ESPN's Skipper: Cord shaving dinging subs, but ad sales and revenue stronger than ever

Issuing his network's most strident defense yet amid rampant investor concern over its declining subscriber numbers, ESPN President John Skipper blamed the customer losses on cord shaving and insisted the channel's strong revenue performance proves its traditional business model still works.

In a Q&A with The Wall Street Journal, Skipper said that despite the "sturm und drang" over ESPN's loss of about 7 million subscribers from 2013 to 2015, ESPN's performance has remained strong. And its commitment to the pay-TV ecosystem is solid, too.

"We are still engaged in the most successful business model in the history of media, and see no reason to abandon it," he said.

Skipper blames the subscriber attrition not on people ditching cable and satellite TV services, but on customers reducing their programming packages.

"People trading down to lighter cable packages," he said. "That impact hasn't leaked into ad revenue, nor has it leaked into ratings. The people who've traded down have tended to not be sports fans, and have tended to be older and less affluent. We still see people coming into pay TV. It remains the widest spread household service in the country after heat and electricity."

While not charging headlong into direct-to-consumer streaming, ESPN will continue to experiment with various models, Skipper said.

"Last year, we tested this model when we sold the Cricket World Cup direct-to-consumer," he noted. "We sold 100,000 subscriptions for a hundred dollars apiece. It worked beautifully. We are interested in 'multisport' -- aggregating a bunch of content and delivering it over the top and charging a subscription fee, or an individual price for an individual game or season."

Remarking on distribution through next-generation pay-TV platforms, Skipper called Sling TV's distribution -- a much speculated upon industry secret right now -- "significant."

He was asked by WSJ about a rumored clause in which ESPN could pull out from Sling if the streaming service proved to be cannibalizing parent company Dish Network's (NASDAQ: DISH) core satellite subscriber business.

"I'm not going to contradict that," Skipper said. "Our concern was: there is no financial benefit to us if people trade down [pay TV packages for Sling], but there is financial benefit to us if new entrants come in. We've had meetings with Dish. They, to our complete satisfaction, have showed us their research. We are highly satisfied that the overwhelming majority of Sling TV subscribers are new entrants."

Meanwhile, Skipper also remarked on the pay-TV service Apple (NASDAQ: AAPL) has been struggling to assemble.

"They are creating a significantly advantageous operating system and a great television experience and that television experience is fabulous for sports," he said. "We are big proponents of believing it would be a fabulous place to sell some subscriptions. We have ongoing conversations. They have been frustrated by their ability to construct something which works for them with programmers. We continue to try to work with them."

For more:
- read this Wall Street Journal story
- read this WSJ Q&A

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