has been losing in the neighborhood of 300,000 subscribers a month.

 

These 621,000 lost subscribers in the past month alone lead to a drop in revenue of over $52 million and continue the alarming subscriber decline at ESPN. Couple these subscriber declines with a 24% drop in Monday Night Football ratings this fall, the crown jewel of ESPN programming, and it's fair to call October of 2016 the worst month in ESPN's history. But this isn't just a story about ESPN, the rapid decline in cable subscribers is hitting every channel, sports and otherwise. It just impacts ESPN the most because ESPN costs every cable and satellite subscriber roughly $7 a month, over triple the next most expensive cable channel.

The historical cable TV game goes a little something like this...in any given market there is typically 3-4 subscription TV providers (2 satellite companies, 1 (or more) cable providers and a Telco).  Those providers sign multi-year deals to buy content from media companies (e.g. ESPN, Discovery, Time Warner, Viacom, etc. etc) and then bundle them all together and pass the costs of those contracts along to consumers. Every 3-5 years those content contracts come up for renewal and the cable providers (i.e. consumers, since the costs just get passed along) are effectively forced to pay whatever increase ESPN (and others) asks for or risk losing millions of subscribers. 

Now, there are roughly 100mm pay TV households in the U.S. and, because of the channel "bundling" scam, approximately 90% of them are forced to "buy" ESPN whether they consume sports content or not.  Moreover, because ESPN is considered "must have" content they're able to extract the most value from the cable providers getting roughly $7 per sub per month, or more than double the next highest content provider...tack on a little extra margin for the cable provider and the average consumer is paying $120 per year for ESPN even if they never watch a single minute of sports programming...seems fair, right? 

Fortunately for consumers, and not so much for ESPN, the power in the system, courtesy of "over-the-top" content providers like HBO and Netflix, is just starting to shift from the media companies to consumers...which will be disastrous for the historical beneficiaries of the cable bundle.  Outkick The Coverage laid out the math on what pay TV sub losses means for ESPN:

A loss of 3 million subscribers would leave ESPN with 86 million subscribers in 2017. That would be down roughly 15 million subscribers in the past five years alone. Given that ESPN makes right at $7 a month from every cable and satellite subscriber a year, that means ESPN's subscriber revenue would be $7.22 billion in 2017. Toss in an additional $1.8 billion or so in advertising revenue and ESPN's total revenue would be $9 billion. We don't know what the costs of running ESPN are -- employees, facilities, equipment, and the like have to cost a billion or more -- but it's fair to say that ESPN is probably still making money in 2017. Just nowhere near what they used to make.

 

But those sports rights costs are going up and those subscriber revenue numbers are going down.

 

So if we're very conservative and project that ESPN continues to lose 3 million subscribers a year -- well below the rate that they are currently losing subscribers -- then the household numbers would look like this over the next five years:

 

2017: 86 million subscribers

 

2018: 83 million subscribers

 

2019: 80 million subscribers

 

2020: 77 million subscribers

 

2021: 74 million subscribers

 

At 74 million subscribers -- Outkick's projection for 2021 based on the past five years of subscriber losses -- ESPN would be bringing in just over $6.2 billion a year in yearly subscriber fees at $7 a month. At $8 a month, assuming the subscriber costs per month keeps climbing, that's $7.1 billion in subscriber revenue. Both of those numbers are less than the yearly rights fees cost.

 

Uh oh.   

But that's just the short-term incremental impacts.  The real question is how many consumers would actually purchase ESPN if the bundle truly disappeared and consumers were given the option to buy all content a la carte (which we suspect is the inevitable end game)?  If we assume that 45mm households would be willing to purchase ESPN directly, at their current cost of $7 per month, then that would equate to roughly $3.8BN in revenue per year or about half of their $7.5BN in annual content costs...which we suspect is a slight problem for Disney.

But, like it not, a la carte content purchases are the way of the future.  While cable providers used to be incentivized to protect the "channel bundle" the advent of the internet and over-the-top content providers means that their true value offering to consumers is now in their broadband and not the content.  Therefore, it's not terribly surprising that, as Bloomberg points out, new a la carte, streaming TV services are becoming very popular.

AT&T Inc. set a price of $35 a month for a new online-streaming TV service with 100 channels or more, and the company may experiment with “a la carte” programming, giving customers choice on what channels they pay to watch.

 

DirecTV Now will be priced to compete with two leading online TV providers -- Sony’s PlayStation Vue and Dish Network Corp.’s Sling TV. PlayStation Vue starts at $39.99 for 60 channels and runs as high as $54.99 for more than 100 channels. Sling TV begins at $20 for 28 channels and goes as high as $40 for a 48-channel multi-screen package.

 

The competition for cable-like online services is suddenly fierce. YouTube has been working for months on the paid live-TV streaming service, called Unplugged. Hulu LLC, which is co-owned by Fox, Disney, Comcast Corp. and Time Warner, will introduce its own service in the coming months, and Amazon.com Inc. and Apple Inc. have explored the idea.

Of course, ESPN isn't the only content company that has benefitted from the forced charity of the American consumer.  We suspect the many other cable content providers are also about to face a very turblent transition as well.

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LN's picture

People still watch TV?  Who knew.

LN

flaminratzazz's picture

saw one of those mini Dish dishes in the ditch.. wife and I laffed our asses off.. die you hollowoodjewhores..

LN's picture

Would that be the micro bundle I've heard about?

:)

LN

WestVillageIdiot's picture

ESPCNN sucks.  Try watching that channel.  Horrific.  This is no longer a sports channel.  This is a crypto-fascist "progressive" channel that sucks shit.  ESPCNN needs to die. 

LN's picture

I've not watched TV in decades, except for the first two presidential debates this year.  Damn near stroked out watching them.  I think I'm good for the next several decades, or until something else wakes me up.

LN

Mano-A-Mano's picture
Mano-A-Mano (not verified) LN Oct 29, 2016 9:01 PM

Can't afford bundles. America is broke. Will get worse.
http://wp.me/p4OZ4v-3z

lonnng's picture
lonnng (not verified) Mano-A-Mano Oct 29, 2016 9:02 PM

Loan Shark. 1-800-WHITE-HOUSE

Bunga Bunga's picture

"This is Hillary, Goldman Sachs branch D.C., what can I do for you?"

AVmaster's picture

Cable tv, msm, all dead....

 

Thank god for the internet...

Boris Alatovkrap's picture

Thanks goodness for neighbor WiFi and forget to change default password!

Bendromeda Strain's picture

Beware Huma Abedin honeypot... (yech)

thecondor's picture

Not really since we gave up control.

sessinpo's picture

I don't think she'll live long enough to get there.

N2OJoe's picture

Not in this bannana republic.

cheka's picture

skype running espn have been pushing the nyc sjw agenda.  their expert commentators are now women or low iq negroes....with some gays mixed in.  none of which their scriber base considers worth listening to -

Sam Clemons's picture

No joke. Every time I turn around, my cable bill has increased and they have some very very complicated way if billing. Like predictive but also semi billing cycle after. As in they bill you for future months for service you don't have but at the same time it's in the past. I tried understanding for a while then threatened to cancel and they refunded me.

Crash N. Burn's picture

"Every time I turn around, my cable bill has increased"

Tell them to fuck themselves, see below.

Mobdro (android only)

Kodi (runs on everything)

For Kodi, google how to install Exodus and Phoenix. That'll get you started.

 

mkkby's picture

Look what dipshits are paying for.  Fake news/propaganda, endless reruns of shows that were always unwatchable, 20 minutes an hour of commercials, nigger ball, and spanish language channels.

HBO now is an even bigger joke.  $15 a month for 3 movies and Lena Dunham's fat, ugly face -- over and over again, morning, noon and night.

When I cut the cord in 2009, comcast offered it for free.  I said "free is too expensive for fake news, commercials and reruns".  Pay me a hundred a month and I'll take the box home.

1777's picture

I can't believe you're still paying those creeps! CUT THE CORD BRO! You will thank yourself....

Bendromeda Strain's picture

Internet has jumped $5 twice since I stopped TV and phone... need real broadband competition to kill Comcast/COX/TW, hands down the most hated companies in America.

Bunghole's picture

You're a real hero by continuing to feed them.

You showed them, alright.

Yep, that red was from me.

True Blue's picture

Just die already you forum infesting cockroach. Mofio, Assbottle of Grease, Gargoylian etc.

Theosebes Goodfellow's picture

~"Can't afford bundles. America is broke. Will get worse."~

I upvoted the statement. I would have downvoted the mysticism link. Sort of like WWJ watch. Seriously?

Personally, when they go a la carte these bastards will starve, if you ask me. What's that old adage about standing together or hanging separately? I'm boycotting until all olympics competition is streamed and are available. FU NBC.

lurker since 2012's picture

I watched the debates but found other things to do. The reason was if Trump was losing  I did not see it. I just caught bits and pieces.

Uzda Farce's picture
Uzda Farce (not verified) WestVillageIdiot Oct 29, 2016 10:40 PM

Richard Plepler, president of Time-Warner/HBO, is a director of the Rockefeller/CFR. Jeffrey Bewkes, chairman of Time-Warner, is a CFR member. Disney director Sheryl Sandberg and Disney/ABC exec Benjamin Sherwood are CFR members. See member lists at cfr dot org.

http://www.cfr.org/about/people/board_of_directors.html

Bendromeda Strain's picture

ESPCNN needs to die.

ESJW more like it. Entertainment Social Justice Warriors. It is only a coinkydink that the letters can be transposed to reflect their Disney Masters...

On Dasher - On Dancer - On Ovitz, Eisner & Iger...

flaminratzazz's picture

hell that aint no bundle, boy.. I'll show you a bundle that will make you fvkin mouth water.. shit niggah.. you got nuffin.

King Tut's picture
King Tut (not verified) flaminratzazz Oct 29, 2016 8:42 PM

Couldn't happen to a nicer bunch than the assholes at (((Disney)))

SAE 73's picture

Package sounds more classier than bundle if that's possible.  HAHAHAHA.   Lol

Agstacker's picture

My dad uses it as a target for his rifle.

Freddie's picture

F TV!

F Zollywood!

F ESPN!

F HBO!

F Trayvon thug NFL, NBA and NCAA college ball watched by white sheep American male retards!

I love that douchebag Colin Kappnacker.   He got a few dumb white males to wake up and smell the roses with their fawning over Trayvon Dindu NFL, NBA and NCAA dindu nuffin rapists.

I like he Russians because they are serious people and do not watch dindu ball.

Putin is also a Christian and Putin threw Soros the F out of Russia.

thatthingcanfly's picture

Everything on the talking box relates to psychological manipulation for economic gain of the global telecommunications compaines and marketers who use them (for a fee). The whole idea of "broadcasting" should be rejected by every "consumer" of the toxic waste that poses for entertainment on TV. HBO has, apparently unwittingly, discovered that there is a demand for "narrowcasting," which would be a very good thing for "us." If a true a la carte selection could be made of a family's TV channels, you'd see a progressive leveling of the socio-political spectrum of ideas available for "consumption" via this medium. There would be enough Christian households who would demand programming that talked to their spiritual, cultural, and even political ideals, while rejecting the soft-core porn such as "Friends," "The Kardashians," and "The Bachelor/Bachelorette" series, to give a few examples, to justify the creations of whole new networks to service that market. The implications for the so-called "alt-right" are obvious. As are the implications for the "main-left."

Saratoga's picture

You drank the Kool Aid

Tall Tom's picture

 

saw one of those mini Dish dishes in the ditch.. wife and I laffed our asses off.. die you hollowoodjewhores.

 

 

....and did you harvest the LNB for the Gold???

 

LMAO if you left the Gold. (Gold is where you find it...)

thatthingcanfly's picture

Unless you've got a streamlined process for recovering the tiny amount of gold flake plating on that Low Noise Block converter (I had to look it up), including the lab equipment and chemicals to dissolve the epoxy holding it to the board itself, and can process hundreds of these a day, then you're probably better off just leaving it in the ditch.

Stackers's picture

You can get HBO for $5/mnth thru SlingTV internet based TV

flaminratzazz's picture

5 bux a month, that aint paying me near enuff.. they would have to up that to at least 4000 a month to buy my attendance to that full on mind death. bill mauher or wtf evah? fvk that his condescending tribe clap trap is not about to enter my domicile.

good riddance to all of this lame stream shit.

Bumpo's picture

Stream it over the internet if you really want it. Otherwise, between Netflix, Amazon and my powered Antenna, I aint missing shit. Especially Bill Maher.  Lately, its just my NFL team, maybe a movie at the end of the day, and Walking Dead on Sunday. Shit shows like Modern Family make me boycott anything ABC, NBC or CBS are trying to ram down my throat.

blue51's picture

Bill Maherstein , SUUUUCKS .

JRobby's picture

I repeat myself when under stress

"cut the cable, scrap the dish, STARVE THE BEAST !!!!!!!!! KILL IT DEAD !!!!!!!!!!!!!!!!!"

It is beginning

MalteseFalcon's picture

ESPN has been shoved down the throat of non-sports fans for years.

They don't want to pay for it.

I am a sports fan and I am no longer interested in ESPN's PC meme laden content.

And the NFL can take their kneeling to the anthem and shove it up their ass.

I stopped watching the NFL and ESPN and now I don't want to pay for them either.

Lots of sports are greatly subsidized by ESPN.

"Sports-world" is finally going to feel the effect of the greatest depression.

RafterManFMJ's picture

I quit bothering to hit the bar to watch football (no TV for 10 years) when they made them wear pink shoes for tit cancer.

Fuck.You.

Know what? I've watched maybe 3 games in the last 2 years, and somehow I've survived. And you'd be amazed how empty the stores and restaurants are on Sunday. So easy to get shit done, and no lines.

BabaLooey's picture

Bingo.

+1,000 for the "tit cancer" quip.

What the Sam Hill does the National Fooseball League care about that?

Fooseballs a man's sport. How about ASS cancer, or DICK cancer?

Pete Rozelle's former limo driver is driving the league into the LoveBoat Canal.

I watched last week.

More flowing hair than a Sauve convention.

More dancing than a "Dancing With The Twats" TeeVee spit up.

More players signaling shit than an Italian sign language group coffee break.

More stoppage of play than a backed up toilet at an Ex-Lax volunteer patient experiment.

...and more commericals than a Darren Stevens/Larry Tate brainstorm session.