Getting down to business
A funny thing happened the other day on the way to yet another rerun of full-contact karate on ESPN. The 24-hour, all-sports cable network, which has been losing money by the bushel, delivered a chop to the soft underbelly of its early-morning programming. Beginning March 1, ESPN will air financial news from six to eight each weekday morning. Seems that 24-hour TV sports is an idea whose time has come and gone. Goodby 7 a.m. repeats of pro rodeo from Mesquite. Hello U.S. traders on the Zurich gold exchange.
The program, which will be called Business Times, will be a fast-paced briefing session for America's white-collar folks. One subject the show might consider exploring is the future of ESPN. From its inception in 1979, the network trumpeted itself as television's only all-sports channel. NBA basketball, water polo, Australian-rules football, it didn't matter—there would be nothing but sports from dawn till daybreak. The problem, ESPN now admits, is that sometimes nobody watched.
ESPN, which can be seen in 23.3 million households, or in 28% of the nation's homes that have television, became eligible for Nielsen ratings last October. Says Dana Redman, the network's chief of research, "Nielsen won't give us a rating for any period in which we get less than half a rating point. The period shows up as an asterisk in the rating book. Most days between six and eight in the morning, we get asterisks [in prime time, ESPN's average rating is about 2.0, not bad for a cable outfit]." There isn't much of a market on Madison Avenue for asterisks. Thus the move to the independently produced Business Times, which, according to ESPN's research, will appeal to a large segment of the network's upscale, male audience.
Advertisers agree that the change in format at ESPN is a prudent one. But, in fact, the move amounts to putting a Band-Aid over a gunshot wound. Getty Oil, which owns 85% of ESPN, pumped in a reported $10 million to start it. The network's president, Bill Grimes, has admitted that ESPN had a $20 million deficit in 1982, and a reliable source says it lost $30 million in both 1980 and '81. Total bill: at least $80 million, not counting the original outlay from Sugar Daddy.
Why such losses? For one thing, ESPN unexpectedly found itself fighting for sports broadcast rights with such other basic cable services as WTBS, the USA Network, even the Christian Broadcasting Network. Outsiders have crashed ESPN's party, and there's only so much cake to go around. A grievous blow for the network came in January 1982, when WTBS outbid it ($17 million to $7 million) for prime-time college football. Last April, USA got the NHL for $8 million after ESPN tendered $6.5 million. Also, last year ESPN's advertising revenues lagged 30% behind projections, while its rights costs were more than twice as much as they were in 1981.
Grimes, who plans to cut losses by charging ESPN's 5,000 cable affiliates more for programming, maintains that his network has no plans to carry additional non-sports shows. "If the advertisers come to ESPN the way we still believe they will, then we won't have to diversify anymore," he says. Stuart Evey, head of Getty's non-petroleum industries, says ESPN will be profitable by mid-1985 and professes to be "very positive" about its future.
Others aren't. "I just see the Business Times move being the forerunner of changing the entire operation," says former ESPN President Chet Simmons, now the commissioner of the U.S. Football League. "If they do it for two hours in the morning, then they'll do it for two more hours or four more hours in the afternoon. It really comes down to the question of just how long Getty will be willing to keep on sucking it up if the advertising revenues keep flagging."
Simmons thinks that ESPN ought to become a pay-cable network like HBO or Showtime. Indeed, ABC holds an option to form a pay-per-view cable channel with ESPN that would broadcast at least one major event per month. Says Grimes, "I think there are enough rabid sports fans out there and that a certain percentage of them would pay five dollars a month or whatever to have ESPN."
The plight of ESPN is enough to lend a touch of irony to one of its promotional spots. A tired businessman, after being "blind-sided, elbowed under the boards, checked and hit after the bell" at the office, comes home, collapses in a chair and tunes in ESPN "where the cheering never stops." The ad is still running, only now everyone at the network is holding his breath.
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Grimes doesn't plan any further straying from sports.