Disney Chair & CEO Bob Iger said that ESPN+ now "boasts 3.5 million subscribers," up from 2.4 million in August, according to Paul Bond of the HOLLYWOOD REPORTER. Disney overall during Q4 '19 saw net income fall to $1.1B from $2.3B a year earlier, thanks in part to "costs associated with the creation of Disney+," which launches Tuesday. For FY '19, net income fell to $11.1B from $12.6B a year ago. The repercussions of the streaming wars will "not only impact Netflix but also the legacy TV industry as consumers cut their cable and satellite cords." Along those lines, ESPN has been "shedding subscribers for years." Nevertheless, Disney reported 20% year-over-year revenue growth in its cable networks unit and 26% growth in broadcasting (HOLLYWOODREPORTER.com, 11/7).
BALANCING ACT: CNBC.com's Sherman & Young note the Q4 results "put Disney in a bit of a dilemma when it comes to ESPN." The net is an "economic juggernaut" that generates about $10.3B in annual revenue. But it is a "non-factor for Disney+, the product by which investors will judge" the company going forward. Iger's plan "seems to be to thread the needle, preparing for a day when ESPN+ is a stronger product with popular sports rights, while not rocking the boat on ESPN's value for the next few years." One plan to boost ESPN+ while keeping ESPN steady "may involve the NFL Sunday Ticket." Sources said that several Disney execs "covet Sunday Ticket and would like to own the rights to it, bundling it with ESPN+." This "could happen in 2022 if Sunday Ticket ends its deal with AT&T's DirecTV." With Sunday Ticket, ESPN+ "could become a stronger product to bundle with Disney+, boosting subscribers for both streaming services." Iger has also "hinted at moving other sports from ESPN to ESPN+ over time" (CNBC.com, 11/7).
TAKING STOCK: Winview Exec Chair Tom Rogers said Disney “deserves its due that ESPN+ showed the kind of growth that it did” which was a “nice surprise.” Rogers asked why ESPN “beyond programming isn’t embracing that revenue stream” of legalized gambling. Rogers: “They are so well suited to be able to take advantage of that … (and) ESPN+ you’d think would be built for that” (“Squawk Box,” CNBC, 11/8). CNBC’s Jim Cramer said when listening to Disney’s earnings call, there was "probably maybe 45 seconds devoted to ESPN.” Cramer: “ESPN is now like what we used to think about with ABC. I remember when ABC started going down as an importance to ... Disney and it was amazing to me to think, ‘Well, that's impossible. If that goes down, it’s going to take the company down.’ Then we even stopped talking about (it).” Cramer: “I kept waiting for someone to say, ‘Well wait a second Bob, ESPN is falling apart,’ which by the way it is not. Instead he talked about how ESPN+ has Chris Berman and people love that. He answers all the objections” (“Squawk on the Street,” CNBC, 11/8).
