Disney presented a positive outlook for ESPN and its sports segment during its Q4 earnings call on Thursday.
Anchored by its expanding live sports portfolio and a 2025 launch of its Flagship direct-to-consumer product, ESPN has a strong story to tell investors.
ESPN’s global revenue increased 1% year-over-year, bringing in $3.856 billion during Q4. The vast majority of that revenue ($3.492 billion) was generated from ESPN’s domestic properties while international revenue chipped in $364 million.
Streaming has also been a successful enterprise for Disney the past two quarters. For the second time in a row, Disney secured a profit from its streaming portfolio of Disney+, Hulu, and ESPN+. The company secured a profit of $321 million from streaming in Q4, up from $47 million last quarter, mostly on the back of subscribers choosing the ad-supported tier of Disney+. ESPN+ is also seeing marginal growth, having gained 800,000 subscribers since Q2 (from 24.8 million to 25.6 million).
Advertising revenue for the network increased by 7% year-over-year in Q4, a figure that benefited from increased pricing and advertiser demand in spite of stiff competition with NBC during the Paris Olympics.
Still though, despite the positive top line figures, Disney’s sports segment managed to see its operating income decline by 5% in Q4. The reason? Rights fees for ESPN’s new college football inventory are substantially higher.
This season marks the first in which Disney has owned the full complement of SEC college football games. The network pays a reported annual fee of $710 million to the conference. ESPN says that ABC’s college football ratings are the best they’ve been since 2009 and up 40% versus last year. ABC has had 12 of the 15 most-watched college football games of the season so far. Obviously, the investment is paying off, but it seems the financial benefits haven’t yet been realized with the deal in its early stages.
Given the current environment for legacy media companies, ESPN seems to be doing just fine. Its expansive suite of live sports rights will keep it relevant for years to come, and the anticipated launch of its Flagship direct-to-consumer product should serve as a nice hedge against the prevailing winds of cord cutting.
