ESPN, the once-invincible sports media giant, is set to ax big-name on-air talent as it tightens its belt in response to lower ad revenue — the result of lower subscriber numbers and ratings — combined with ballooning sports rights fees.
The profitable Disney unit is looking to cut hundreds of millions of dollars from its budget over the next two years, according to reports.
ESPN reps denied the cuts were that high but declined to be more specific.
The sports network was once able to pay “name your price” fees to leagues, secure in the knowledge that cable and satellite operators would fork over fat subscriber fees to cover their costs.
In recent years, ESPN agreed to pay the NFL an average of $1.9 billion a year, up from $1.1 billion under the previous deal. The NBA gets $1.4 billion a year in ESPN cash — up from $575 million annually under the previous deal.
MLB is paid $700 million a year, a 100 percent increase from its previous deal.
But with ratings and ad revenue now falling, ESPN President John Skipper is forced to truly manage a budget — and some well-known faces are likely to get pink-slipped or not have their expiring contracts renewed, according to Sports Illustrated, which first reported on the upcoming cuts.
No names were listed, nor was the precise number of cuts disclosed in the SI report.
ESPN is expected to complete the cutbacks by June, it said.
“Today’s fans consume content in many different ways and we are in a continuous process of adapting to change and improving what we do,” ESPN said in a statement in response to the SI report. “Inevitably that has consequences for how we utilize our talent.”
The cuts are expected to hit solely on-air talent.
In October 2015, ESPN laid off 300 behind-the-camera workers.
“They have to keep laying off staff to hit the budget for the parent company,” noted Laura Martin, a Needham & Co. analyst. “There are revenue falls as subscribers fall and sports rights increase in the double digits. The only cost they can get back is to cut people. Seventy percent of the revenue is from subscribers.”
ESPN’s annual content costs are forecast to be $7.3 billion — larger than Netflix’s $6 billion, according to Boston Consulting Group and SNL Kagan.
A year of boffo cable news ratings, coupled with competition from the Rio Olympics on NBCUniversal’s channels, has made for a tough ad environment, too.
According to SNL Kagan, the cost of carrying ESPN alone is $8.25 a month this year, up from $7 in 2014.
SMI AccuTV, an ad spending measurement firm, reports that for 2016, ESPN ad revenue was off 3.8 percent from 2015, to $2.23 billion.
Subscribers fell to about 88 million in January, from 100 million-plus five years ago.
To be sure, ESPN is still a ratings juggernaut, and in January drew more eyeballs in prime time than any cable network.