ESPN Has Fallen and Can’t Get Up

The biggest company in the San Fernando Valley – in fact, in the entire Los Angeles area – is the Walt Disney Co. So it’s increasingly alarming to see the company continue to fumble with ESPN, which is the biggest chunk of Disney’s biggest division. The sports channel accounted for the deeply disappointing portion of Disney’s generally disappointing earnings report last week. Subscribers have been leaking from ESPN since its peak in 2011, and lately that leak has widened. It’s not quite a screen-door-on-a-submarine kind of leak, but it’s getting there. Worse: Disney doesn’t appear to know what to do with ESPN. If you cup your ear to hear Disney’s plan for rescue, you’ll hear crickets. Granted, a lot of ESPN’s problem isn’t Disney’s direct fault; it has to do with larger societal trends. Thanks to the internet, fans can get their sports highlights online for free. And thanks to the so-called over-the-top bundles, cable subscribers have been furiously cutting the cord. Since ESPN is the most expensive cable channel at more than $7 a month for each subscriber, it makes any cable package that includes ESPN a pricey one, making it a ripe target for cord cutters. But some of the problems were caused by Disney and the sports channel. For one thing, ESPN keeps paying ever-larger sums for rights to broadcast games. How could they have allowed that to happen? Given the declining state of the cable industry, it is stunning that Disney and ESPN haven’t done a much smarter job of negotiating down those costs. I mean, think of all the tenants who hammered down their rents in mid-lease back in 2009 and 2010. And it’s not as if the sports leagues have all that many competitors to ESPN that could broadcast games. There’s ESPN and – what? – channel 442 and 443, maybe. But the most dunderheaded misstep was ESPN’s decision to go political. As you well know, you can go up or down your cable listings and find plenty of channels with partisan types yelling past each other. I used to think of ESPN as a welcome respite from that; a safe place where you could stop, nestle in and learn about something newsy that specifically and pointedly wasn’t political. But alas, now you get a heavy dose of pious partisan sermonizing on ESPN, too. Sometimes I agree with the political views of the ESPN commentators, and sometimes I don’t. It doesn’t matter. The point: there is no business reason for a sports channel to take sides in our country’s political divide, thereby frosting off one side or the other. I wonder what was said in the meeting when managers decided to veer down the partisan path. “Hey! Here’s an idea: Let’s drive off half of what remains of our subscribers!” Maybe they thought they were improving their product, but Coca-Cola chiefs thought the same thing when they proudly unveiled the disaster of New Coke. Regardless of whether ESPN’s problems are self-inflicted or result from a changing market, the big and important question is this: What is Disney’s plan to turn around ESPN? That’s the part that is really alarming. There doesn’t appear to be one. True, ESPN has gone through some furloughs, but that’s a decision to reduce costs, not a strategy to win back viewers. Disney Chief Executive Bob Iger recently denied that ESPN is too political, so the campaign to alienate half the audience apparently will continue. And any move to join the cord cutters and stream more sports is a decision to get into a low-margin business that will hurt the high-margin cable franchise. It reminds you of that old television commercial in which an older woman groans, “I’ve fallen and I can’t get up!” ESPN – the biggest piece of the Valley area’s biggest company – has fallen. And Disney appears flummoxed about how to get it back up. • • • On the other hand, Disney just pulled off a coup for its ABC television network. ABC announced early this month that Ryan Seacrest would be the permanent co-host with Kelly Ripa on the “Live! With Kelly” morning show. That was immediately intriguing because it brought up the possibility that Seacrest could move his reality-show powerhouse, “American Idol,” to ABC. As you may recall, “Idol” ended its long run last year on the Fox network. Last week, it was reported that yes, “Idol” is moving to ABC. What will “Idol” do for ABC? Well, as others have pointed out, the show’s lowest-rated season over its 15-year run on Fox would make it ABC’s second-rated show today. What’s more, “Idol” will be a nice complement to ABC’s “Dancing With the Stars” and “The Bachelor/Bachelorette.” In Seacrest, ABC got much more than just a partner for Ripa. Charles Crumpley is editor and publisher of the Business Journal. He can be reached at [email protected].