“ESPN is a differentiator for this company. It’s the best sports brand in television. It’s one of the best sports brands in sports. It continues to create real value for us. It is going through some obviously challenging times because of what’s happened in linear programming – but the brand of ESPN is very healthy, and the programming of ESPN is very healthy. We just have to figure out how to monetize it in a continuing, disrupting world. That’s it. But we’re not engaged in any conversations right now or considering a spinoff of ESPN.”
Returning Disney chief executive Bob Iger gave ESPN the dreaded vote of confidence during a call with Disney investors after its new structure was announced, whereby ESPN would in essence become a standalone company. While Iger sounds bullish on ESPN’s future within Disney, the key question is whether or not the sports broadcaster fits into the overall Disney strategy. While Disney is obviously known for some iconic characters and its theme parks, some of its recent acquisitions are completely focused on entertainment rather than sports. One of the reasons that Iger is back at the helm is due to the fact that Disney is hemorrhaging money via its Disney+ platform – mainly due to the company creating content for that platform.
How does this impact ESPN? Ultimately, it comes down to the value of sports rights. The fees for sports rights are going only one way and that is up. ESPN recently agreed deals across NFL, NHL, and Formula 1 in the US, committing billions to secure rights to those sports. While sports are the last bastion of ‘must watch TV’, the cost of keeping up with the sports arms race will be a consideration for a Disney company that saw their share price fall by 44% in the past 12 months, marking the worst year for Disney stock since 1974. While the ‘Streaming Wars’ are likely to dominate the wider discourse in the years ahead, with company consolidation already underway and likely to accelerate over the next few years, sports occupy a very specific place in this discourse.
Many companies have built their content strategy around sports. Warner Bros. Discovery has the global rights to the Olympics outside of the US and has recently entered into a joint venture with British broadcaster BT Sport, with consolidation likely to occur into a sale sooner rather than later. Rival Comcast owns the rights to the Olympics via NBC alongside Premier League rights in the US and in the UK via Sky Sports.
We have also seen the ‘Netflix of Sport’, DAZN, enter various markets with varying degrees of success. While DAZN has been propped up by majority shareholder Leo Blavatnik, the others mentioned have utilized sport as a means of driving viewers and therefore attracting advertisers and revenue from those brands. This is a fundamental issue with streaming – paying a premium for the service means viewers are not open to adverts, removing a major source of revenue for their owners and impacting directly on the bottom line.
ESPN has long been a cornerstone of the Disney offer, with the ESPN+ streaming service launching as means of moving the brand into the modern age. Given the focus on stopping the bleeding for the wider Disney+ service, though, one must question whether Disney is willing to commit the necessary resource to the ESPN service, especially given that Disney is now spinning the ESPN brand out into its own company.
With the domestic media rights deal for the NBA coming up for renewal at the end of the 2024-25 season, rights currently owned by ESPN and Turner Sports, owned respectively by Disney and AT&T, we will soon have an indication as to how Disney view the future of the ESPN brand. The NBA is reportedly looking for somewhere in the region of $75 billion for its next contract, bringing it in line with the NFL’s 10-year, $110-billion deal. Should Disney commit to securing the NBA rights, with competition expected from the likes of domestic broadcasters ABC and NBC, then we can take Iger’s words at face value. However, should Disney commit its resources to the Disney+ platform and lose one of their most high-profile sports rights deals, it would be a huge indicator that the ‘House of Mouse’ is getting out of the sports media rights sector.
The question then would be: how much is the ESPN brand worth and who will buy it? Would Amazon or Apple look to consolidate their position in the sports market or would one of the traditional giants like Comcast see the value in bringing one of America’s most recognizable brands into their portfolio?
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