The sports industry leader in the world is still active.
For the first time ever, Disney has released the financial details of its sports division, and ESPN’s operating income increased 16% year over year to $987 million in the company’s fiscal fourth quarter. The segment’s revenue increased 1% annually to $3.8 billion.
Disney also disclosed that ESPN+ generated $33 million in revenue during the quarter. In contrast, Disney’s other streaming services, Hulu and Disney+, lost $420 million during the quarter.
Even though sports rights account for 40% of Disney’s total content spending, ESPN’s increases in operating income and revenue suggest the company isn’t going out of business, despite a 9% decline in revenue from Disney’s other linear network. That ought to be a huge comfort to investors.
Disney CEO Bob Iger predicted last year that traditional TV would eventually go extinct, saying that “linear TV and satellite is marching towards a great precipice and it will be pushed off.” The sports network might not be in as bad of a situation as the rest of the linear universe, according to the ESPN results.
Iger described ESPN as being “on a great trajectory” during a Wednesday interview with Julia Boorstin. Furthermore, the ratings are genuinely very high. In terms of ratings, ESPN had, I believe, one of its best years in the previous four or five years in 2023. That is really wonderful. It goes without saying that we intend to launch ESPN directly to consumers. We are really happy about that.
ESPN+ is already profitable, despite Disney’s streaming division still being a year away from breaking even, based on internal estimates. ESPN advertising saw a “modest increase” during the quarter, according to Disney’s earnings statement, despite a decline in linear network advertising.
All of this doesn’t make ESPN’s existential crisis of trying to survive in a world where streaming dominates over cable bundles go away. However, it does imply that ESPN isn’t quite in crisis mode as some investors might have thought.
According to a July report, Disney has held talks regarding minority equity stakes in ESPN with the four major U.S. professional sports leagues: Major League Baseball, National Football League, National Basketball Association, and National Hockey League. In an interview on Wednesday, Iger stated that Disney has also held talks with other tech firms “that can add either marketing support, technology support or possibly content support.”
According to Iger, Disney hopes to make ESPN the leading digital sports distribution platform in the upcoming years. He also revealed that ESPN’s direct-to-consumer business will begin operations no later than 2025.
During Disney’s earnings conference call, Iger stated, “ESPN is the No. 1 brand on TikTok with about 44 million followers, which is an incredible statistic.” “We believe that because of its special qualities, its popularity, and its profitability, embracing it is the right course of action.”
