Page 2 - March 2016 Special Report

The Future of Our Industry
by President John James
Mostly by accident, Disney purchased a cable property called ESPN when they purchased the ABC television network. All they really wanted was the broadcast network because at the time, that was the most profitable distribution model for television. At one point ESPN represented almost 45% of the Disney company’s income. A happy mistake, but not anymore. According to Disney CEO Bob Iger (who) told CNBC, “the business model may face some challenges over the next few years”. He wasn't kidding - to the tune of 300 “behind the scene” personnel including Producers, TD’s and other production personnel being released. (1)
ESPN utilizes (like other sports broadcasters on cable) a dual income model. On-air advertising and a share of money from cable subscribers. ESPN’s subscriber losses,
which have seen it lose nearly 8.5 million homes in the last 4 1/2 years, according to Nielsen estimates, or down about 8 percent, are at a rate that is declining faster than the
rest of the industry. (2)
Another factor is the increasing rights fees of which the network was willing to pay based on a prediction that conditions generating revenue for the network would not change. “Many past and present employees place most of the blame for the layoffs on the company’s huge NFL, MLB and NBA rights deals. The most frequent criticism heard last week dealt with the NFL contract, which is worth a whopping $1.9 billion per year — $800 million more than the NFL’s next biggest deal.” (3)
So what is the future of any business broadcasting sports on cable or over the air? Confused.
In the next few months the FCC will begin an auction of the broadcast TV spectrum, basically allowing over-the-air stations to sell their spectrum position so that same spectrum can be used for cellphone data transmission. The spectrum is considered a public resource in the same way raw land held by the government or our national parks is held and operated for the benefit of the public - the public being the owners of that resource. These stations will reap gigantic profit by auctioning their spectrum position—a public resource they have a license to use but do not own.
Pres: John “Sully” James E-mail: j.james@iatse748.com Phone: (888) 610-3342 x1
THE EDGE NEWSLETTER 2