Yesterday Disney announced in its yearly 10K filing that ESPN lost another two million subscribers in fiscal year 2018.

ESPN now has 86 million subscribers, down from over 100 million subscribers in 2011.

Now the positive for ESPN is that the rate of subscriber decline seems to have slowed this year, but the negative is that since 2011 ESPN has now lost 15 million cable and satellite subscribers. Those 15 million lost subscribers equate to $1.44 billion a year in lost yearly revenue that ESPN will never be able to book. (This is based on an $8 a month subscriber cost for ESPN multiplied by 12 months in the year.) Again, this isn’t just a one time yearly revenue loss, this is a loss in yearly revenue forever.

Now every cable and satellite channel is losing subscribers — as dumb Twitter users who don’t read this article will immediately respond in my mentions — but the impact disproportionately impacts ESPN for two reasons: 1. the network makes far more in revenue off the cable bundle than any other channel so it stands to lose, by far, the most off the collapsing business model and 2. the network has guaranteed tens of billions in sports rights fee payments over the next decade and more to sports leagues.

Where does that money in guaranteed payments come from?

You and me who are paying our cable and satellite bills.

So unlike, for instance, CNN, which can simply cut back on costs for programming in the event revenues aren’t meeting projections, ESPN purchased much of its sports rights years ago before the full impact of cord cutting had become apparent to their executives. (The Wall Street Journal referred to these ESPN executives, who denied the impact of cord cutting, as “flat earthers” in a recent article).

ESPN’s albatross of an NBA deal, for instance, which is presently facing a substantial ratings decline in the wake of LeBron James’s move to the west coast and costs the network over a billion dollars a year, was signed before the network knew its cable and satellite business was going to collapse. That NBA deal, which I wrote about quite a bit in my new book, Republicans Buy Sneakers Too, will cost Disney billions and billions of dollars a year at the tail end of the deal, when ESPN will be paying out far more for NBA games than they can recoup in subscriber fees.

If you ever watch ESPN now and wonder, why do they spend so much time on LeBron and the NBA, this is the reason. It’s because they so wildly overpaid for the NBA television rights that they are desperately trying to keep ratings as high as they can by overcovering every minor detail in NBA action.

(I happen to believe that when LeBron retires the deal will look even worse than it does today. That’s because, much like in the Michael Jordan era of the NBA, the NBA doesn’t have a league, it has a player. NBA TV ratings, even twenty years after Jordan’s last title, are still lower than they were in 1998).

This is even more problematic for ESPN when you consider what’s on the horizon — ESPN is paying $2 billion a year for Monday Night Football and that deal expires in 2021. Can ESPN afford to continue to pay $2 billion a year for Monday Night Football based on its present subscriber losses?

No way.

Will the NFL take less than $2 billion a year? That seems doubtful. (No NFL TV deal has gone down for generations). So who will ESPN be bidding against for these rights? Potentially Amazon, which is why I said Disney CEO Bob Iger has such an interesting decision to make when it comes to selling the 22 regional Fox Sports Networks the company is obligated to part ways with as a condition of its purchase of the 21st Century Fox assets. Does Iger sell them to Amazon and, in the process, create a huge competitor for ESPN when it comes to sports rights?

We’ll see.

Remember, it’s even worse than this too, it’s the Monday Night Football deal which allows ESPN to show NFL highlights. Even if ESPN is outbid or can’t afford to purchase Monday Night Football rights, the company still would be forced to pay hundreds of millions, if not a billion, just for the right to show NFL highlights at all.

And if you thought ESPN was overcovering the NBA now, can you imagine ESPN without the rights to even show NFL highlights? How does SportsCenter exist without NFL highlights? Put simply, it can’t. So even if ESPN saves money by not paying for Monday Night Football, the NFL has the network over the barrel anyway, they can just charge more for the highlights.

There’s just no way ESPN can afford to pay what they pay now for the NFL. But I also don’t see any way ESPN can’t do it, which makes this an intractable mess.

That’s why the sports leagues, which have grown used to the inflated payments they receive thanks to the cable bundle, desperately need for the technology companies like Apple, Facebook, Google or Amazon, to bid for their rights in the years ahead. The money, quite simply, isn’t going to be there from cable any longer.

But this points to the existential crisis facing ESPN, what’s the network worth without sports rights? How many more millions would walk away from ESPN without the NFL? What if the Big Ten disappears next? (The network has just five years remaining on that deal). How about the college football playoff after that?

For over a generation ESPN had the best business in media history as it built up 100 million cable and satellite subscribers, but now that business is rapidly unraveling, we are going to watch the collapse of ESPN over this current generation.

Remember, ESPN owes almost all of its audience to its purchase of sports rights. What is the company left with absent those sports rights? Some 30 for 30’s and old PTI and First Take shows. Good luck making money off that.

(By the way, I actually think the market for individual sports talent won’t be hit to the same degree. In fact, I think it could thrive. Talent is rare and the top sports commentating talent on ESPN, the Stephen A. Smith’s, Dan LeBatard, and Scott Van Pelt’s of the world, for instance, would always be able to find an audience for their opinions and analysis of sports, I think it would just move to smaller sites like Outkick, honestly. I can see a future media market where Van Pelt, Stephen A. Smith, Dan LeBatard, and Outkick are all either part of standalone subscription services or are all rolled up into larger subscriptions. I don’t think America will suddenly have less interest in sports opinion and analysis, I think the money will just move to a different arena. Instead of hoping to be employed by large media companies, individual talent will make individual deals predicated on audience size.)

This business challenge, by the way, is why I believe ESPN went so aggressively left wing political. It was desperation, a cry for relevance in a media market where that relevance was rapidly collapsing. I think ESPN executives put pressure on TV execs to increase ratings and the gambit was, let’s go political.

That, clearly, was a disaster that instead of rescuing the company actually accelerated ESPN’s own obsolescence.

To his credit ESPN president Jimmy Pitaro, at the direction of Bob Iger, has repudiated that programming decision and it has led to the departure of Jemele Hill, Kate Fagan, and other left wingers at the network. Now I think ESPN is hunkering down and focusing everything they have on sports.

This was reflected, interestingly, earlier this week when Fagan said she was leaving ESPN because she no longer believed ESPN had an interest in covering the intersection of LGBT and sports in the way she hoped they might. It’s a sign of how lost ESPN’s priorities had become that they were covering the intersection of sports and anything. How about instead of worrying about covering things that intersect with sports, you just cover sports?

Pitaro and Iger’s new idea, which I think is probably a smart one, is the best way to forestall your decline is to go hard after your base — ESPN is promoting those who love sports the most and kicking politics to the curb. It’s the strategy, honestly, they should have gone to four years ago.

But even doubling down on sports and those who love sports doesn’t combat the biggest problem facing the network — it’s an inevitable and structural decline in revenue.

As revenue declines, relevance declines.

The sports leagues don’t love ESPN, they love ESPN’s money.

And as ESPN’s revenue continues its yearly decline, eventually the costs for sports programming are going to overwhelm the revenue produced by the channel and turn ESPN into an earnings albatross for Disney. What’s more, that decline will rapidly accelerate as ESPN’s declining revenue leads to a decline in quality of game programming.

This is why there is so much focus on the promise of ESPN+, which ESPN hopes can stem the revenue losses they are booking in the main cable and satellite business. The problem, of course, is that ESPN+, at least so far, is a finger in the dam of a collapsing business flood.

ESPN+ presently brings in revenue of $4.99 per month. Recently ESPN announced they have one million ESPN+ subscribers. (They included ESPN insider subscribers to reach these numbers). Even assuming all of those million subscribers are paying $4.99 every month that’s just $60 million a year in revenue, or about what ESPN pays to air one single half of Monday Night Football on ESPN this year.

Maybe ESPN+ will turn into a significant business one day, but right now it is likely losing several hundred million dollars a year and providing no help in turning the negative tide facing the larger ESPN business.

And that brings us to the biggest issue facing the network — there is just no way to replace the revenue ESPN is losing from cord cutting.

(This, by the way, is the larger issue facing all of Disney’s cable businesses. It’s why the launch of the new Disney+, Disney’s Netflix competitor, is really a hail mary designed to protect the cable business.)

That means Disney CEO Bob Iger doesn’t have very many good options with ESPN.

What are those options?

1. He can try and sell ESPN or spin it off as a standalone business.

But the problem with this is who wants to buy a slowly declining business over the next decade or more with tens of billions in fixed cost obligations for sports rights?

Maybe a private equity company would want to take all the money ESPN tosses off and not reinvest it in the company and slowly allow the company to die over the next generation while, hopefully, booking a profit in the process.

But what kind of premium would they pay for ESPN right now?

Not much.

And even that leaves behind a shell of a company that isn’t worth very much.

And why couldn’t Disney do the same thing, take the money ESPN still produces and invest it in more profitable parts of its business?

That seems to be what ESPN is doing now.

2. Disney can pray that cordcutting eventually slows and there’s a fixed number of people who will never cut the cord, allowing ESPN’s business to stop growing, but die very slowly.

I think that’s what executives are doing now — hoping that cord cutting will stall out and there will be a high number of people who stick with cable and satellite no matter what.

But is doing nothing a very good strategy?

Frankly, we don’t know. The past seven years would suggest it isn’t, but, remember, ESPN’s execs never thought we would get to the place we are now, where Disney has lost 15 million subscribers. The flat earthers at the company never believed cord cutting would happen.

Maybe cord cutting could cease.

But what if it doesn’t, what if the cord cutting trend of the past seven years just continues for the next decade?

If Disney were able to continue to increase ESPN’s subscriber fees on a yearly basis then maybe, just maybe, they could run the business as essentially a breakeven proposition over the next ten years.

Let’s say that Disney “only” loses two million ESPN subscribers a year for the next ten years. But that’s still twenty million lost subscribers over the next decade, which would leave ESPN with 66 million subscribers.

Maybe, if you drastically cut costs on programming, you could make money without the NFL, the Big Ten, and the college football playoff, but why would anyone subscribe to ESPN then?

I don’t know.

Neither do ESPN executives.

I do know this, cable and satellite companies would, at some point, certainly start to rebel over paying the rate they do now for an ESPN without exclusive sports programming.

3. Could ESPN take the channel direct to subscribers via a streaming property?

This is what ESPN+ is testing. (ESPN+, however, only offers programming that isn’t airing on the ESPN channels now).

The problem is this, once you go direct to subscribers via a streaming property then all the cable and satellite companies would drop ESPN off their cable and satellite packages, meaning ESPN would lose far more money by going direct to consumers.

This doesn’t even consider what the channel would have to cost to replace the lost revenue.

There is just no math I have seen so far, unless ESPN turns into a sports gambling company, that could replace the revenue and profit ESPN is losing from cord cutting.

4. Could Amazon buy ESPN?

This would be a hell of a coup for Bob Iger, what if instead of just selling the 22 regional sports networks, he unloaded all of ESPN to Amazon?

I’m going to write a longer column on this idea, but it is very intriguing if Amazon is truly going to move into the sports marketplace and buy these regional sports rights.

What if Amazon just bought all of ESPN from Disney?

And, you know what, if Amazon is truly moving into the sports business, this could actually make some sense.

But here’s the challenge for Amazon, why buy ESPN since much of what you’re buying is just the contracted for sports rights that ESPN presently controls? If you truly want to compete with ESPN, why not just buy up all the sports rights that ESPN presently has as they all come to market?

Now the answer might well be, if Amazon has decided it wants to get into the sports business, buying now makes more sense than waiting for all of ESPN’s contractual rights to come to market.

I’m not sure I buy that angle, but the truth of the matter is this, the only company I could see purchasing ESPN is a tech company.

Would any tech company make this move?

Time will tell.

In the meantime, the story at ESPN isn’t changing, every year millions less people are paying for ESPN’s content than paid the year before.

And that ain’t good.

In fact, it’s downright deadly to any business.

ESPN needs a solution fast. And so far, they don’t have one.