Disney’s restructuring is giving investors their first look at ESPN’s financials.
The insight – which shows that ESPN’s revenues have been declining in recent quarters – comes as the parent company searches for a strategic investor for what has long been considered the crown jewel of the business.
Earlier this year, Disney announced a raft of changes to its business, which included not only massive cost-cutting and more than 7,000 job cuts, but also a restructuring of the company into three segments.
The company is now split into three divisions, one of which is an ESPN segment that includes the television network and the ESPN+ streaming service. This separated sports from entertainment, which now includes most of the streaming and media businesses. Parks, Experiences and Products make up the third division.
Disney is scheduled to report fourth-quarter earnings on 8 November.
On Wednesday, Disney reported that its sports segment, which includes smaller contributions from Star India, had total revenue of more than $13 billion for the nine months ended July 1, subtracting that amount from its entertainment segment revenue, where it was previously reported. ESPN generated more than $12.5 billion of this nine-month total.
ESPN’s revenues – its domestic business makes up the bulk of its revenues, with some coming from international – have been declining in recent quarters.
The network had about $4.06 billion in revenue in the third quarter, down from nearly $4.1 billion in the second quarter and about $4.4 billion in the first quarter, according to Wednesday’s filing.
The report shines a spotlight on ESPN, the cable TV network that has long generated big traditional TV fees and viewership for the company – even at a time when cable providers are losing customers at a rapid rate in favour of streaming.
ESPN has been the linchpin not only of Disney’s cable TV networks, but of the entire traditional package, and has been one of the highest paid TV networks. Last month, at the start of the football season, it sparked a carriage battle between Disney and cable provider Charter Communications, which ended with Disney channels being reinstated for customers and some getting access to its streaming services as part of the deal.
Part of the battle was Disney’s future plans for ESPN on streaming. Disney plans to make the ESPN channel a direct-to-consumer option outside the bundle for customers in the future.
Disney’s reorganisation had been part of the company’s response to activist investor Nelson Peltz and helped it fend off his firm, Trian Fund Management, for a few months. Last week, however, Trian increased its stake in Disney and now a second proxy battle is brewing.
