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There are a ton of wild theories circulating the internet trying to explain why ESPN just underwent its latest round of layoffs, a reality that has seemingly become an annual summer tradition at this point. Is it Pat McAfee’s impending $60 million deal? How about Stephen A. Smith’s nine-figure contract?
It’s easy to be frustrated. McAfee and Smith aren’t everyone’s cup of tea, and the ESPN many once knew and loved strays further from its glory days with each passing moment. And, to be fair, there’s some truth to the idea that McAfee and Smith are taking up a larger portion of the budget. At a base level, there’s one pool of money at ESPN that needs to fund the entire operation. But it’s not talent deals that are manufacturing the squeeze. It’s that ESPN’s pool of money is shrinking, and the cost of doing business is going up.
There is perhaps no better way to explain the current situation than a chart published five years ago by Kendall Baker, then writing for Axios. The chart has resurfaced online today and shows exactly why ESPN has been shedding weight for more than a decade now.
As you can see, by 2021 ESPN had lost nearly a quarter of subscribers from its peak of 100 million households in 2011. In the past five years, that number has declined even further, with a 2024 estimate pegging ESPN at under 68 million homes.
Meanwhile, the cost of live sports rights has ballooned. ESPN is now paying $2.6 billion per year for NBA rights, up from about $1.5 billion it paid under the prior contract. The network pays $2.7 billion per year for its NFL package, a price that will likely increase by more than a billion dollars when the league renegotiates, likely within the next year. The first year of ESPN’s new deal with the College Football Playoff begins this season, and the network is paying $1.3 billion. Add $710 million for regular-season SEC games, and college football inventory is well over $2 billion annually for the network. Before we even get to any non-football or basketball sport, ESPN is approaching $8 billion in yearly rights fees, and could approach $10 billion once new NFL deals are in place.
Suffice it to say, with fewer people paying for a product that costs more to produce, something has to give. Some of that has come through ever-rising distribution fees, which get passed along to the consumer. But unfortunately, it has also manifested in extensive and regular layoffs at ESPN.
The network can no longer afford excess, particularly in its linear television business, where the vast majority of Tuesday’s cuts were focused. Instead, the network has to use its shrinking resources on investing in emerging areas like its new app, podcast deals with Omaha Productions, and, yes, licensing The Pat McAfee Show.
The post ESPN’s layoffs can be explained by one graph appeared first on Awful Announcing.
