ESPN layoffs is a lesson to Tv networks

Posted on April 27, 2017 12:29 am

The widespread ESPN layoffs that were announced couple of hours ago didn’t come as surprise to me. I do sympathise with those who’ve been laid off and wish them well and can’t ignore that I won’t miss some of the great faces of ESPN NFL’s team like Trent Dilfer and reporter Ed Werder as it remains one of my favourite sport and Super Bowl is unmissable in my must watch every year. But that layoff aside, what does this restructuring of ESPN mean to African broadcasters? Well, bigwigs won’t be bothered but small players have a reason to worry than ever before. Me thinks the broadcast industry is under intense duress and many of broadcasters will continue to post reports of shrinking revenues and others losses if they don’t adjust their businesses urgently.No doubt, weak advertising market and increased competition and content costs will continue to be a big challenge. In the case of Africa, broadcast industry is obviously under intense pressure because main players are privately held commercial free to air television broadcasters who continues to face regulatory hurdles and exorbitant broadcast licence fees.Even though traditional Tv earnings have continued to come under pressure, with some reporting a sharp decline private broadcasters have failed so far to manage diversification, technology uptake and adjusting business models that will help provide a broader earnings base. With an uneven African economy, very tough currency headwinds and the ongoing transformation of the media landscape, unstable revenues, low pre-tax and interest earnings and unhealthy cash flows are some of the challenges facing broadcast media in Africa.But whats the connection between ESPN layoffs and broadcast media in Africa? Well, plenty of similarities exist. For those who’ve followed ESPN’s for the last two decades, will agreed with me that its business model mainly based on subscriber fees is outdated and only appeals to a certain demographic who hardly have time to watch telly. Who wants to pay subscription for a content that is readily available online?

Its the same situation facing Tv stations in developing world like Africa. Some want people to subscribe to your content package but the same content is available freely on video platforms online. Also, just like ESPN has long ignored, subscribers in places like Africa have the option to unbundle channels they don’t need and current subscribers only model broadcasters especially in Africa has seen plummeting number of subscribers.What most current executives in Africa’s TV networks need to understand is that they are under pressure as a result of technological change and global competition. African governments should also support licensed broadcasters by cutting broadcast licence fees and to some extent they can consider offering some form of reliefs if broadcasters create direct and indirect employments.Back to ESPN, the layoffs serves as a reminder to broadcasters that economic losses will continue because advertisers want to pay for the size of the audience reached and only way for them to survive is charging premium prices for ads on blockbuster Tv shows but how many have their own equivalent of Netflix’s House of Cards? Bottom line is that advertising prices fluctuate wildly and the trend won’t change since the advertising market is short and dangerously tight. Its a hard knock life for television networks as they have to compete against online advertising. Gone are the days when a 30 second ad during prime time cost about almost $100,000. Metrics used in selling advertisement like we reach this number of viewers per day is dead and buried in the annals of history.TV stations in Africa and other developing regions are struggling due to a lack of ad sales and human resources that can help create good programming which requires a lot of money and manpower but most TV stations are short of advertisements due to a limited share of the audience. That can only be achieved by leveraging on technologies widely available like Live streaming and Video on Demand. The opportunity for everyone is clear and the chance to retain and grow customer numbers while gaining an intimate understanding of viewers using the content they want to watch.I believe ESPN ignored that.

Being a millennial I grew up knowing that for me to watch live sports on ESPN, i’d to rush for the Tv screen, turn it on and get hit with the pre-game chat of commentators both in studio and pitches as well as do with adverts with major advertisers. But thats not the case anymore. Nowadays am able to hit a calm landing page on my tablet computer tiled with apps for my favourite sports like Formula One. Technology clearly brings in more tension around television broadcast and going forward it will all depends on what distribution strategy Tv networks develops for their content. Any individual who has the ability to amass audience and distribute content is a potential competitor for Tv networks.Tv networks in Africa will have to get into streaming because their immediate competitors pay TV networks are getting into broadband and their future business competitors telcos are getting into content business and what will happen is that all will be converging into the middle. The days when companies existed to sell telco services and products like internet connections have come to an end and operators are doing more to avoid becoming commoditised providers like has happened with postal services across Africa.Television networks gatekeeping for advertisers wanting to reach into our living rooms are being bypassed fast as TV shows are now available freely over the internet.TV networks in Africa that are streaming will be able to capture audiences once they leave their homes on their mobile, tablet or desktop.It has created a diverse content moment, which is great TV experience because the bulk of such people streaming on their devices are out of home, on a device and importantly, nowhere near a television.ESPN’s layoffs is acknowledgement that it has a serious problem in the business and should serve as a lesson to Africa’s Tv networks that have bureaucracy, an additional challenge Tv stations faces. Most station operations are far from optimal with a low average live broadcasting time and only one-fifth of ad slots are filled according to latest data I have access to. As revenues decline, Tv networks in Africa will have to keep cutting costs to survive and for them to remain relevant they have to manage to do that without cutting program quality otherwise viewers will settle for online content once and for all if they can’t differentiate between amateur and professional content.

Contador Harrison