ESPN’s Future at Disney Uncertain

Will ESPN’s audience follow them to a streaming subscription service?

ESPN may no longer be the large investment Disney once thought it was. According to recent reports, the sports network’s profits are down, and Disney is debating whether to sell a stake in the company.

In the first six months of their fiscal year, ESPN earned Disney $14 billion in revenue and $3 billion in profit, according to The New York Times. While those numbers may be significant profit for some companies, $3 billion in revenue is a 6% decrease from the year prior, and a 29% decrease in profit. Additionally, it has brought in more than $2 billion annually in advertising.

However, while the company is still bringing in billions, its viewership has drastically decreased. In 2013, more than 100 million households got ESPN as an option due to their cable viewership, and that number has dropped to 70 million today. By 2027, the amount of homes that will subscribe to cable will shift to 50 million.

Iger has also gone back and forth with the idea of selling parts of ESPN, or selling ABC and FX. This could help Disney save some of their cashflow, as well as hopefully make ESPN profitable again. However, we may not know until Disney releases their financials.

“The company is facing a lot of challenges, some of them self-inflicted. We’ve gotten a lot done very quickly, significant cost reductions and significant realignment of the company. But we’re dealing head-on with some of our biggest challenges,” Bob Iger said of the matter.

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In order to help save the company, Bob Iger has roped in two of Disney’s former executives to try to get the company back together. Both Tom Staggs and Kevin Mayer are back to help find partners for ESPN and help prepare for the company’s shift to streaming, Forbes shared. Both Staggs and Mayer have previous relationships with dealmakers that can help leverage ESPN into an easy buy. With the two execs coming back on board, shares jumped 3%.

Another way that the company is working to save itself is by pivoting to a streaming service. With the streaming service, they still intend to keep their linear channels. Should the streaming service go live, it would help bring high-ticket items like football and basketball to a wider platform. Currently, they offer ESPN+ at $9.99 per month, or it is available as a bundle with Disney+ and Hulu. However, they only offer sports like soccer, combat, baseball, tennis or golf. Those items alone may not drive someone to their current service.

However, some are worried that the shift to streaming and linear TV could be the end of cable TV. During the first quarter in 2023, 2.3 million US households cancelled their subscription, and the amount of households with cable TV is at its lowest in three decades, Forbes shared.

While it’s on the horizon, the new service may not be out until 2025. Iger has shared with investors that they need to wait until the service makes sense. However, it’s unclear when it would make sense. Disney lost 4M subscribers during their last quarterly report, even with ESPN+ gaining subscribers.

Insider Take

Like many legacy companies, Disney has had a rough time coming out of the pandemic. They’ve had losses and layoffs, and Bob Iger has returned to help save Disney and its assets from extinction. Will a shift in strategy help return things to normal? Will ESPN’s audience follow them to a streaming channel?

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

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