ESPN’s Financial Performance Revealed
Last month, Disney revealed the financial performance of ESPN for the first time, as part of its effort to explore strategic options for the network. According to the report, ESPN generated $2.9 billion in operating income in fiscal year 2022, excluding a nine-figure loss from Star India. This was a significant decline from its peak of $4.4 billion in one year between 2012 and 2018.
The report also showed that ESPN had 79 million subscribers in 2022, down from 100 million in 2010. The network has been facing challenges from cord-cutting, rising sports rights costs, and competition from streaming platforms.
Potential Partners For ESPN
BofA analysts estimated that ESPN could fetch an enterprise value of $24 billion, based on a multiple of 8x its estimated EBITDA of $3 billion in 2022. They also suggested that Disney could sell a 36% stake in ESPN, assuming it wants to retain a 51% majority interest and taking into account Hearst’s 20% investment.
The analysts identified several possible partners for ESPN, including:
- Distributors like Verizon and Comcast, who could benefit from bundling ESPN with their broadband and wireless services.
- Tech companies like Apple and Amazon, who could leverage ESPN’s content and brand to boost their streaming offerings and attract more subscribers.
- Sports leagues like the NFL and the NBA, who could gain more control over their broadcast rights and revenue streams.
The analysts noted that Disney would also benefit from partnering with an outside investor, as it would allow ESPN to focus on its high-growth streaming business, expand its product portfolio, and maintain the option of a spin-off with additional funding.
Challenges And Opportunities For ESPN
However, the analysts also acknowledged that finding a suitable partner for ESPN might not be easy, as the risk-reward trade-off is unfavorable at the moment. They pointed out that ESPN faces several challenges, such as:
- The uncertainty of the future sports rights landscape, as new entrants like Amazon and DAZN are bidding aggressively for major events.
- The difficulty of balancing its linear TV and streaming businesses, as it needs to maintain its cable affiliate fees while growing its direct-to-consumer revenue.
- The competition from other sports media players, such as NBC Sports, CBS Sports, Fox Sports, Bleacher Report, and Barstool Sports.
On the other hand, the analysts also highlighted some opportunities for ESPN to improve its performance and valuation, such as:
- Investing more in original programming and content creation, such as documentaries, podcasts, and shows.
- Expanding its international presence and reach, especially in emerging markets like India and China.
- Exploring new revenue streams and business models, such as sports betting, e-sports, and NFTs.
The analysts concluded that ESPN remains a valuable asset for Disney, but it needs to adapt to the changing media landscape and consumer preferences. They said that partnering with an outside investor could help ESPN achieve its strategic goals and unlock its full potential.
