James Andrew Miller went on one of The Ringer podcasts this week to talk about the ongoing challenges that ESPN is dealing with as viewing habits are changing.
TV is less than 50% of viewing hours now.
As James talked about what the strategic path forward is for ESPN, I got to thinking about “The Power Framework”, a tool that I learned about from Dr. Kamal Munir at Cambridge University.
It states that a strategy needs to gain power in three areas to be considered strong:
- vs. Customers
- vs. Competition
- vs. Suppliers
In looking at ESPN right now, they have lost power in all three areas…let’s take a quick look.
V. Customers:
We all know how many streaming options there are now.
We’ve also seen the declining numbers of cable subscribers. The numbers today sit at around 71 million Americans with a cable bundle vs. 100 million at the peak less than a decade ago.
There’s also the rarely mentioned number of illegal streams which is uncaptured revenue, but also highlights another option that customers have to gain access to the content that they want.
As far as customers v. ESPN, customers are in the driver’s seat because the cable bundle has become less and less essential to the consumption of sports, meaning the annuity that ESPN is being cut.
The other challenge is that customers’ viewing habits and needs are changing as well.
Is there a path for ESPN to gain more control over its customers?
That’s something we can look at later.
V. Competition:
I teach folks not to think about competition but to think about alternatives.
Why?
Because most businesses are not really sure about whom the competition really is.
In most instances, the status quo is the real competition.
In this situation, ESPN’s best hope is that the status quo sticks, but that doesn’t seem to be the case.
In which we have to look at the alternatives that people are picking now.
The reality is that the ratings for the NFL are huge. The NFL almost always has the top-rated program in a given week during the season.
A disappointing game still has a viewership that is better than almost every other show on TV.
So who is the competition?
We don’t know, but there are tons of alternatives and viewership numbers, attendance numbers, and customer research tells us pretty clearly that the number of non-customers is much greater than the number of customers for ESPN.
Creating a network with programming that reaches a bigger audience that is willing to pay is key.
V. Suppliers:
Well, there is only one NFL. There is only one NBA. There is only one NHL. There are numerous soccer leagues that could draw in viewers and there is college football, WNBA, and some other emerging and smaller leagues.
The thing is, real or not, the amount of streaming players, broadcast networks, and other broadcasting channels means that ESPN doesn’t have a monopoly on eyeballs.
These leagues/properties are going to look for the biggest dollars and/or the best combination of money and exposure. Since these deals are typically exclusive or limited in scope…ESPN doesn’t hold the strongest hand, especially as the money starts to shrink.
What does this mean?
As James Andrew Miller points out, there isn’t a clear path ahead.
I’ll come back to the way forward at a different time, but here are some things to consider:
- Selling part of the network to the leagues as a partner doesn’t seem like a strong starting position as cord-cutting continues. Why are you going to turn down billions of dollars that are contractually guaranteed to take part in a business that is profitable now, but continues to shrink with no turnaround plan in sight?
- What does the price research say about going the ESPN D2C route? D2C is sexy in marketing speak and is a viable part of your marketing strategy, but brands that rely entirely on the D2C model have done a lot better job building their brands but not as good a job of making money. D2C works best as part of a fully integrated plan that includes different routes to monetization.
- How are you going to expand your reach? Top-of-the-funnel ideas have driven a lot of the thinking behind teams like the Suns and Jazz taking their games to broadcast TV. It is also the reason that the NFL/Nickelodeon partnership has been so successful…the NFL’s marketing team did research that showed that getting kids to watch the NFL early meant you were much more likely to get them to become fans.
Let me know what y’all think about this one…
I’m sure I’ll come back to this later…