ESPN let go of 300 employees last week, 4% of its workers, in possibly the most credible sign yet of an impending bubble in the sports business. ESPN has been losing subscribers as cable has created more flexibility for its customers. Many have left ESPN out of their new packages, previously not something that happened a lot. That factor in ESPN’s belt-tightening is the result of a changing media environment, not a problem implicit with sports. It’s simply cable being forced to operate in a more customer-centric landscape that offers viewers more options for entertainment delivery.
But the other factor dovetailing with the declining viewer base is the vertiginous rights prices ESPN pays the major sports leagues. (Sometimes a monopoly, which ESPN resembles in sports broadcasting, hurts itself by having no real rival exists to check its growth through competition.) Does that mean sports leagues themselves are working at inflated prices, pumped up unnaturally like some antibiotic-swelled chicken? Former Microsoft CEO Steve Ballmer paid $2 billion for the perennial also-ran Los Angeles Clippers last year because the NBA brand is so strong. That brand value is based largely (though not entirely) on the league’s broadcast value, which seems — based on ESPN’s layoffs — to have been miscalculated. Ex-ESPN man Charlie Steiner says ESPN’s cuts were “Not just fat. Not just muscle, but down to the bone.” How off are those valuations?
