E$PN FOR $ALE

Disney reveals ESPN financials for the first time

Alexandra Canal
·Senior Reporter
Thu, October 19, 2023

Disney (DIS) officially revealed its financials for sports, which includes the revenue and operating income generated by its flagship sports network ESPN.

According to a new SEC filing, ESPN generated more than $16 billion in revenue and $2.9 billion in operating profit in Disney's fiscal year 2022, which ended on Oct. 1, 2022. The bulk of that revenue and profit came from its domestic business at $14.6 billion and $2.81 billion, respectively.

The results show how crucial ESPN is to Disney's overall sports strategy with total revenue for the sports segment, which also includes its Star India business, totaling $17.3 billion for full-year 2022, or 20% of overall revenue.

The company is currently seeking strategic partners, either through a joint venture or part ownership, to enable ESPN to launch a new direct-to-consumer (DTC) service.

The bulk of the sports segment revenue came from affiliate fees at $10.8 billion followed by advertising at $4.4 billion and subscription fees for ESPN+ at $1.1 billion.

ESPN typically has the highest carriage fees, or fees pay-TV providers pay to network owners to carry their channels, of all basic cable networks. According to an estimate from SNL Kagan, ESPN charges pay-TV operators $8 to $9 per subscriber.

Disney officially revealed its revenue breakdown for sports, which includes the revenue and operating income generated by its flagship sports network ESPN. (David Kohl/AP Photo, File) (ASSOCIATED PRESS)

The new breakout structure also showed sports revenue has trended down in the nine months ended July 1, 2023 — dropping 1.3% compared to the year-ago period.

Macquarie analyst Tim Nollen said that figure is "not great" but is better than standalone linear network revenue, which is down 8.7%. Overall, ESPN is less than 60% of total linear networks revenue, or roughly 30% of operating income.

"This update can help set some expectations for both an eventual ESPN OTT service's financials, and can help set some parameters around valuation of any possible asset divestitures, as Disney has acknowledged could be on the cards," he said.

In February, Disney CEO Bob Iger restructured the company into three core business segments: Disney Entertainment, Sports (ESPN), and Experiences.

At the time, Iger said the new strategic organization "will result in a more cost-effective coordinated and streamlined approach to our operations, and we are committed to running our businesses more efficiently, especially in a challenging economic environment."