As Disney Pressures ESPN to Cut Costs, President John Skipper Loses Control

As Disney Pressures ESPN to Cut Costs, President John Skipper Loses Control

Media Gossip/Musings

As Disney Pressures ESPN to Cut Costs, President John Skipper Loses Control

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It was just two paragraphs, and they were buried at the bottom of a Bloomberg Business story in early May about Disney’s soaring profits. The headline – “Disney Profit Tops Estimates on Theme Parks, ‘Frozen’ Toys” – wasn’t one that would prompt sports fans or media members to read the story. But these two paragraphs prompted a significant internal memo at ESPN that will have lasting effects:

Rising costs ate into earnings at the company’s largest division, media networks, which includes ESPN, the Disney Channel and ABC. While sales rose 13 percent to $5.81 billion, operating income dropped 2 percent.

Disney blamed higher programming and production costs at ESPN, which pays billions for rights to air live sporting events. Profit jumped 90 percent at ABC, thanks to higher affiliates fees and advertising revenue.

Timing is everything, even at billion dollar companies. Soon after, an internal memo went out to cabinet level higher-ups at ESPN, detailing how salaries for talent are impacting the rising production costs. Of course, numerous other factors were at play, including ESPN’s expensive new deal with NBA (which will soon be driving up costs from an estimated $430 million to over $1 billion a year), increasingly traveling SportsCenter, and so on.

But who are we kidding here – ESPN prints money.

Yet, three days after this earnings report, ESPN President John Skipper announced that Bill Simmons would not be re-signed. Skipper would later say it “did not come down to money,” but you know what H.L. Mencken says about that. In addition to the money, there’s the whole Goodell-is-a-liar comment, and a subsequent one about testicular fortitude, and more than a handful of Skipper’s lieutenants had been in his ear about Simmons for years.

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It seems that elsewhere in 2015, anytime ESPN could save some money on personnel, it jumped at the opportunity.

Bob Knight and Lou Holtz – who were both near retirement anyway – departed. A SportsCenter host who attempted to almost double his salary during contract talks was shown the door. Mark Schlereth’s overall deal got cut – some of that was him wanting to dial back his duties — as he left his ESPN radio show. Jason Whitlock was removed as the boss of the website he was hired to run, The Undefeated. Whitlock’s move wasn’t a cost-cutting move, but it was described this way in a press release: “we have collectively decided to make some structural adjustments that will maximize the skill sets and strengths of our team.”

This week, another cost-cutting move went down: A month after ESPN announced that the network’s flagship radio show, Mike & Mike, was moving from Bristol to New York City, they had to walk that back. It’s not happening, ESPN announced today. What you won’t see in that press release: There is financial pressure from Disney to cut costs.

And there are potentially larger moves on the horizon that may save the company money. Keith Olbermann, who returned to ESPN in 2013 amid much fanfare, is in the middle of his contract talks. Though he may stay, there is a sense that with 2016 being a political year, Olbermann could return to cable and dive back into politics.

Then there’s Nate Silver’s 538 website. He also joined ESPN in 2013 during Skipper’s hiring binge in an effort to collect talent ahead of Fox Sports 1’s arrival. 538 has been all over the place and lost its managing editor in late 2014, before recently hiring another. Two of the website’s most-cited posts are about Burritos and Fast Flights.

As such, a lot of people are asking what will become of Nate Silver now that Bill Simmons and Jason Whitlock have been removed from the top of their ESPN verticals. One popular answer: Silver departs before the election year begins, and 538 is rolled into ESPN.com or perhaps shuttered altogether. Or, perhaps they could do something like they did with Whitlock, and remove him from the responsibilities of running his own publication, so he can focus on maximizing the value of his own content at the time in the news cycle where it’s most relevant.

What does all this movement mean?

It’s probably a combination of things – talent doesn’t really matter as much as it used to at a time when ESPN is tripling down on SportsCenter; in hindsight, Skipper made a few panicked moves in 2013 as FS1 was getting ready to launch, borne out of fear of the unknown; and finally, perhaps there is dissension among the ranks in Bristol between their vision and that of Skipper, a notorious risk-taker.

The most popular theory among ESPN’ers: ESPN President John Skipper is not in control. He’s in a vulnerable spot.

[Top image of Nate Silver (L) and John Skipper (M) via Paley Center for Media; Skipper/Goodell photo via Getty; front image of John Skipper via Hollywood Reporter]

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