ESPN agreed to pay out full contracts, which in some cases lasted more than five years. Several reporters offered to continue working through their contracts without incurring expenses, but they were told they couldn’t.
Talent that had contracts were told that they were still employees of ESPN on payroll, but they no longer worked for the company. Many have non-compete clauses in their deals, which means they can’t report their beats, even on social media, until their contracts end or they are released. In order to get around the non-compete clauses, they would have to report on entirely different beats than the ones they spent years developing at ESPN.
What already had been a rough market for on-air talent became a lot rougher.
“It’s rare that you see such a huge shift in the marketplace for talent,” said Jim Miller, author of best-selling books on ESPN and CAA.
It also marks a stark difference from four years ago. That was soon after NBC Sports rebranded its sports channel to NBC Sports Network and FS1 launched. Throw in CBS Sports Network and all the league-owned channels, and the market for on-air talent soared. Wanting to keep people from going to the rival networks, ESPN, in particular, was generous about paying to keep its talent roster intact.
“ESPN didn’t want to create the perception that the new kid on the block in FS1 was a good place to go,” Miller said. “ESPN paid extraordinary increases in new contracts because FS1 expressed interest.”
Top talent agent Sandy Montag, founder of The Montag Group, said the feeding frenzy as those channels battled for talent “created a false sense of security in the market.”
Much of last week’s press blamed the layoffs on “cord cutters,” consumers who are going without traditional cable or satellite service. And for good reason: Since FS1’s August 2013 launch, ESPN has lost 10.8 million subscribers, according to Nielsen. It currently is in 86.9 million homes.
During that time, though, ESPN also spent big on sports rights, including its multibillion-dollar NBA deal that kicked in last fall.
“The layoffs showed that sports is big business,” Montag said. “The amount of money ESPN and Turner are paying for the NBA has a direct impact on their costs.”
For tech and media investor Eric Jackson, last week’s layoffs will have little effect on ESPN’s overall business. He’s more interested in its digital plans, including its investment in BAMTech and upcoming over-the-top launch, even as he acknowledges that the layoffs will garner more attention.
“This is a drop in the bucket compared to the size of the new sports rights deals,” he said. “At least it shows that they are putting their toe in the water.”
Montag said the market for on-air sports talent remains frothy for A-listers who can command an audience. But many of the people now in the market will find it hard to find similar TV jobs.
“With so many talented people in the market, it could change the landscape,” he said. “ESPN created positions that have never existed before. CBS does not need an MLB reporter, for example. ESPN set the market on a lot of these positions.”
Playbook Inc. founder and CEO Reed Bergman agreed.
“When they have a need, networks will go out and spend on top talent,” he said. “When it’s the right kind of talent, they’re going to pay for it.”
Both Bergman and Montag said many of the people looking for work should look beyond television to companies such as AT&T, Amazon and Apple.
“I am still very bullish,” Bergman said. “I believe that while the landscape is changing, you will start to see more impact players that are non-traditional.”
Montag agreed.
“We are going to see more programming on non-linear devices,” he said. “So many people have gotten into sports broadcasting. There aren’t enough TV jobs for everyone who wants to be an anchor. It’s more of a buyer’s market than a seller’s market.”
