Harvard business guru Clayton Christensen made a name for himself by studying business disruption and how disruption makes titans of an industry disappear almost over night. Christensen first studied the automobile industry and explained how so many foreign carmakers we able to crush the American grip on car sales. People my age and older can remember the Datsun and the early Honda that resembled today’s “smart cars,” tiny, built inexpensively and, frankly, death traps. I remember, as a young teenager, my friends and I could actually lift a Honda and move it to another parking spot. You could take your fingers and press the metal on the doors. But those early Japanese cars came to overtake the car market. Today, what was once the maker of cheap cars now owns Lexus.
Christensen went on to study the computer industry. He explained in minute detail how personal computers almost killed the giant IBM. Well, today, Christensen might turn his attention to sports entertainment. Cable television, another disrupter, gave rise to the mother of all sports networks, ESPN. Every cable provider had to have ESPN in its stable of channels. Is there anyone with cable TV who has never watched ESPN? For nearly 40 years, it has grown into one of the most successful cable stations ever.
But in 2015, ESPN laid off 350 of their 8000 employees. Everyone seemed to dismiss the layoffs as part of the natural business cycle. After all, the people laid off were mostly management types. But just yesterday, ESPN announced another round of layoffs – probably around 150 more employees when all is said and done. But this time many of those employees were on-screen talent and some pretty popular.
There are many theories as to why these layoffs came at this particular time. Of course, ESPN executives claim its just part of doing business. The business climate changes and ESPN needed to reorder it priorities. And that’s a reasonable explanation. But, as Clayton Christensen has shown, disruptions to a natural business cycle can create irreparable harm.
The fact is today, with technologies advancing with the speed of light, what was once our go-to consumer option no longer makes any sense. More and more people are unplugging from cable TV. ESPN subscribers have dropped from 100 million to 88 million in just a few years. At the same time, costs to provide sporting events are skyrocketing. Sports leagues now hold hostage broadcasters such as ESPN and that free-market extortion only gets more profitable. ESPN paid the NBA nearly $25 billion to air games through the 2024-2025 season. Even local markets get expensive. Time Warner Cable paid over $8 billion for the rights to air Los Angeles Dodger baseball games.
But there is another theory afloat as to why ESPN has made such dramatic staff cuts: political correctness. Over the years ESPN has become more outspoken on political issues. Sports programs such as HBO’s Real Sports and Showtime’s 60 Minutes Sports were once the only venues to delve into social and political issues like race relations or Title IX women’s issues or drug dependency problems among athletes. Political correctness is so pervasive today that any reporter, from the booth to the sidelines, seems to feel obliged to weigh in on every controversy. Neither did it help ESPN to honor Caitlyn Jenner with its Arthur Ashe Courage Award.
The reaction has been two-fold with the same result. ESPN viewers, mostly sports-addicted men just want to see the game and, if there is any chatter for debate, let it be focused and intelligent. Guys watching ESPN aren’t really interested in the political opinions of sports commentators. There are other cable stations if they want that. Furthermore, it turns out the guys watching ESPN aren’t really all that hip. So when Caitlyn Jenner is highlighted at the ESPY Awards, real sports enthusiasts turn off the TV. As the costs grow higher, the incentives to watch decline.
The firings at ESPN are the writing on the wall: Either change your business model and rein in political correctness or sports junkies will turn to less expensive and less intrusive ways to get their fix.
I’m Paul Mero. Thanks for listening.
