How Worthwhile Is ESPN? Disney Breaks Out Figures for First Time

Simply how worthwhile is ESPN to The Walt Disney Co.? For the primary time, there’s a transparent reply, and it reveals simply how profitable the sports activities enterprise is for the corporate.

Starting subsequent quarter, Disney will change the way it stories its quarterly financials. The transfer comes after CEO Bob Iger’s reorganization earlier this 12 months to “to revive creativity to the middle of our enterprise.”

The brand new construction will encompass parks and experiences, leisure and sports activities (which is nearly solely ESPN, with Star-branded sports activities channels in India comprising a small portion). Whereas earlier than ESPN was lumped in with all of Disney’s linear TV and streaming belongings within the Disney Media and Leisure Distribution division, and earlier than that was folded into its different TV belongings, together with ABC and the Disney cable channels, it is going to now occupy its personal division, led by Jimmy Pitaro.

In keeping with an SEC submitting Wednesday that outlines the brand new monetary reporting construction, ESPN delivered $16 billion in income in fiscal 2022 (the corporate’s fiscal 12 months ended Oct. 2022), and had earnings of $2.9 billion.

For comparability, the brand new “leisure” division, which incorporates Disney’s different TV networks and streaming companies, in addition to its movie and TV studios, had revenues of $39.6 billion in fiscal 2022 … however earnings of solely $2.1 billion, because of Disney’s yet-to-be-profitable streaming enterprise.

That profitable revenue margin for ESPN underscores why the corporate appears intent to maintain it in the meanwhile, and why it was so keen to chop a cope with Constitution Communications and finish its blackout final month.

Certainly, a deeper learn of the funds present that the majority of ESPN’s revenues got here from pay TV carriage charges ($10.1 billion), in contrast with promoting income of $4.4 billion. As cord-cutting has worsened, ESPN has bore the brunt of it for Disney, because of its profitable carriage offers.

It’s price noting that earlier than Disney started spending billions on streaming, the submitting reveals that its conventional leisure enterprise was very worthwhile, and the “peak losses” at Disney+ pushed them down final 12 months.

Now Disney is on the lookout for companions to turn into minority shareholders in ESPN, with sports activities chief Jimmy Pitaro saying earlier this 12 months the corporate needs “companions that we expect could make the flagship product extra compelling” because it plans a streaming providing. Hearst, an early investor in ESPN, continues to personal a 20 p.c stake within the channel.