ESPN and other Disney TV units causing a financial drain on the company

It’s been chronicled about ESPN’s recent travails from losing subscribers to falling NFL ratings. While Disney’s movie units such as Lucasfilm, Marvel and Pixar do well, it’s TV divisions are not.

ESPN and Disney’s other cable networks have been losing subscribers, but ESPN in particular, getting hit with a loss of 621,000 households in October, a figure the network disputes. Some accounts have ESPN amounting to as much as 30% of Disney’s operating income. And while it was a cash cow for Disney for a long time, it appears that those days are over.

ESPN’s sports rights have increased thanks to heavy competition from Fox and NBC. In addition, the Worldwide Leader has to pay more for NBA rights thanks to a new contract that kicks in next year.

Due to increased costs, Disney is already warning shareholders that earnings will grow at a more modest rate than in the past. Not only have costs increased, but ESPN’s advertising revenue has taken a hit due to the Olympics on NBC where buyers chose to purchase time during that event instead of spreading it to other networks. Another factor has been the legal issue involving daily fantasy sites DraftKings and FanDuel which have not spent as much as they did last year.

The problems for Disney are not just due to ESPN, but also ABC whose ratings have fallen to the point where the network is behind CBS and NBC in the primetime broadcast ratings. Viewership is down 13% in the important 18-49 category and down 9% in total viewers.

So as Disney tries to stem the tide with its TV networks, it hopes that it can find the right combination to offset the lower revenue from ESPN and ABC. Right now, it hasn’t found it.

[Variety]