Just how profitable is ESPN to The Walt Disney Co.? For the first time, there’s a clear answer, and it shows just how lucrative the sports business is for the company.
Beginning next quarter, Disney will change how it reports its quarterly financials. The move comes after CEO Bob Iger’s reorganization earlier this year to “to restore creativity to the center of our business.”
The new structure will consist of parks and experiences, entertainment and sports (which is almost entirely ESPN, with Star-branded sports channels in India comprising a small portion). Whereas before ESPN was lumped in with all of Disney’s linear TV and streaming assets in the Disney Media and Entertainment Distribution division, and before that was folded into its other TV assets, including ABC and the Disney cable channels, it will now occupy its own division, led by Jimmy Pitaro.
According to an SEC filing Wednesday that outlines the new financial reporting structure, ESPN delivered $16 billion in revenue in fiscal 2022 (the company’s fiscal year ended Oct. 2022), and had profits of $2.9 billion.
For comparison, the new “entertainment” division, which includes Disney’s other TV networks and streaming services, as well as its film and TV studios, had revenues of $39.6 billion in fiscal 2022 … but profits of only $2.1 billion, thanks to Disney’s yet-to-be-profitable streaming business.
That lucrative profit margin for ESPN underscores why the company seems intent to keep it for the time being, and why it was so eager to cut a deal with Charter Communications and end its blackout last month.
Indeed, a deeper read of the finances show that most of ESPN’s revenues came from pay TV carriage fees ($10.1 billion), compared with advertising revenue of $4.4 billion. As cord-cutting has worsened, ESPN has bore the brunt of it for Disney, thanks to its lucrative carriage deals.
It’s worth noting that before Disney began spending billions on streaming, the filing shows that its traditional entertainment business was very profitable, and the “peak losses” at Disney+ pushed them down last year.
Now Disney is looking for partners to become minority shareholders in ESPN, with sports chief Jimmy Pitaro saying earlier this year the company wants “partners that we think can make the flagship product more compelling” as it plans a streaming offering. Hearst, an early investor in ESPN, continues to own a 20 percent stake in the channel.
