We’ve long heard just how valuable ESPN is to Disney. Now we’re actually getting some numbers to back that up.
Starting this quarter, Disney is making a change to how it reports quarterly financials as part of a move by CEO Bob Iger “to restore creativity to the center of our business.”
Previously, ESPN was lumped in with all of Disney’s other linear TV and streaming assets or included with other TV properties such as ABC and Disney cable channels, which made it hard to suss out the financial specifics. Now, however, ESPN is essentially its own division within Disney, making for a much clearer financial picture.
Wednesday’s SEC filing showed that ESPN numbers have been on the downswing through the first nine months of fiscal 2023. The sports media giant has generated more than $12.5 billion during that time, but revenue has been dropping over time. After a first quarter that generated $4.4 billion, second-quarter revenues were down to $4.1 billion and third-quarter revenues came in at $4.06 billion. The business ended up with $1.9 billion in operating income during that time, down from roughly $2.1 billion in the same 2022 timeframe. Earnings fell to $1.48 billion over those nine months as well.
For comparison, revenue for fiscal 2022 was $17.3 billion with an operating profit of $2.7 billion, while in 2021, revenue was $16 billion with $2.7 billion in operating profit.
All of that said, the numbers also reveal just how important the Bristol-based sports entertainment arm is to Disney. As a point of comparison, Disney’s “entertainment” division, which includes other Disney TV networks and streaming services, as well as film and TV studios, generated $39.6 billion in revenue but “only” $2.1 billion in profit for fiscal year 2022. You can assign that lack of profits to Disney’s streaming service, which, like so many other streamers, has been hemorrhaging money in the name of subscriber growth.
ESPN’s high pay TV carriage fees have always been a point of discussion about the company’s reliance on cable and the over $8 billion in revenue explains why, especially when compared to advertising ($3.2 billion) and subscription fees ($1.1 billion). That’s why those fees were a major part of the Disney-Charter battle last month.
Overall, the financial numbers seemed positive against expectations, though there are still plenty of questions about where the business goes when it eventually launches its potentially lucrative direct-to-consumer product.
“There’s perhaps more durability in ESPN’s top-line growth than expected,” Wells Fargo analyst Steven Cahall said. “The real test comes when ESPN launches DTC.”
Iger and Disney have made it clear they’re on the hunt to find a “strategic partner” for ESPN. Despite the flagging revenue numbers throughout fiscal 2023 so far, the hope is that the financials showcase just how robust the business still is in spite of changing TV habits and industry trends.
[Yahoo! Finance, Deadline, CNBC, Morningstar]
