ESPN: Eliminating Their Esports Vertical

ESPN, along with hundreds of layoffs, has decided to eliminate their esports vertical — but is that the right decision?

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Friends,

Last week, ESPN announced the worst headcount reduction in the companies 41-year history — 500 in total, with 300 current employees being let go and another 200 open positions not to be filled.

Here’s a quick timeline of their recent layoffs:

  • 2015 - 350 employees

  • 2017 - 100 employees

  • 2020 - 300 employees and 200 open positions

From 2015 to 2020, ESPN’s global workforce has gone from 8,000 to 6,200.

(📸 / ESPN)

Regardless of your feelings toward ESPN, it sucks to see anyone lose their job — especially during a global pandemic that’s impacting millions of people socially, emotionally, and financially.

For ESPN, this is the same song and dance though.

While sports broadcasting rights continue to climb higher, ESPN has lost about 20 million cable subscribers since 2011—down from 100M to 80M—which carried affiliate fees of $7-$9 per sub. To offset hundreds of millions in revenue loss from a decrease in cable subscriptions, they’ve been steadily increasing affiliate fees — but that can only go on for so long.

Their business model is broken.

As ESPN continues to pivot toward an OTT model with ESPN+, their streaming solution for cable cutting, more layoffs are bound to happen with time.

The part you may not have heard?

ESPN is also shutting down their esports vertical completely.

What a terrible mistake that is.

(📸 / ESPN)

Launched in 2016, ESPN’s esports vertical has grown into a trusted source for breaking news, long-form content, and the business behind the growing esports industry.

ESPN has also televised and streamed a wide array of esports including the 2020 League of Legends Championship Series (LCS) Spring Split Playoffs, the Overwatch League Playoffs, the EA SPORTS Madden NFL 18 Championship Series and more.

Here’s what ESPN had to say about the shutdown (Source):

“We have made the difficult decision to cease operations for our dedicated daily esports editorial and content,” an ESPN spokesperson told The Esports Observer. “We recognize esports as an opportunity to expand our audience, and we’ll continue to do so through coverage from the broader team for major events, breaking news and coverage.”

ESPN isn’t ditching esports completely, just shutting down their dedicated editorial and content team — they’ll continue to cover breaking news through traditional outlets and look to stream live events where it makes sense.

So why do I think it’s a terrible move?

Because whether sports fans like it or not, esports is here to stay.

Simply put — how can you call yourself “the worldwide leader in sports” when you don’t even cover the billion dollar esports industry?

Not only is esports here to stay, but it’s growing — fast. Estimated at a $1.1 billion dollar industry in 2020, esports revenue has grown at a 16% CAGR for the last few years — while their audience continues to expand internationally.

Point being, why is ESPN sacrificing the growing—albeit still small—part of their business for the segment that is dying?

What do I mean?

While ESPN is cutting hundreds of jobs to reduce costs, they’re also engaged in a multi-billion-dollar bidding war for Sunday Night Football broadcasting rights.

Don’t get me wrong, I understand the dilemma.

ESPN gave it a shot for 4 years, didn’t see enough upside, and cut the business as part of their long-term strategy. But why sacrifice a growing segment of the sports industry to double down on your antiquated sports broadcasting strategy? Especially when you consider their esports vertical probably cost pennies on the dollar to operate.

For example, in four years ESPN has built up millions of followers across their esports social accounts and made individuals on their content team—like Jacob Wolf—legitimate media personalities.

Still don’t think esports are legit?

Consider this…

Yes, I know Ninja’s number is inflated because Mixer shut down — but you get the point.

In the end, only ESPN knows the financial details and overall strategy behind the decision to cut their esports editorial and content vertical — but on face value, it doesn’t appear to be strategic to the long-term dynamic of the sports industry.

With a variety of esports organizations worth hundreds of millions of dollars and growing, I think ESPN will regret this in the future.

Remember — it’s typically better to be early than late.

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