ESPN's Worst Nightmare Is Coming True

ESPN is reportedly firing hundreds of people for the first time since 2009.

Tony Manfred at businessinsider.com reports the company is still in great shape. It's still the most valuable media property in the world. It's still crushing its competitors. And it's still printing money.

But the rumored reason behind the layoffs — the soaring cost of broadcast rights eating into the company's profit margin — is a real concern for the future of the company.

ESPN is such a monolith because it charges the highest subscription fees on cable, in addition to ad revenue. It can justify those subscription rates because it controls a massive chunk of live sports broadcasting rights — a finite commodity that is getting more and more valuable as TV audiences for other types of programming continue to fragment into smaller groups.

The broadcast rights to live sports are going up for two reasons: 1) live sports is the only thing you have to watch live in the DVR era, and 2) the rise of NBC Sports, CBS Sports Network, and Fox Sports 1 has made bidding more competitive.

In the last 24 months, ESPN has agreed to huge rights deals with a bunch of leagues and events. Some of the highlights:

• $15.2 billion over 10 years for Monday Night football (73% higher annually than the previous deal).
• $7.3 billion over 12 years for the new college football playoff (480% higher annually than what it was previously paying for BCS bowls).
• $5.6 billion over 8 years for MLB (100% higher annually than the previous deal).
• $825 million over 11 years US Open tennis (400% higher annually than the previous deal).

That doesn't include smaller deals with specific college sports conferences, golf tournaments, and NASCAR.

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