ESPN yet to open new rights negotiations with NFL

The call was the first for new Disney CEO Josh D’Amaro, who took over from Robert Iger. D’Amaro, who previously oversaw theme parks and cruise ships, focused his remarks largely on the parks and movie side of the business during the call, leaving most references to the NFL and sports to Johnston.

For example, when it came to a macro take on ESPN and sports, it was Johnston who spoke.

“Turning to sports in totality, we view ABC as strategically connected when we think about ESPN and sports in general,” he said. “Sports is admittedly a separate discussion in that it is much earlier in its monetization transition, having just launched Unlimited [the new app] last year. However, when we look at the marketplace for streaming in our competitive set, Netflix, Prime Video, YouTube, Paramount+, all of them are increasing their position in live sports. Sports rights are expensive and can be dilutive without scale, but we have scale in our most important market, the US and the biggest sports media brand in the world, in ESPN. We view sports as a key part of our programming strategy, and ESPN as an important contributor to our distribution portfolio.”

The NFL can re-open its media deals under an opt out provision in 2029, and 2030 for Disney’s ESPN (the league is pushing for even earlier contract redos).  CBS’s purchase last year by Skydance triggered an early opt out there, and the league is reportedly seeking at least a $1 billion, or about a 60 percent increase.  Unfortunately on Paramount’s earnings call this week no analyst asked a question about this issue.

Next week Fox reports its earnings. Fox CEO Lachlan Murdoch though already said on their last call Fox would “rebalance” its sports rights portfolio if it needed to find resources to keep the NFL. Fox is viewed as the most vulnerable to the coming NFL asks because it is far smaller, and has reportedly triggered the DOJ investigation into the NFL’s media practices.

Investors were bullish on Disney earnings, which saw higher than expected revenues and profit, and streaming picking up the declines in the linear business. The stock is trading up around 8 percent today, far outpacing the 1 percent rise in the Dow Jones Industrial Average. Notably Disney said it has not seen a consumer dip from higher fuel prices.

Yes, this observation was made in the context of theme parks and cruises, but it also means consumers are also buying Unlimited app subscriptions.

“Our direct-to-consumer strategy,” the company letter to shareholders proclaimed, “is already yielding results as revenue generated by our digital subscribers in Q2 more than offset secular declines in the linear subscriber universe.”

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