ESPN Ignored Cord Cutting Threat, Paid For It With Huge Viewership Losses

Historically, the cable and broadcast industry has made a full-time sport out of trying to ignore the changing TV landscape and the threat posed by internet video. There's a fairly significant number of cable and broadcast execs who still believe that internet video, cord cutting, cord trimmers (users who cut back on cable packages) and recent ratings declines are some kind of mass delusion akin to the yeti or the mysterious chupacabra. Others think this recent commotion is just a fad we're going through that will magically resolve once millennials start procreating.

One of the biggest culprits for rising TV prices is sports programming, which is driving more and more users to either internet video, or so-called "skinny bundles" provided by TV operators. Companies like Verizon have gone so far as to boot ESPN from the core cable lineup (and have been sued for it by ESPN). Like so many broadcasters, ESPN apparently hoped things would stay the same forever, but recent subscriber data suggests that's very much not the case. Analysts, in fact, point out that new data indicates ESPN has lost around 7 million subscribers in just two years:

"ESPN topped out with 99 million US subscribers ("subs") 2 years ago, according to their filings with the Securities and Exchange Commission. Since then, its sub count has been shrinking. It's currently at around 92 million. That drop in subs has meant a big drop in profitability for ESPN which has been at the heart of its parent company's profitability."

And, at least according to former ESPN insiders like Bill Simmons, neither ESPN nor Disney saw the hit coming (it's apparently hard to see with your head buried squarely in the sand):

"Did ESPN or Disney see the cord-cutting decline coming? It doesn't look that way, despite predictions from a number of market watchers that it was a sizable risk. The sports network reportedly spent $125 million or so on a revamp of the Sports Center set, which seems like an odd investment if you think your viewership is going to fall. Former Grantland editor Bill Simmons also said on a recent podcast that he never heard ESPN executives talking about their concerns about cord cutting until last year."

ESPN now finds itself at a notably tricky crossroads. It could remain comfortably in denial, or it could embrace the modern era and start building its own, more flexible sports streaming video empire. The problem? ESPN's contracts with cable operators dictate that if it launches a standalone streaming service, cable operators will be allowed to boot ESPN from their core cable lineups. That will of course accelerate ESPN's losses, but it would also accelerate ESPN's adaptation to a market evolution the company has refused to take seriously.

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