ESPN on-air talent may be cut amid rising programming costs, falling ratings

ESPN Los Angeles
Disney-owned ESPN pays more than four times as much per viewer than major broadcast networks for Monday Night Football, a factor that could lead it to slash its employee rolls once more. (ESPN Los Angeles)

ESPN is reportedly preparing for another round of layoffs soon that could impact on-air talent.

As reported by Sports Illustrated, the sports network has to reduce “tens of millions” in staff salary, and that could mean saying goodbye to some of its most recognizable faces. Contracts up for renewal could be particularly at risk, and ESPN could be considering buying out some contracts as well. All told, the damage is expected to be done by June.

This would be the second round of significant cuts in fewer than two years for ESPN. In October 2015, the network laid off about 300 employees.

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The fallout at ESPN is likely the impact of higher programming costs coupled with falling ratings, which hurt parent company Disney in its latest earnings report.

Revenues at the company’s Cable Networks division revenues fell 2% to $4.4 billion and operating income decreased 11% to $0.9 billion. ESPN’s combination of higher programming costs and lower advertising revenue was partially offset by affiliate revenue growth. But ESPN’s results were hurt by rate increases for NBA and NFL programming. Sinking advertising revenue was due to lower impressions and rates, which Disney said occurred partly because of a shift in the scheduling for some College Football Playoff games.

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Meanwhile, ESPN’s lower impressions were due to a decrease in average viewership and the network’s affiliate revenue growth came because of contractual rate increases.

Recently, analysts have noted that ESPN’s ROI for costly NFL rates doesn’t stack up favorably compared to the league’s other broadcast partners.

ESPN pays the most annually for its NFL rights, shelling out $1.9 billion every year. Meanwhile, Fox and CBS both pay about $1 billion per year for Sunday games and NBC pays $960 million per year for Sunday night games. In addition, CBS and NBC each kick in $465 million per year to split rights for Thursday Night Football, according to a new MoffettNathanson report.

In terms of gross ratings points (GRPs), ESPN is paying $43 per thousand GRPs while, for the same reach, NBC pays $11, CBS pays $9 and Fox pays $8. According to the report, ESPN pays more than four times as much per viewer than the broadcasters for Monday Night Football.

“It is worth noting calling out that ESPN’s deal includes access to more than just MNF (including the NFL Draft, the Combine, the Pro Bowl in addition to extensive highlights rights). Still, it seems ESPN is paying a steep price for a program that is down -15% over two years,” analyst Michael Nathanson wrote.