Bloomberg has reported that up to 350 jobs could be cut in the next few weeks — maybe even today — at the worldwide leader in sports and entertainment. ESPN has been struggling to control costs following increased TV rights competition from other sports-focused channels and the need for relatively DVR-proof programming for advertisers. This shouldn’t be surprising. The signs were there to see that cutting costs — and the easiest way to do that is through job cuts — would be something that Disney, ESPN’s parent company, would request to increase the profit margin from ESPN.
This is a consequence of the rising cost of rights. NBA, NFL, and MLB TV rights are expensive. The need for new technology to appease the masses watching at home costs money to develop and execute. Fans have driven the industry to expand costs to keep them engaged through new camera angles, higher resolution, and increased production costs. Other companies may soon follow. NBC Sports has been increasing its TV rights portfolio, while FOX and FS1 are not far behind.
The media companies will use other means to cut costs as well. Remote announcer teams could keep play-by-play and color commentators at headquarters. That cuts down on travel costs and production costs. It also creates an odd dynamic on television as TV viewers can almost always tell the announcers aren’t on-site.
These cuts are a reminder that the sports industry is like any other business. The industry’s job is to provide value to its shareholders or ownership. Disruption of an industry usually comes from the outside, but this was created by the industry players. To stay profitable, sports media companies will have to get creative or more job cuts are on the horizon.
Michael Colangelo is Managing Editor of The Fields of Green and Assistant Director at the USC Sports Business Institute.