OP-ED | What Happens If ESPN Fails?
As if Connecticut didn’t have enough to worry about amid the economic disruption caused by revenue shortfalls and a state government unwilling to live within its means. One of the business community’s jewels is, by some accounts, collapsing.
Bristol-based ESPN, America’s premier cable sports network, announced earlier this month another round of cost-cutting layoffs — the third since 2013. This time, however, it’s not just managers and behind-the-scenes executives being shown the door. Dedicated viewers will notice the latest losses.
About 300 people were laid off last year, two-thirds of them based at the company’s Bristol headquarters. This time around, however, the company is said to be cutting up to $100 million mostly through eliminating on-air salaries.
But beyond the latest loss of jobs, two major questions remain for Connecticut residents: What will be the economic impact of ESPN’s demise, if it happens, and was the state’s investment in the company a wise move?
Let’s start with the latter. ESPN’s inclusion in Gov. Dannel P. Malloy’s First Five program was defensible, given the company’s astounding success over the years and its impact on the economy of the state and the city of Bristol.
As part of the deal in 2011, ESPN received a $17.5 million loan from the state Department of Economic and Community Development over 10 years for the construction of their new “Digital Center 2” building, in which the company planned to invest more than $100 million. The center eventually had a price tag of $178 million and ESPN officials estimated the construction of that project would create 200 jobs.
The deal also offered up to $1.2 million to ESPN for an incentivized job-training grant program. The amount of money the company received depended on the number of jobs it created.
According to Courant columnist Dan Haar, even after the latest round of cuts, the number of ESPN jobs in Connecticut will stay above the 4,072 the network was required to reach by 2016 under the 2011 incentive deal. It’s unclear at this point precisely how many jobs will be lost and which personalities will be the casualties in this latest round of cutbacks.
Needless to say, an ESPN collapse would be devastating not only because of the thousands of jobs that would be lost but because it is by far the largest taxpayer in Bristol, which has a grand list of about $4 billion. ESPN accounted for 5.4 percent of all taxes collected citywide in 2015. And, of course if the company goes out of business or if it survives as something far smaller, Malloy’s investment deal with ESPN will look like a very bad idea.
ESPN, jointly owned by Disney and Hearst since 1996, is going through a particularly painful chapter in its history. And it’s not alone. Traditional television such as cable and satellite, where the vast majority of ESPN’s viewers see its product, have lost viewers over the last several years as consumers discover a whole new world of à la carte content shopping.
The relatively new practice of cord-cutting, in which consumers cancel their cable or satellite television service in favor of an internet-only model of delivery, is on the rise. And it makes perfect sense. Many consumers, especially younger viewers, are fed up with high cable prices, excessive fees, and programming packages in which they’re paying for a lot of channels for which they have no use.
Netflix is said to be a major disruptive force for the cable industry, as are Hulu and other on-demand video streaming services viewable on smart TVs and an array of mobile devices. Not to be outdone, some cable channels such as HBO and Showtime are responding with stand-alone apps in which subscribers pay to stream only that channel.
ESPN is said to be introducing such a service this year, but it may be too little, too late. After all, if you like Major League Baseball, the NFL, NHL or NBA, there’s already an app for each of those.
According to a 2016 consumer survey by the marketing firm Civic Science, more than half of cable subscribers were eager to drop ESPN to save $8 a month on their bills. Talk about bad news for legacy television and cable.
If ESPN fails, I can tell you one thing: Comptroller Kevin Lembo will look like something of a hero and will be well positioned to run for governor next year. Much to the annoyance of those who like to muddy the waters, Lembo has been a strong advocate for transparency and heavier oversight of the business assistance and incentive programs doled out by the state. Run Kevin, run!
Contributing op-ed columnist Terry Cowgill lives in Lakeville, blogs at ctdevilsadvocate.com and is managing editor of The Berkshire Edge in Great Barrington, Mass. Follow him on Twitter @terrycowgill.
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