Case study 17-1

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Concordia University Texas *

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Management

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Feb 20, 2024

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1. Identify the effects of the various marketplace changes and the risk factors identified in this chapter on ESPN, and rank those potential effects on ESPN. Risk factors that were identified in this chapter were declining subscribers, decreasing ratings, rising sports rights fees, workforce layoffs, political controversy, and sexual harassment claims. There was a loss of approximately 12 million subscribers between 2013 and 2017, this can have a serious impact on several businesses, ESPN included. When losing this many subscribers there was a serious drop in annual revenue. Low ratings is also another risk factor, the ESPN ratings went down 7-11% in a year, which can reduce advertising revenue which then can result in a disinterest from viewers. ESPN’s has many long term agreements with major sports leagues, this has significantly increased its annual rights fee obligation. This financial strain can affect the ability for ESPN to invest in other content they may want to invest in. Workforce layoffs are another big factor, ESPN laid off 550 workers, this can indicate the many financial challenges they faced. Political controversy has caused ESPN to lose advertisements due to the fact that some stated that they were making political comments rather than sports related comments during some games. Claims of sexual harassment can harm the networks reputation and lead to legal and financial repercussion, including settlements and potential damage to sponsor relationships. I would rank these potential risks: 1. Declining subscribers 2. Rising sports rights fees 3. Decreasing ratings 4. Workforce layoffs 5. Political controversy 6. Sexual harassment claims 2. Based on ESPN’s business model as of 2017–a $7.25 per month subscription fee, paid by 88 million cable/DBS subscribers, producing 75% of ESPN’s revenue– construct an alternative model (including existing revenue sources as well as new sources) to generate equivalent revenue. Digital subscription services: Increasing the number of digital products it offers, like the subscription-based streaming service ESPN+, may help it draw in more customers and boost earnings. Advertising innovation: Increasing advertising revenue can be achieved by implementing targeted advertising and investigating new forms of advertising. ESPN might spend money on data analytics as well to enhance ad targeting. Merchandise licensing: ESPN may enter the merchandise and licensing market by using its brand to sell branded goods and content rights. E-sports and gaming: ESPN can provide competitive gaming-related events and content to draw in younger viewers and possible sponsors by leveraging the expanding e-sports and gaming industries.
3. If other networks besides ESPN also incur revenue losses that result in less revenue being available for rights-fee payments, what would be the consequences for the sports industry? Reduced Player Salaries: There could be disagreements between players' associations and league management if sports leagues are forced to reduce player salaries. Increased Competition for Sponsorships: The competition for sponsorships may get more intense as networks compete for a smaller pool of advertising dollars, which could result in higher costs for advertisers. Potential league restructuring: Leagues may need to review their revenue-sharing plans and look into other sources of funding, which may require adjusting the organizational and operational frameworks of the leagues. Decline in Production Quality: Networks with smaller budgets may see a decline in production quality, which would affect viewer experience and lessen the value of sports content. In recent years, ESPN has had to deal with a number of issues, such as decreasing ratings, a decline in subscribers, an increase in sports rights fees, layoffs, political scandals, and allegations of sexual harassment. The effects of these issues have varied, but the two most significant ones are the decline in subscribers and the increase in sports rights fees. ESPN could investigate alternate revenue streams like digital subscription services, inventive advertising, global expansion, merchandise and licensing, and e-sports in order to produce comparable revenue. For ESPN to continue dominating the sports television market, it will need to adjust to these challenges. Hums, M.A. (2018). Principles and Practice of Sport Management. Burlington: Jones and Bartlett Learning
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