Signs of deep trouble at the 'Happiest Place on Earth' emerge as Disney announces another major round of layoffs at ESPN and Maker Studios

The all-sport cable juggernaut ESPN is no longer going to be a cash cow for the Walt Disney Company
The hemorrhaging of cash at Disney continues to flow unabated as the multinational media giant recently announced another major round of layoffs at its most profitable business division, ESPN, and also at its recently acquired YouTube internet media business, Maker Studios.

You will not see many old familiar names at ESPN after June as Disney is again
layoffing on-air talent to try to desperately cut costs at the ailing cable network
Disney, the parent company of ESPN, announced on Monday another shocking and devastating round of layoffs at its most profitable and lucrative business division of about 1,000 employees who perform on-air at ESPN.

This is the second round of layoffs at the all-sports cable network since October 2015, when Disney stock prices initially plunged on the news that ESPN was struggling to stay profitable and had to cut back on its costs to try to keep its business model afloat; however, at the time, many experts correctly noted that kind of solution was like putting a band-aid on a crumbling dam that was about to burst.

Interestingly enough, it seems the Mouse has not come up with any definitive answers for the past two years on how to make the bleeding stop in either of its subsidiaries in question, except for taking last-ditch nominal steps of trying desperately appear to slash costs by reducing its work force which does little to solve the problems at hand; however, no one sees these moves as being long-term fixes for either of these business' ever-growing financial woes.


Much like the last time it announced such bad news, the stunning layoffs announced at ESPN include some of the network's most prominent on-air talent, including game analysts John Kruk, Ray Lewis and Cris Carter from its roster. Brent Musburger was also recently forced to retire from the network, while another long-time sportscaster, Chris Berman, was forced to take a reduced role at the cable network with a significant pay cut as part of the same move.

Disney is also gutting Maker Studios, showing that its $675 acquisition of the
YouTube video creator studio was a complete bust
The problems at ESPN appears to be a fatal flaw in EPSN's inherent business strategy of trying to lock in long-term exclusive broadcasting rights to all the professional sporting leagues, which in the past ESPN has tried to obtain at any cost.

Now, Disney is finding ESPN cannot keep pace with these ever-growing costs as its subscriber base is now shrinking from cord-cutters cancelling their cable subscriptions at an alarming rate.

Here are the key numbers to look at: ESPN lost 610,000 subscribers in the month of October 2016, then 550,000 subscribers in the month of November, then 542,000 subscribers in December, then 417,000 subscribers in January, and now 422,000 subscribers in February. That's a staggering loss of 2,541,000 subscribers in just the last 5 months!


The February numbers, in particular, are telling since A.C. Nielsen now integrates digital-TV viewership into its ratings survey numbers, so if ESPN's integration into new skinny bundle packages were going to stabilize their subscriber numbers, that should have been seen by now.


Unfortunately for ESPN, Disney executives had seen this coming for years now, but had done little to try to adapt to the changing digital media landscape. In fact, they seem to be going the same way as the dinosaur and against the political tide, especially against the demographics of its core audience which is not remotely closely liberal, where ESPN's and Disney's core values seem to lie.

One reason why viewers are tuning out and cancelling their ESPN subscriptions
is because they are being force-fed Disney's liberal political agenda

When the average sports viewer wants to watch sports, they don't expect to be talked down to, admonished or lectured to about their political views by an elitist liberally-biased media conglomerate hellbent on pushing their own liberal social and political agenda onto the paying customer.

Yeah, we get it: Disney is pro-gay, pro-choice, supports gay marriage, Black Lives Matter, Colin Kaepernick, Kaitlin Jenner, thinks the Russians influenced the elections, wanted Hillary Clinton to win the elections, hates Trump, and all that good stuff, but most viewers tune in just to watch Monday Night Football and didn't tune in to watching all this other drama that has nothing to do with sports.

There's a time and place for that, and it's usually designated for cable news channels such as CNN and Fox News, but it certainly is not deemed appropriate for a 24-hour sports channel. Really, give us all a break!

Since EPSN can't seem to help themselves in promoting Disney's political views, it seems to have turned off a great deal of the channel's traditional core audience, who do not seem to be receptive to Disney's political leanings. So those viewers are in growing numbers saying, "Enough is enough!" and tuning out.


These days, pay-TV viewers have many, much more cheaper ways to view various media content, from streaming video on-demand services and subscribing to cheaper skinny cable TV bundles over the internet, such as Netflix, AppleTV, GoogleTV, Google Chromecast, Amazon, Hulu, Sling TV, which are all available on all kinds of viewing devices from traditional TV sets to mobile devices on demand through streaming video, so if you give them any reason not to tune in, then they may do just that.


Thus, programming costs is where Disney should be making its deepest cuts, and not so much in on-air talent, but Disney has been living in denial about the elephant in the room for all this time, even when the problem became painfully evident from Wall Street a few years ago, although it might not be a bad idea to get rid of anchors who keep, not so subtly, pushing the company's off-putting liberal political agenda on air.

Maker Studios has seen a tumultuous ride at Disney, losing money ever since
its $675 million acquisition in March of 2014
When all is said and done, these insignificant budget cuts from on-air talent layoffs are expected to be completed by June; however, the depth of the staff reductions has yet to be fully determined or appreciated.

In addition, Disney announced about two weeks ago that it was poised to lay off approximately 80 more staffers and drop more than 55,000 YouTube content creators backed by its recently acquired Maker Studios division in Culver City, California.

Maker Studio was acquired by Disney for $675 million in March of 2014; however, it's been a struggle since the acquisition for Disney to figure out how to make any money off of its YouTube video content studios. The studio has already gone through two studio heads, Ynon Kreiz and Courtney Holt, since Disney's acquisition of the upstart YouTube-based video studio in March of 2014.


Disney is now completely gutting Maker Studios as it plans to bring the total number of YouTubers it supports down to around only 300 creators, which is just about 0.5% of the number of video content creators it currently supports. Thus, it is now evident that the investment that Disney put into acquiring Maker Studios is a complete bust for the House of Mouse.


The move by Disney to dramatically downsize Maker Studios has reportedly been in development long before the House of Mouse very publicly dropped its most popular YouTube star, PewDiePie, a few weeks ago for allegedly posting some questionable videos with anti-Semitic imagery.

Maker Studios CEO Ynon Kreitz was gone one year after Disney's acquisition
All these drastic cost cutting measures appear to prove that all is not well at the "Happiest Place on Earth."

In the past month alone, Disney has also had to bail out it's a struggling overseas Disneyland Paris theme parks and resort operations and had announced significant losses at its Hong Kong Disneyland operations a few weeks after.

All but one business segment inside Disney is struggling of late which is concerning many investors just as Disney is holding a shareholders meeting Denver this week.

Disney's stock prices have seen an unusual rebound since last October—up about $20 per shared—fueled mostly by investor speculation about acquisition talks of Disney acquiring Netflix, Apple acquiring Disney and the post-Presidential election bounce that all Dow industrial stocks have benefited from; however, that false sense of optimism in Disney's stock prices has leveled off of late and is poised to set up Disney stocks to plunge again unless Disney can show some hard numbers for renewed growth.

The biggest threat to long-term growth at Disney once again is that its most profitable division, the all-sports cable network ESPN, is shackled by serious problems of potentially losing revenue in the long-term as subscriber numbers continue to decline. Disney executives have had no answers on how to rectify the problem created by lost revenue from a rapidly shrinking subscriber base, and no answers are expected anytime in the near future.


Since February 2011 when the all-sports cable network had around 100 million subscribers, ESPN has shed some 12.5 million subscribers with the latest tally of 87.5 million cable subscribers in February, according to data from A.C. Nielsen. Viewers simply no longer want to pay exorbitant monthly cable bills for hundreds of channels they never watch.

Disney went through another Maker Studios head, Courtney Holt, with their
latest move to gut Maker Studios
ESPN commands an industry high carriage fee of about $7 per month for each cable or satellite subscriber that receives its channels in their cable TV basic cable lineup, whether or not the subscribers actually watch the channels included in their bundle packages.

In the past, that has been a very lucrative business model for Disney to just print money from cable subscribers without having to justify its actual viewership of the cable TV channel. In essence, carriage fees from cable bundle subscribers was just free money in the bank for Disney without having to work at all for the ratings numbers to justify the price of being included in virtually every cable TV lineup in every household.

Last month, Disney reported posting lower-than-expected quarterly revenue due to, not only lower cable subscriber numbers seen at an alarming accelerating rate of cord cutters, but also due to a significant drop in ad revenues at ESPN.


This bad news, along with a second major round of layoffs at the all-sports cable juggernaut since October of 2015, only portends much bigger troubles for Disney in the future. The question now is: Will Disney ever come up with any answer for its ESPN problems?


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