http://www.wsj.com/articles/espns-john-skipper-plays-offense-on-cord-cutting-1453228543
President of sports network sees no reason to abandon cable, even as it tests ‘over the top’ options ESPN President John Skipper spoke to The Wall Street Journal about Brady or Manning, whether or not he’d hire a cord-cutter, and his favorite non-sports thing to watch on TV. By AMOL SHARMA and SHALINI RAMACHANDRAN Updated Jan. 19, 2016 8:28 p.m. ET As president of sports TV giant ESPN, John Skipper runs a corner of the Walt Disney Co. empire that has long been a star performer, and rarely a source of anxiety for Wall Street. The mood among investors changed last August when Disney disclosed that ESPN had lost pay TV subscribers and dialed back profit projections for its media networks. That showed that even with its unrivaled sports rights and powerful position in the TV world, ESPN was vulnerable to the forces sweeping through media, as consumers cut the cable cord. The disclosure triggered a $22 billion selloff in Disney stock in two days and contributed to a wider media market meltdown. All told, ESPN has lost 7 million subscribers in two years, Nielsen data shows. Mr. Skipper is an 18-year company veteran who assumed the top post in 2012. The 60-year-old North Carolina native may run a network for jocks, but items on his reading list have included Pablo Neruda poetry and “City on Fire,” a sprawling novel set in 1970s New York. His sports fandom ranges from the New York Jets to Tottenham Hotspur of the English Premier League. He believes soccer is on the rise in the U.S. In an interview, Mr. Skipper dismissed the narrative that something fundamental is amiss at ESPN. Disney’s media networks had their best year ever in terms of revenue and operating income, he said. He talked about the company’s plans to distribute more content online, or “over the top,” to reach cord-cutters, addressed the criticism that ESPN isn’t tough enough on the NFL, and explained the decision to lay off roughly 300 of the company’s 8,000 workers. Edited excerpts: WSJ: ESPN was the apparent culprit in the market meltdown last August. What was that like for you and what was your message internally? Mr. Skipper: We stayed pretty calm. [The loss of subscribers] didn’t come as a bolt out of the blue to us. We had been thinking about this. We had a big town hall meeting in December. We had a priorities meeting earlier where we gathered everybody together to try to ground ourselves in our business. People want pragmatic, optimistic leadership. They want to hear you have a plan. They want to hear that particularly in light of layoffs. A little sturm und drang in the environment doesn’t matter relative to our performance—it matters to our investor relations guys. It doesn’t have to matter to me. WSJ: What has been the biggest reason for ESPN’s subscriber declines? Mr. Skipper: People trading down to lighter cable packages. 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. WSJ: Would it be feasible to offer the entire ESPN network online to cord-cutters? Some analysts estimate you’d need to charge $30 a month. Mr. Skipper: We are still engaged in the most successful business model in the history of media, and see no reason to abandon it. We’re going to be delivering our content through the traditional cable bundle, through a lighter bundle, through Dish’s Sling TV, through new over-the-top distributors, and through some content that is direct-to-consumer. WSJ: What kinds of direct-to-consumer offerings? Mr. Skipper: Last year, we tested this model when we sold the Cricket World Cup direct-to-consumer. 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. WSJ: Was the cricket offering profitable? Mr. Skipper: Yes. WSJ: How did you explain the layoffs to the company? Mr. Skipper: You have to kind of look every so often at how you’re organized and do you need Job Y that you have had for 22 years. At a certain point you need people who do new things, so you’ve got to be straight with people. There is no question that it creates issues of morale. Those issues tend to be pretty transient because we continue to grow and continue to be in a good position. WSJ: Besides layoffs, how else can you reduce costs to cope with the changes in the industry? Mr. Skipper: You can do games with fixed cameras and robotic cameras. You send fewer people to do production of a game now, because you can do a lot more back here [in Bristol]. When you go to Wimbledon you still have a person behind those cameras, but if you’re doing a week-to-week tennis match, you can save money. WSJ: In October 2014, you renewed your deal with the NBA and agreed to triple your average annual rights fees. Would you do that deal again? Mr. Skipper: I have no regrets about that deal. WSJ: What’s the value of niche sites like The Undefeated and FiveThirtyEight? Mr. Skipper: At the Undefeated, the play is about content. If you do a time-lapse of the last two or three years in sports, you’d see more stories pop to the top about race and sports than anything. It is an important area to explore. There is a business reason: among our most important consumers are African-Americans. There is not right now a go-to site for black fans, other than just ESPN sites. [The Undefeated] will be a black-run and black-staffed site. At 538, it is about showing leadership in data and analytics. It actually has helped us recruit. WSJ: Is there anything you learned from Grantland before shutting it down that is helpful for these other ventures? Mr. Skipper: No. Grantland had great brand halo and we did a lot of content to be proud of. I’m not sure if I’ve learned anything beyond that. WSJ: How do you respond to critics who charge that ESPN has been conflicted in its coverage of NFL controversies—whether it be concussions or domestic violence—because of its relationship with the league? Mr. Skipper: Nobody does more difficult stories than we do. Nobody can point to an instance when the programming department asked the news department not to do a story. The two sides come together only in this office. I get the great benefit of the leagues letting me know [when] they feel that we have been too aggressive, while I get to read about six knuckleheads who think that we aren’t doing enterprise coverage. WSJ: ESPN signed a big ad deal with DraftKings before the daily fantasy sector came under intense legal scrutiny? Has that exposed you to any risks? Mr. Skipper: We did satisfy ourselves that everything we did was appropriate and ethical and didn’t violate anything. We didn’t run ads in states where it is clear that it does run afoul of regulatory issues. We aren't equity holders so we don’t have any real risk here. We enjoyed the benefit of the advertising—it was part of the reason we had a good year last year. WSJ: At a time when people are getting sports highlights on their phones, how do you keep SportsCenter relevant? Mr. Skipper: We have almost 100 million unique visitors a month on our digital platforms. We’re approaching $500 million in digital revenue. What we’ve had to do is make sure [SportsCenter] lives on digital platforms. That is why we’re trying to do a late-night SportsCenter show [that will be] like a late-night show. Just giving the scores and highlights, that is going to happen online. We are, in the advertising market right now, selling like ad prices—meaning that if you’re getting your video on SportsCenter or off your mobile phone, the ad costs the same. _______________________________________________ Medianews mailing list [email protected] http://etskywarn.net/mailman/listinfo/medianews_etskywarn.net
