[DC 86]

[quote author=washingtonismoney link=topic=16831.msg192382#msg192382 date=1493310984]
The decision is odd for ESPN in that...

The labor costs from the firings really couldn't have been so great. Let's say the average labor costs of the 100 being laid odd was $120,000. That's $12 million. But the network's subscriber fees fell, i believe, by 62 million last quarter or year or whatever. The point is the salaries pale in comparison to the drops in revenue and the rights fees. They cannot cut their way to success.

Disney is a public company and in every analyst call, ESPN's decline gets the most attention.  Investors are concerned and management has to do something so even if it is a drop in the bucket, it is something they need to do so they can say they are taking action.
[/quote]

I would be interested in the source of the $62 mm number, according to multiple sources ESPN has steadily been losing ~ 3 million subscribers per year (although they did have one single month last year where they lost over 600,000 subscribers), and their average subsriber fee is $7.21, so their annual decline in revenues is closer to $22 mm. Regarding labor costs it's reasonable to estimate that overhead associated with each employee in many of those roles (which involve extensive travel) is easily equal/higher to their salaries/benefits, which themselves are likely to be higher than $10k/month.

Another factor from a financial statements standpoint is that most of those laid off had long term contracts (some with years to go) so ESPN can aggregate all these obligations into a one time non-recurring expense which will also be perceived positively by investors and analysts.

This massive layoff doesn't solve ESPN's long term business model issues related to cord cutting and being locked into expensive rights fees, but the short term financial impact and benefit is real, it's not just cosmetics. I agree that they can't cut their way to success but this layoff does have a material impact which will keep the analysts at bay while they redefine their strategy.

[DC 86]

[quote author=washingtonismoney link=topic=16831.msg192382#msg192382 date=1493310984]
The decision is odd for ESPN in that...

The labor costs from the firings really couldn't have been so great. Let's say the average labor costs of the 100 being laid odd was $120,000. That's $12 million. But the network's subscriber fees fell, i believe, by 62 million last quarter or year or whatever. The point is the salaries pale in comparison to the drops in revenue and the rights fees. They cannot cut their way to success.

Disney is a public company and in every analyst call, ESPN's decline gets the most attention.  Investors are concerned and management has to do something so even if it is a drop in the bucket, it is something they need to do so they can say they are taking action.
[/quote]

I would be interested in the source of the $62 mm number, according to multiple sources ESPN has steadily been losing ~ 3 million subscribers per year (although they did have one single month last year where they lost over 600,000 subscribers), and their average subsriber fee is $7.21, so their annual decline in revenues is closer to $22 mm. Regarding labor costs it's reasonable to estimate that overhead associated with each employee in many of those roles (which involve extensive travel) is easily equal/higher to their salaries/benefits, which themselves are likely to be higher than $10k/month.

Another factor from a financial statements standpoint is that most of those laid off had long term contracts (some with years to go) so ESPN can aggregate all these obligations into a one time non-recurring expense which will also be perceived positively by investors and analysts.

This massive layoff doesn't solve ESPN's long term business model issues related to cord cutting and being locked into expensive rights fees, but the short term financial impact and benefit is real, it's not just cosmetics. I agree that they can't cut their way to success but this layoff does have a material impact which will keep the analysts at bay while they redefine their strategy.