ESPN Can’t Afford Monday Night Football Any More

ESPN pays $2 billion a year to the NFL for Monday Night Football and one NFL wild card playoff game. I’ve written for the past couple of years that as ESPN’s business collapses that ESPN’s decision on whether or not to bid to keep Monday Night Football would be the first big test of how rapidly that business is deteriorating.

What’s a deteriorating business look like? In the month of October ESPN lost over 15,000 subscribers a day in October per the latest Nielson estimates.

15,000 a day!

Last year I wrote this about ESPN’s challenges as it pertained to Monday Night Football:

“ESPN presently pays $1.9 billion a year for Monday Night Football. (This is a wild stat, but did you know that every cable and satellite subscriber who has ESPN is paying $21.50 a year just for Monday Night Football games? That’s whether you ever watch those games or not. That’s the NFL tax that ESPN passes along to consumers.)

What will the NFL want from ESPN for Monday Night Football in 2021? More money, right? The NFL has gotten used to television revenue only going up. Even if, as is the case this year, its Monday Night Football ratings are plummeting. Will ESPN be able to afford to keep the NFL and pay more money despite having lost nearly 30% of its subscriber base in the ten years of the existing MNF contract? That seems highly unlikely doesn’t it? But can ESPN exist as a network without NFL games? Remember, it’s not just the NFL games, it’s all the ancillary content that ESPN builds around the NFL games, think about the hours of studio programming that ESPN devotes to pro football. ESPN justifies its sky high cost per month to cable and satellite companies based on the games it provides exclusively on cable, can ESPN extract an increase in subscriber fees from cable and satellite companies when its deals expire without the NFL games? So how much more money will the NFL be able to extract from ESPN? Or will this be the moment in time when the entire sports industry finally realizes that the bubble has popped?

This is the biggest contract to watch in sports, will ESPN bend to economic reality or will Disney let the worldwide leader in sports spend money it doesn’t have?”

Now we have our potential first answer to these questions from the man, Jim Miller, who literally wrote the book on ESPN. It appears the worldwide leader in sports is now aware that there are many tech companies likely to be able to bid much more for Monday Night Football than they can.

The Hollywood Reporter featured an article from Miller today that laid out ESPN’s Monday Night Football decision.

“First, quietly, ESPN has been able to pull off a dramatic judo move in recent agreements with its affiliates, one whose importance cannot be overstated: There is no longer specific contract language that requires the cable giant to have NFL games in order to earn its lofty (and industry-envied) subscriber fees, currently more than $7 per household. This means the network would not face automatic decreases in that vital artery of its dual revenue stream. Sure, distributors would be aghast, demanding to negotiate lower fees probably immediately, but the point is, there would be negotiations, enabling ESPN to do everything it could to keep those numbers as high as possible.”

It’s important to note what is going on here — Miller is sourcing specific language in ESPN’s cable and satellite contracts. That suggests incredibly high level sources, probably the highest possible level sources.

Effectively ESPN is tossing up a trial balloon letting Wall Street know they probably can’t afford to keep Monday Night Football rights past 2021 when its current deal expires, but they’re trying to make it seem as if this is their decision and it’s a good thing for the company.

And they’re simultaneously letting Wall Street know that their business won’t completely collapse without the NFL either because, how convenient, their executives are geniuses who negotiated language that protected them in case they couldn’t afford the NFL.

But if you think the cable and satellite companies are going to keep paying $7 a month to ESPN without the NFL package, I’ve got a bridge to sell you. This final sentence is hysterical ESPN spin: “Sure, distributors would be aghast, demanding to negotiate lower fees probably immediately, but the point is, there would be negotiations, enabling ESPN to do everything it could to keep those numbers as high as possible.”

Another way to put this would be as follows: ESPN’s business is collapsing so rapidly that they are now trying to figure out which would be more destructive — losing billions on the NFL or losing billions in cable and satellite revenue because they don’t have the NFL.

This won’t be a negotiation, it will be a hold up where ESPN tries to beg the cable and satellite companies not to take all the money out of their wallets because they need the bus fare to get home.

Put simply, ESPN’s business is screwed and they’re trying to make it look like that’s a good thing by leaking this story to a friendly source.

This qualifies as a blockbuster revelation because it provides crystal clear evidence of what I’ve been telling you for the past couple of years — ESPN’s business is collapsing and they have no solution to prevent it.

Sure, ESPN employs a ton of PR executives — at least for now — to try and argue publicly that I’m not telling the truth and that I’m biased against the company, but look at everything I’ve reported about ESPN — it has all come true.

And it’s all still coming true. I told y’all a month ago that ESPN was going to be laying off more people. And what news broke last week? More layoffs.

I told you a couple of years ago that the Monday Night Football deal would be the moment when others started to realize just how screwed ESPN’s business was. And guess what happened this morning? The news caught up to my prediction of a couple of years ago.

The reality is this — ESPN is a broken company that will begin to lose money in a few years. And it has drastically overpaid for sports rights that will slowly expire and probably be bought up by tech companies like Facebook, Amazon, Google and Apple.

That is, the leagues are probably going to step off the ESPN sinking Titanic to the tech company life boats, but ESPN? ESPN’s sinking to the bottom of the ocean floor.

And ESPN executives are like the orchestra on deck of the Titanic, they’re trying to make beautiful music as the company slides into the icy water and everyone drowns.

Don’t believe me?

Look at what the ESPN executives try and say will happen with the $2 billion ESPN doesn’t pay for on Monday Night Football.

“But the good news is the network would have some serious spending money it hasn’t had in years. Take the $2 billion that it is now giving the NFL, subtract say $350 million for (NFL) rights to highlights as described above, and another $250 million to send back to Burbank the way Henry Hill gave Paulie that “tribute” money after a big haul, and that still leaves a billion and a half dollars for ESPN to play the media rights version of Wheel of Fortune. While it’s true that nothing drives a sub fee like the NFL, ESPN could go on a spending spree targeting CBS’ college football deal with the SEC, a Big 12 deal, baseball post-season, rights to NHL hockey, EPL soccer and a whole buffet table of other properties that would prove beneficial in its negotiations with distributors who would want to lower their sub fees.”  

First, keep in mind this is an ESPN fantasy and it’s total bullshit. The reality is the network won’t have this $2 billion to spend because their business is collapsing. That’s why they aren’t buying the NFL rights in 2021.

And all of this “spending spree” positive spin neglects a big fact, ESPN is going to have to pay a ton more to keep the rights they have now. ESPN pays $700 million a year to Major League Baseball and that deal is up in 2020. Figure MLB will expect an increase or ESPN will have to walk away here too. Let’s say baseball costs $900 million a year. The college football playoff is up in eight years. That’s a billion dollar a year property by itself if the playoff expands to eight teams. My bet is the SEC is going to want at least $200 million a year for its CBS package in five years. That’s the entire amount of money that ESPN “saves” by not paying for the NFL and all it does is keep the content roughly the same. (Here’s an olive branch to ESPN executives, try and convince the SEC to play its CBS game of the week on campus on Monday nights. That’s at least one way to replace a big audience on Monday nights.)

But the most interesting part here is the tribute money back to Disney. That’s what is likely to happen more and more often. As ESPN’s business collapses Disney is going to draw more and more of the money off the network to use on growing businesses elsewhere as it slowly winds down the ESPN business. Instead of investing in a money-losing business Disney is going to take all the money out of ESPN it possibly can and use it more effectively. The end result? My best guess is that ESPN will end up auctioning off the latter years of its existing rights packages to the tech companies.

ESPN is the sports version of Blockbuster Video.

Because, ultimately, what is ESPN’s business otherwise? Just like Blockbuster Video it takes the content that other people create and rents them to viewers. The only real assets it has are sports rights agreements. And none of those are permanent. ESPN is just a middle man like Blockbuster. HBO can make money off “Game of Thrones” forever, Netflix can do the same with “Stranger Things,” but once the NFL leaves ESPN, the network retains nothing at all. That’s because ESPN doesn’t actually make anything of lasting value.

It’s MTV when music videos went to YouTube, Blockbuster when movies went to streaming.

ESPN owes its existence to highlights and now highlights are available everywhere for free. Even worse, ESPN’s killer app, the key to its business, used to be that it offered the sports leagues a way to distribute their content to the masses. But, guess what, every league can do that on its own now for much lower costs.

So what will ESPN do to save its business? They should be scrambling to try and create must watch original programming, they need the “Stranger Things” of sports. That is, shows that they actually own that make people want to subscribe to the network and create lasting value. Instead they’re busy turning into MSESPN, a left wing sports TV network that no one wants to watch.

Right now no ESPN show has a shelf life of longer than 24 hours unless you count the 30 for 30’s. (And those have virtually no long term value. It’s not like people binge watch 30 for 30’s).

That’s the exact opposite of most of what Disney has tried to do in recent years — buy up Marvel for all the superhero films, buy George Lucas’s company for all the Star Wars assets, what does ESPN actually own? A ton of fixed costs on studios and employees that mostly have no value.

And every year ESPN’s existing TV contracts with leagues become less valuable because all they’re doing is renting those games and every year those games get closer and closer to ending forever.

Contrary to the spin in this article the public acknowledgment that ESPN can’t afford the NFL in years ahead isn’t a good sign, it’s evidence that ESPN’s a dead company walking, and its execution date is scheduled even sooner than we thought.

Written by Clay Travis

OutKick founder, host and author. He's presently banned from appearing on both CNN and ESPN because he’s too honest for both.


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