Moving van?

Photographer: Mark Cunningham/MLB Photos via Getty Images)

ESPN Dumps Talking Heads for Moving Bodies

Kavitha A. Davidson is a former Bloomberg View columnist.
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ESPN is losing another major on-air personality. The Big Lead's Ryan Glasspiegel reports that Colin Cowherd is out after nearly 12 years at the Worldwide Leader. Rumor has it the loudmouthed, hot-take master who routinely delivers facile generalizations disguised as social commentary might be heading to Fox Sports to reunite with its new president, Jamie Horowitz, who produced "SportsNation" when Cowherd co-hosted with Michelle Beadle.

Cowherd's departure follows a string of high-profile exits from ESPN, including Bill Simmons and Keith Olbermann. Though reports suggest ESPN lobbied hard to keep Cowherd, while it chose not to renew the contracts of Simmons and Olbermann, the company's recent personnel moves could be seen as shedding expensive salaries and cutting production costs at a time when its subscription base is shrinking and its rights deals with leagues are growing ever-more pricey. Simmons pulled in $5 million a year, while it reportedly cost $10 million to produce Olbermann's show. According to Jim Miller, co-author of the ESPN oral history "Those Guys Have All the Fun," the salaries of Cowherd, Olbermann and Simmons totaled $10 million a year.

Then again, there's a well-founded suspicion that Olbermann and Simmons could perhaps have stayed with the network had they softened some of their opinions, particularly when it came to NFL Commissioner (and broadcast partner) Roger Goodell, though ESPN denies those claims. Miller stressed that money was "not primary factor" in the departures of Simmons and Cowherd. Given past brushes with ESPN brass, it's not a stretch to think there was something more personal at work.

Either way, these moves might indicate that ESPN's long-term strategy will be less driven by high-profile, high-cost personalities. Nielsen reports that ESPN has lost 3.2 million subscribers in the last year and seen its reach into households drop by 7.2 percent since 2011, the result of cord-cutters moving away from cable television and to cheaper streaming packages that don't include the sports network's offerings. The TV industry has long believed that live sports are immune to both the DVR effect and cord-cutting because of the immediate nature of the programming -- a view shared strongly by ESPN president John Skipper. Despite the loss of subscribers and household reach, ESPN continues to post staggering ratings and revenues, averaging 2.4 million prime-time viewers since September and driving the majority of Disney's cable networks' $6.4 billion in operating income.

ESPN continues to shell out huge dollars for sports rights, paying $2 billion a year for Monday Night Football and recently extending its partnership with the NBA at $1.4 billion per season through 2024-25 -- three times what it currently pays. This might be a partial explanation for why ESPN would cut some corners around its personalities. If so, it's not be the first time the network sacrificed personnel for programming rights. In 2013, ESPN laid off nearly 400 staffers, who were reportedly told that it was due to higher rights fees. (Others thought it might have to do with a $125 million campus expansion in Bristol, Connecticut.)

In any event, ESPN's bet on live sports relies on continually high levels of subscriptions -- and that's where things get tricky. Live sports might be DVR-proof, and certainly offer a huge (maybe the only?) incentive to continue to pay for cable. But consumers will increasingly move away from traditional television packages, and as long as ESPN resists so-called "skinny bundles," it could be in trouble. ESPN is currently suing Verizon for offering custom packages that allow customers to choose whether or not to subscribe to the sports network.

Perhaps ESPN is so resistant to the a-la-carte world because it realizes it might have priced itself out of it -- its subscription fees are exorbitant at about $6 per subscriber. According to Michael Nathanson, an analyst at telecom research firm MoffettNathanson, ESPN would have to charge $36.30 per subscription for its standalone offerings just to maintain its current margins, assuming that its reach dwindled to about 16 percent of U.S. homes.

Would you be willing to pay that much for ESPN's properties alone? Sports fans tend not to be shy about spending money -- witness NFL Sunday Ticket's popularity. Perhaps ESPN's executives are simply betting that we would rather open our wallets for actual games than for personalities.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Kavitha A. Davidson at kdavidson19@bloomberg.net

To contact the editor on this story:
Tobin Harshaw at tharshaw@bloomberg.net