ESPN has faced various head winds in recent years, mainly the decline in cable subscribers. This year brought new challenges as the coronavirus disrupted the sports calendar and contributed to a sharp decline in sports viewership.
The network, still the dominant force in sports television, went several months without any of its traditional live sports offerings in the spring and summer. When sports did return, they did so with mostly empty stadiums and fan bases whose interest in sports was dampened by the pandemic and a dizzying political-news cycle.
Disney has also seen its theme park, cruise ship and movie businesses deeply impacted. Disney’s struggles have put increased pressure on ESPN to make cuts, according to the people with knowledge of the cuts.
In April, ESPN asked its highest-paid commentators and executives to take pay cuts, avoiding furloughs and layoffs at the time. But its cost-cutting could be seen when several high-profile broadcasters left the company in recent months, including play-by-play announcer Adam Amin and commentators Emmanuel Acho and Will Cain. On-camera talent are not part of the layoffs, but people both inside and outside ESPN expect there will be high-profile people who will not have their contracts renewed moving forward.
“The pandemic’s significant impact on our business clearly accelerated those forward-looking discussions,” Pitaro wrote in a memo to staff. “In the short term, we enacted various steps like executive and talent salary reductions, furloughs and budget cuts, and we implemented innovative operations and production approaches, all in an effort to weather the covid storm.”
A number of other sports media companies have had layoffs during the pandemic as well, including Fox Sports, NBC Sports and the Athletic.
As sports have returned this summer, ESPN has been forced to travel with smaller groups to produce live games, and the company has found that it can deliver similar telecasts with fewer production workers on site. The same is true to some extent with some of its studio programming. A person familiar with the layoffs said the staff of “Outside the Lines,” the network’s flagship news program, was reduced “substantially.”
The layoffs Pitaro announced Thursday are the latest of several large staff reductions at the network, as cable subscribers have declined over the last decade. ESPN laid off around 300 employees in 2015, and two years later cut around 100 journalists and talent and about 100 other positions. After this week’s layoffs, ESPN has around 5,000 employees.
ESPN was in nearly 100 million cable homes in 2013; it’s now in around 83 million. In the third quarter of 2020, the network experienced its largest year-over-year loss in subscribers. Losing subscribers impacts all cable networks but ESPN especially, because it earns more than other channels for its flagship station — more than $7 per customer.
In the memo, Pitaro wrote that ESPN will continue to focus on ESPN+, its subscription streaming service. “The speed at which change is occurring requires great urgency, and we must now deliver on serving sports fans in a myriad of new ways,” he wrote. "Placing resources in support of our direct-to-consumer business strategy, digital, and, of course, continued innovative television experiences, is more critical than ever.”
The emphasis on the direct-to-consumer business is both a company- and industry-wide focus. Disney has already restructured its executive staff to focus more on streaming. ESPN+ currently has 8.5 million subscribers, and ESPN has sought to make the service more enticing for sports fans. Last month, ESPN announced that most of its written content outside of breaking news and investigations will be placed behind the ESPN+ paywall, a decision some writers, who appreciated the enormous platform of ESPN’s popular and free-to-read website, have chafed at.
While the company is planning for a more streamlined future in some areas, it is also committed to expanding its live sports offerings. According to multiple people with knowledge of ESPN’s plans, it is hoping to add a second NFL package to its current Monday night game during its current negotiations with the league and has discussed making a run at the NHL when its rights agreement expires with NBC.
Disney will hold an earnings call next week and then a call for investors in December. In a nod to how Wall Street thinks about the future of the cable TV business, one investor, Eric Jackson, founder of EMJ Capital, a tech and media hedge fund, said he hoped Disney would announce that it is extricating itself completely from its cable and broadcast properties.
“Are they going to go all-in on streaming? I hope so,” he said. “I’d like to see them spin off ABC and the cable networks and just retain the ESPN+ portion of ESPN. It’s easier said than done, but that would be the scenario that would make Wall Street most excited.”