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OutKick first reported in October that ESPN was bracing for cost cuts, including the potential layoffs of hundreds of employees. Today, ESPN announced that 300 employees will be laid off and 200 positions will go unfulfilled.
“Prior to the pandemic, we had been deeply engaged in strategizing how best to position ESPN for future success amidst tremendous disruption in how fans consume sports.” ESPN chairman Jimmy Pitaro wrote in a memo to employees, obtained by OutKick. “The pandemic’s significant impact on our business clearly accelerated those forward-looking discussions. 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.”
“We have, however, reached an inflection point,” Pitaro’s memo continued. “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. Placing resources in support of our direct-to-consumer business strategy, digital, and, of course, continued innovative television experiences, is more critical than ever.”
ESPN has about 4,000 employees in Bristol, and about 2,500 others spread out across the rest of the United States and the globe.
As we wrote previously, this news does not come as a major surprise to those who are following both the media industry and Disney in the pandemic. NBC Universal layoffs impacted up to 10 percent of their 35,000 employees, including many at NBC Sports. CBS News was hit with layoffs in May. Fox Sports laid off between 50 and 100 staffers in July. We could go on and on naming media organizations, both in and out of sports, who have had to slash their budgets lately.
The pandemic has affected many of Disney’s business operations, such as theme parks, cruises, movies and live sports. As a result, Disney announced in September that it was laying off 28,000 park employees. Though most sports leagues have been salvaged, there was some lost revenue in college football and other sports.
ESPN has also been slowly transitioning away from a business model that primarily focuses on cable TV, where they have been steadily losing subscribers since 2015, to the OTT streaming future. No one yet knows how long it will take to evolve. Earlier this month, Disney CEO Bob Chapek announced that the company would be focusing on its direct-to-consumer initiatives, which means a big push behind content on Disney+ and ESPN+.
ESPN has long been the bellwether of the sports media industry. Thus, news about turbulence in their business cuts deeper than it does with other entities. ESPN had previously laid off about 300 behind-the-scenes workers in 2015 and and about 100 talents in 2017.
While every TV network has been affected by cord cutting, it hurts ESPN the most drastically because they have, by far, the highest subscriber fees. Between ESPN and ESPN2, they get over $10 per month per subscriber. Multiply that by 12 months per year and about 20 million subscribers and it is over $2 billion in annual revenue losses.
Even with this attrition, the Disney/ESPN/ABC conglomerate will be a formidable player in sports for years to come. They wrested the SEC Game of the Week package away from CBS and will air all the conference’s football games later this decade. They are trying to add a second NFL package, reportedly bidding aggressively to try to poach Sunday Night Football away from NBC. Their deals with the NBA and MLB are in good standing.
“We are parting ways with some exceptional team members – some of whom have been here for a long time – and all of whom have made important contributions to ESPN,” Jimmy Pitaro wrote in the memo to ESPN employees. “We’re very grateful for all they’ve meant to us, and I assure you we are taking steps to make their transitions easier. I am proud of the people at ESPN. Together, we have overcome tremendous challenges and adversity over these past several months and please know that the decisions and plans executed today were not made lightly. They are, however, necessary and I am convinced that we will move forward and effectively navigate this unprecedented disruption.”