ESPN President Skipper on Layoffs: ‘We Are Doing What We Need To Do To Succeed in the World’

Just one week after ESPN made waves across the sports-TV industry by laying off more than 300 employees, John Skipper, president, ESPN/co-chairman, Disney Media Networks, opened the NeuLion Sports Media & Technology Conference by SportsBusiness Daily/Global/Journal in New York on Wednesday by addressing the controversial move head-on.

“Let’s be clear: we laid off employees last week. It was the most difficult week of my tenure at ESPN,” he said. “We do not make those decisions lightly because we understand we are affecting people’s lives, and we regret that and appreciate their contributions. On the other hand, we are doing what we need to do to succeed in the world.”

ESPN’s John Skipper

ESPN’s John Skipper

Though acknowledging that the layoffs were “intended to save money and make sure we are as cost-efficient as we can be,” he stressed that the network is not on the retreat but is rethinking where it dedicates its resources. He pledged that ESPN and parent company Disney will continue to hire new employees, launch new ventures, and invest in media rights — as it did when it outbid Fox Sports, NBC Sports, and beIN sports for the Euro 2020 rights this month (at a reported $110 million).

“If you are cutting jobs in retreat, you are in trouble. But what we are doing is preparing to have a modern workforce with the people we need to adapt to a changing environment,” he said. “We are preparing for success. Yes, [the layoffs were] intended to save money and make sure we are as cost-efficient as we can be. But those things aren’t contradictory. If there is a sense that, in success, you need to be extravagant in how you spend money, we reject that.”

Cord Cutting and Adapting for the Future
Skipper also addressed growing concerns regarding cord cutting and ESPN’s loss of roughly 7 million subscribers since October 2013 as a result of consumers’ departing the pay-tv–bundle universe.

“There are places in the ecosystem where there will be increases and where there will be decreases. We do not have our heads in the sand about things that are going on, but there are challenges and there are opportunities.

“We continue to have a very robust return from the pay-television universe,” he continued. “We are committed to the pay-television universe and continue to try and drive value there. I do not accept the proposition that we will reach less people. We will need to be nimble and have new combinations and platforms to reach more people, but we will not accept reaching less.

“We are committed to the return value of the pay-TV universe,” he added. “It is still where we get the most value back. We do not make our linear content that appears on those platforms available for free. It boggles my mind that people do so. But we will look for other opportunities to create other kinds of business — including direct-to-consumer. “

The Rights Issue
Following last week’s layoffs, ESPN faced intensified scrutiny for its prodigious spending on rights, especially the $15.2 billion, eight-year deal it struck for Monday Night Football in 2011 (the deal began in 2014). Skipper took exception to this criticism, saying that ESPN operates “in a disciplined manner relative to our bottom line.” Specifically, he argued that it would be unfair to compare the MNF deal with other NFL-rights deals, given the thousands of hours of studio content, billions of video highlights, Pro Bowl and NFL Draft rights, extensive onsite Super Bowl studio programming, and other extraneous content ESPN gains in the agreement.

“It is woefully uninformed to compare our NFL package to the packages of the other networks because we don’t just buy 17 three-hour windows,” he explained. “If you look at the dollar spent on the NFL by ESPN versus a dollar spent by other networks, … I would guarantee you that our return on a dollar spent on the NFL is higher than anybody else’s. It is inaccurate that we pay too much on those rights.”

With the exception of the Big Ten-football and –basketball–rights deal expiring in 2015-16 (Skipper called the rights “top tier” but stopped short of using the term must-have), the sports-rights landscape promises to calm down a bit over the next half decade. He believes no one stands to benefit more from this than his network.

“We will certainly be the beneficiary of long-term rights deals, which are stable. There are very few rights deals to do in the [near] future with the exception of the Big Ten. There are no significant rights deals to be done for about four years after [it expires], and we will be the beneficiary of that.”

Other highlights from Skipper’s opening session at the Sports Media & Technology event:
On IAC Chairman Barry Diller’s comments that ESPN should be blamed for a “false economy” in which 100 million subscribers are subsidizing a much lower actual viewership for ESPN: “Barry Diller has put us in an inappropriate, inaccurate narrative for a long time. … I will respectfully ask Barry Diller to acquaint himself with the facts before he flaps his lips in public about this.”

On how the launch of Fox Sports 1, NBCSN, league-owned networks, and other cable sports channels have impacted ESPN in recent years: “We have not lost share in the last few years; we have gained share. We have also not been deprived of the rights for the NBA, Major League Baseball, and the NFL, which we need to continue our business.”

Regarding ESPN’s stance on daily fantasy sports: “We are very happy with our current position. Our principal engagement in fantasy is accepting advertising, and it has been a very satisfying experience over the last three months. … We will watch what’s going on there and adjust our activities accordingly. … I am convinced that they are games of skill, although I will say it is not my duty to figure out the regulatory or legislative part of this. So that is what I think, but I’m not positive that that really matters.”

On ESPN’s upcoming production of the World Cup of Hockey in 2016: “I’m bullish on the World Cup of Hockey. We love these international events where the world gets together for a contained period of time. Because of all the platforms we have, we are a big megaphone. We are able to use digital and all of our networks and ESPN Radio and The Magazine to have a big megaphone for a contained period of time that has a lot of games. I’m confident that we can do a very good job of making this a very good event. And, frankly, we’re excited to be in hockey.”

On how potentially disruptive technologies will impact ESPN: “We work very hard at ESPN not to be concerned about disruptive technologies but to adopt disruptive technology and figure out how to serve our fans better. We have never resisted new technologies whether it was HD, the Internet, mobile, VR, or social media. Our goal is to adopt them so we can assert our advantage better, not to fear them.”

On the future of ESPN: “We like the hand we have. There is no one else that has the collection of assets or the potential and likelihood to succeed like we have at ESPN.”