Why ESPN is laying off hundreds of people

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President John Skipper confirmed that ESPN is going to lay off employees and a spokesperson says approximately 300 employees will lose their jobs this week.

This is the second time in two years that ESPN is laying off hundreds of employees and the timing of both have one important thing in common, something that is actually good news for those who make the cut and keep their jobs.

In early 2013, ESPN laid off "hundreds" of employees. This came just before the network's new broadcast rights deals with Major League Baseball and the NFL kicked in, raising ESPN's total commitment to broadcast their major sports leagues and events from under $3 billion to nearly $5 billion.

Now, a little more than two years later, the amount of money ESPN is dishing out to air live sports is about to jump again, with the NBA's new TV deal starting in 2017 and their contract to broadcast Big Ten football set to renew following the 2017 season. In other words, when costs skyrocket, people lose their jobs.

ESPN Broadcast ContractsCork Gaines/Business Insider

ESPN has not re-upped with the Big Ten Conference yet and could save $200-300 million per year if they chose to let somebody like Fox Sports take over. However, that seems unlikely as it is live sports that drives ESPN's enormous subscriber fees and makes them the self-described Worldwide Leader in Sports.

Jason McIntyre of The Big Lead, who first reported the lay offs, says the company was directed to trim $250 million from the 2017 budget, and that "ESPN began looking for ways to lower costs in anticipation of the enormous NBA TV deal that is on the horizon."

The good news for those who survive the purge is that ESPN's broadcast fees won't rise substantially again until 2022, unless they decide to grab some sports they don't currently air. That means there should be at least 5-6 years of stability before we see this again.

For the purpose of this report, we have included ESPN's deals with the NFL, Major League Baseball, NBA, the six major college conferences (SEC, Big Ten, Big 12, Big East, Pac-12, ACC), the BCS and major bowls, U.S. Open tennis, and Wimbledon. This data does not include ESPN's obligations to major golf tournaments or the Australian Open in tennis, as data was not readily available. Data is based on the average annual value of the contracts.

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