This is true and not true. You have to remember that ESPN for a long time was effectively a monopsony until 2006ish. If you wanted eyeballs on your sport at a national level, you pretty much had to play ball with ESPN. With Comcast/NBC, CBS, and Fox all wanting the sports market (a TV market seen as more stable than non-sports programming, less likely to record/DVR, more likely to watch commercials), sports broadcast contract values exploded. Everyone not ESPN was willing to overpay to get marketshare, and ESPN had to be both choosey about what they were willing to go after but still had to pay going rates for content. So while it's true that ESPN is overpaying relative to the kind of returns (or non-returns) they're getting, it's in line with what everyone else is willing to pay for these contracts as well.
I'm hesitant to say ESPN is in a death spiral because everyone has the same problem ESPN has to some degree. ESPN is just the giant that everyone knows so their struggles are getting more scrutiny than say those of CBS Sports Network, which captures so few eyeballs that they don't pay Nielsen to figure out how many people actually watch the network, or NBC and its Olympics contracts which never seems to actually make them money.
Bingo. The Giant is going to be just fine. People won't stop watching ESPN or live sporting events. No way, no how. The model may change, and sports may not make quite as much money, but they aren't going away.
What is really screwed are all the tiny guys. They are the ones that truly survive off the cable model. If that goes away, they may not be able to get enough ala carte customers to be on their own. Can Lifetime or Spike or whatever survive if it isn't just in your feed all the time like it is on cable?
In some ways, the bigger streaming services have the same thing as cable --- you pay for HBO Now to get Game of Thrones, but you also get a bunch of other stuff HBO pays for. If HBO put out a smaller Game of Thrones subscription, would people rather pay for that?
Amusingly, the cable model is basically exactly what these new platforms (Netflix, HBO Now) are doing, except they do it on a program basis versus cable's channel basis.
Overall though - I think the ease of use of streaming (on demand, no commercials, high-quality) is one thing hurting cable badly, and the other is the high amount of content available (supply is high, with Netflix alone you can watch tons of things) - have reduced the price people are willing to pay for content in both a hoops (having to record on a DVR, watch at a certain time) and dollar amount (the price of cable).