The Walt Disney Company has yet to start negotiations with the NFL on re-opening their media contracts, even as the league is keen on redoing all of its deals that were originally inked in 2021 for over $100 billion, and which went into effect with the 2023 season.
Since the NBA inked media deals worth $75 billion, strongly suggesting the NFL’s contracts were underpriced, given football’s far stronger audience metric than basketball’s. In what seemed to be a prepared remark, Disney chief financial officer Hugh Johnston told an analyst’s earnings call this morning that the company expects to be in business with the NFL for a long time.
Given the NFL now owns 10 percent of ESPN, a stake the league received in exchange for the NFL Network and RedZone, it’s hard to quibble with Johnston’s optimism.
“You know our relationship with the NFL is as broad and as deep as it’s ever been, and we’re excited looking ahead to the upcoming NFL season with the NFL Network and with red zone linear now part of our distribution portfolio, on top of Monday Night Football and broader NFL coverage,” he said. “To get to your question specifically, we haven’t yet engaged with the league on early renewal conversations, but we’re not dogmatic about the process, and we’re always willing to have a conversation with the NFL in an effort to find new opportunities for growth. We expect to be in business with the league for years to come, and we’ll, of course, evaluate this deal as we would any deal with discipline and a focus on driving value for Disney shareholders. In that regard, we’re really looking forward to our year of the Super Bowl and all that it can bring to both football fans and Disney shareholders in the coming year.”
Disney changed the structure of the earnings call, requiring analysts to submit questions, rather than ask them live. Thus, Johnston’s remarks could have–and almost surely were –prepared beforehand.
The call was the first for new Disney CEO Josh D’Amaro, who took over from Robert Iger. D’Amaro, who previously oversaw theme parks and cruise ships, focused his remarks largely on the parks and movie side of the business during the call, leaving most references to the NFL and sports to Johnston.
For example, when it came to a macro take on ESPN and sports, it was Johnston who spoke.
“Turning to sports in totality, we view ABC as strategically connected when we think about ESPN and sports in general,” he said. “Sports is admittedly a separate discussion in that it is much earlier in its monetization transition, having just launched Unlimited [the new app] last year. However, when we look at the marketplace for streaming in our competitive set, Netflix, Prime Video, YouTube, and Paramount+ are all increasing their position in live sports. Sports rights are expensive and can be dilutive without scale, but we have scale in our most important market, the US, and the biggest sports media brand in the world, in ESPN. We view sports as a key part of our programming strategy, and ESPN as an important contributor to our distribution portfolio.”
The NFL can reopen its media deals under an opt-out provision in 2029 and 2030 for Disney’s ESPN (the league is pushing for even earlier contract redos). CBS’s purchase last year by Skydance triggered an early opt-out there, and the league is reportedly seeking at least a $1 billion, or about a 60 percent increase. Unfortunately, on Paramount’s earnings call this week, no analyst asked a question about this issue.
Next week, Fox reports its earnings. Fox CEO Lachlan Murdoch already said on their last call that Fox would “rebalance” its sports rights portfolio if it needed to find resources to keep the NFL. Fox is viewed as the most vulnerable to the coming NFL asks because it is far smaller and has reportedly triggered the DOJ investigation into the NFL’s media practices.
Investors were bullish on Disney earnings, which saw higher-than-expected revenues and profit, and streaming was picking up the declines in the linear business. The stock is trading up around 8 percent today, far outpacing the 1 percent rise in the Dow Jones Industrial Average. Notably, Disney said it has not seen a consumer dip from higher fuel prices.
Yes, this observation was made in the context of theme parks and cruises, but it also means consumers are buying Unlimited app subscriptions.
“Our direct-to-consumer strategy,” the company letter to shareholders proclaimed, “is already yielding results as revenue generated by our digital subscribers in Q2 more than offset secular declines in the linear subscriber universe.”
About Daniel Kaplan
Daniel Kaplan has been covering the business of sports for more than two decades. A proud founding reporter of SportsBusiness Journal, he spent the last four years at The Athletic.