SBJ Unpacks: Disney Earnings Hit Hard, But Streaming On The Rise

Another Tuesday in 2020, another typically bittersweet news day in the sports world.

The Indy 500 announced it’ll be held with no fans for the first time ever, while the U.S. Open’s player fields currently include 19 of the top-20 women, but no Rafa Nadal (or injured Roger Federer) on the men’s side.

Disney’s latest earnings announcement kind of summed things up for the industry these days: the company lost over $3 billion because of closed parks but now tops 50 million subscribers for eight month-old Disney+; in other words, it could have been worse.

-- Bret McCormick

ESPN+ A BRIGHT SPOT FOR DISNEY DURING TOUGH Q3

• The pandemic hit Disney hard in Q3 as it "continues to feel the impact of the coronavirus pandemic on sectors like its parks business," per CNBC. The company "took a $3.5 billion hit to its operating income from parks being closed during the quarter."
  
  
• Some of the only good news came on the streaming side, where Disney+ reported 57.5 million subscribers, and ESPN+ reported 8.5 million subscribers. Last November, ESPN+ was at 3.5 million subscribers. Its growth comes from being the home to UFC pay-per-view events and being bundled with Disney+ and Hulu.
  
  
• Overall, Disney revenues fell 40% to $11.7 billion, a number that "missed expectations, even if the adjusted profit was a pleasant surprise for investors," per Variety. Media networks, including ESPN, saw a 2% drop, to $6.56 billion. The direct-to-consumer and international group, which includes the streaming services, was the only one to see a revenue increase during the quarter, jumping 2% to $3.97 billion.
  
  
• Of note: Disney shares "initially fell on the report but rose more than 4% during the company’s earnings call as CEO Bob Chapek announced an exclusive movie release (Mulan) for Disney+ subscribers."

RACING INDUSTRY BEGINS TO FEEL PANDEMIC FALLOUT

• The motorsports industry has gotten back to holding events as quick as any sport, but today was a stark reminder that the pandemic will still have a major long-term impact on racing, writes SBJ's Adam Stern. In a couple-hour span, owner Bob Leavine announced that he had sold his NASCAR team -- confirming a resolution to talks first reported by SBJ last month -- and Indianapolis Motor Speedway made the unprecedented announcement that the Indy 500 would be held on Aug. 23 without fans. 
  
  
• Leavine explicitly blamed the pandemic for his decision; specifically, how it impacted both his Texas-based construction business and the sponsorship market. NASCAR teams rely on sponsorship for about 75% of annual revenue.
  
  
• Leavine: “We looked at our marketing people and we are going to be lucky to sell $50,000 worth (of sponsorship) for the rest of the year. Big companies are going bankrupt. They can’t invest in something that has no more return than what they are going to get during a pandemic. It was the perfect storm.”
  
  
• Meanwhile, Indianapolis Motor Speedway, a facility spread over 500 acres with around 250,000 grandstand seats, today cited increasing virus cases in the metro area in its reasoning for keeping fans away from this year’s Indy 500. Organizers believed that it could hold the event with reduced capacity. The race is by far the NTT IndyCar Series’ biggest annual cash cow, and the financial impact of not allowing fans even for one year could be felt for months -- if not years.

NEW ADVISORY GROUP AIMS TO HELP VENUES REOPEN IN COVID ERA

• Veteran sports and entertainment security executives focused on how safety, security and health interacts with the fan experience have launched a new trade advisory group, reports SBJ's Karn Dhingra.
  
  
• The Innovation Institute for Fan Experience was being planned before the pandemic, but COVID-19 triggered a faster timeline for the launch, said Dr. Lou Marciani, who recently retired as the director of the national center for spectator sports safety and security at Southern Miss. 
  
  
• The institute will provide “next-level” direction for industries that want fan attendance at live events “back to normal and whose very existence depends on how well they can safely gather fans.” Marciani said he plans to leverage his connections to industry experts and his association with Interpol’s Project STADIA program to hold round tables and discussions among stadium and arena managers about best practices and new technologies that will help them reopen their venues in the COVID era. 
  
  
• Membership will be open to sports and entertainment executives, teams, educators, risk management firms, architectural firms, and security firms. The institute’s founding fellows include executives from Ilitch Holdings, the Blue Jays, Spurs, 49ers and Ironman Group. 

ARAMARK'S LATEST EARNINGS REPORT SHOWS STARK REALITY

• Aramark’s revenue in food service operations for sports, leisure and corrections was down 71% year-over-year, sliding from $681.4 million in June 2019 to $194.3 million in June 2020, executives said during the company’s Q3 earnings call. 
  
  
• Aramark, which reduced senior executives salaries and furloughed others in April, said its losses in the sports, leisure and corrections sector were partially offset by “labor and product cost reduction, SG&A (Selling, General and Administrative Expenses) cost management and the outcome of client contract renegotiations,” writes SBJ's Karn Dhingra.
  
  
• Aramark’s sport business is still a question mark as fans have yet to return to major stadiums and arenas, although it still has the highest potential for growth, if the coronavirus pandemic subsides or there is a vaccine, executives told analysts on the call. 

WILL NFL SEE FLURRY OF PLAYER OPT-OUTS?

• NFL players "must make their decisions on whether to opt out" of the 2020 season because of concerns over the coronavirus by 4:00pm ET on Thursday, according to Mike Jones of USA Today. 
  
  
• Sources said that owners and the NFLPA "agreed to the terms" last night, and the player body was "notified of the arrangement shortly after." Originally, the NFLPA and owners had "agreed to set the opt-out deadline for seven days after the finalization of the modified Collective Bargaining Agreement." But with final details of the economic aspects of the deal "still unresolved, and as more than 40 players have opted out already, NFL owners wanted to nail down the opt out deadline."
  
  
• ESPN's Dan Graziano cited sources as saying that the NFLPA got the owners to "agree to a number of changes to the final language they feel are beneficial to the players." Changes include "better protection for players in the discipline process for 'high-risk' behavior away from the facility." Per the agreement, players "can be disciplined for engaging in activity that could increase the risk of spreading COVID-19, such as attending a concert or other indoor gathering with more than 15 people."
  
  

• NBC Sports Boston's Tom Curran writes "for players who’ve now seen what it’s like or who bristle at the rules now officially in place -- a fine system for 'refusal to weak mask, PPE or tracking device or maintain social distancing during team travel' for instance -- that Thursday deadline could be busy." As of today, more than 50 players have opted out of the 2020 season. Eight of them were Patriots -- "by far the highest number of opt-outs in the league (the Cowboys and Browns have the second most with three each)."

WORLD TEAMTENNIS RE-EVALUATING BUSINESS MODEL

• World TeamTennis CEO Carlos Silva said he didn’t know if his league “could have done anything any better” following the conclusion of a three-week “bubble” season at The Greenbrier resort in West Virginia. “This definitely changes World TeamTennis forever,” Silva told SBJ’s Bret McCormick. “It’s really a question about how our planning goes here in the next couple weeks and months to think about how we approach 2021.”
  
  
• Silva and WTT’s owners will look at this year’s unusual competition to see which aspects could be included in future years -- chiefly whether to have all the teams at one site again. All nine teams have traditionally had their own home venue. But Silva said returning to The Greenbrier could be a possibility, as well as moving to a touring model, similar to the Premier Lacrosse League.
  
  
• "All of us being in one location was amazing,” Silva said. “I know all of the players really appreciated not having to fly every day over the course of those three weeks. Will we do it exactly the same again? Probably not. But is there some sort of hybrid approach to it? Absolutely.”
  
  
• WTT administered over 800 COVID tests at a total cost of about $100,000, but returned no positive results. One player, Danielle Collins, was dismissed from the competition for breaking quarantine. 
  
  
• Silva said that sorting out expiring deals with CBS, ESPN and Tennis Channel is his top priority this offseason. WTT set viewership records twice this season on CBS, including a new 45-year high of 556,000 viewers for the championship match on Sunday. That number was just shy of ESPN’s viewership of live coverage of the Australian Open men’s final earlier this year (571,000), though that match aired at 3:30am ET. Silva also feels positively about sponsorship renewal discussions with DraftKings and Guaranteed Rate.

WORKING FROM HOME WITH MAESTROE SPORTS & ENTERTAINMENT’S GABBY ROE

• Maestroe Sports & Entertainment President Gabby Roe had never been a big fan of working remotely, but the past few months have definitely changed his mind. “We've been trusting technology -- Zoom and Slack in particular have been really, really well-utilized to keep our communication going internally, as well as with all of our clients,” he said. “I can very deeply say that we're more efficient now than we were when we were all commuting into an office together.”
  
  

• The Pennsylvania-based agency, just outside Philadelphia, primarily works with what Roe termed high-growth and emerging sports properties -- think cornhole, break dancing, ultimate frisbee, curling or axe throwing.
  
  
• “Most of them are not in the ticket sales economy as part of the lifeblood of their organization,” he said. “Most of them are in the televised sports and sponsorship economy. So, thankfully sports, whether they were repeats or live shows, were still happening.” He pointed to the American Cornhole League gaining popularity on ESPN and repurposed American Ultimate Disc League footage getting exposure on Fox Sports.
  
  
• With the landscape for the rest of this year still largely unknown, Maestroe is shifting most of its focus to 2021, and Roe isn’t worried about when large crowds will be the norm again. “That's not part of the business model,” he said. “So, as long as we are able to deliver really good digital and television content and package our partners and sponsors into it, the athletes can play and the sport can be watched by fans. The on-site audience isn't really a major factor for almost all of our sports properties.”
  
  
• Roe, a former SBJ "Forty Under 40" honoree, goes for a run most mornings between 6:00-7:00am and spends most of his workday on video calls from his second-floor guest suite. His three children -- two in college and one in high school -- are pretty self-sufficient these days, he said, so they don’t need much help from Roe and his wife when it comes to schooling. Roe has been rooting hard for the Union in the MLS Is Back Tournament and has been playing golf whenever he gets the chance. “I’ve played more recently, just because its outside, you can do it,” he said. “I’m not good at golf but I enjoy playing it.”
  
  
• Want to share what your work-from-home setup is like? Reach out to SBJ's David Rumsey.

Roe spends most of his workday on video calls from his second-floor guest suite

SUMMER PLANNING WITH RED BULLS' KARI COHEN

• With 2020 forcing everyone across the industry to shift their calendars around, SBJ's Kody Timmers is catching up with execs, talent, team personnel and more to see how they are making the most of an unprecedented summer. Below, Red Bulls General Counsel Kari Cohen dishes on how she's been spending her free time, what future vacation she'd most like to take and what she's reading and binge watching. 
  
  
  
  • Red Bulls' Kari Cohen:
    
    
    • Working on: "My Tom Seaver pitching skills -- I have yet to strike my 4-year-old son out. I'm also perfecting my performance of Anna Kendrick’s Cups 'When I’m Gone' scene from 'Pitch Perfect.'"
    • Future vacations: "Big Sur in California."
    • Reading: "White Fragility" by Robin DiAngelo.
    • Binge watching: Two shows: "Working Moms" and "Fauda."

Cohen has kept busy this summer by working on her wiffle ball pitching

SPEED READS

• Defending champion Rafael Nadal will skip the U.S. Open because of the coronavirus pandemic. Nadal explained his decision in a series of tweets. He wrote, "The situation is very complicated worldwide, the COVID-19 cases are increasing, it looks like we still don't have control of it." Nadal called sitting out the tournament scheduled to begin Aug. 31 in New York "a decision I never wanted to take," but added that he would "rather not travel." The current No. 1-ranked woman, Ash Barty, already had announced she would be missing the U.S. Open.
  
  
• Golf Channel’s Jaime Diaz called Commissioner Jay Monahan the "central figure" in the PGA Tour succeeding in its post-shutdown comeback and said he has "really been a leader." Diaz added, "Primarily he’s been a pioneer, because there is no playbook for this. As a result, everybody’s been watching him. The scrutiny has been huge throughout sports. How do you do it? How do you make your sport work in a pandemic? Jay has gone through a lot of trials and learned from a lot of them. He’s gained great respect.” He later said, “Jay Monahan has risen as one of the great commissioners”
  
  
• Knicks and Rangers parent MSG Sports is "cutting 50 jobs," or about 15% of its corporate staff. MSG Sports and MSG Entertainment -- both run by James Dolan -- "have been hit hard by the pandemic, which has shuttered live events and sports in the Big Apple since mid-March," per the N.Y. Post.
  
  
• Tiger Woods held his media availability this afternoon ahead of his Thursday tee time at San Francisco's Harding Park, and safe to say it was the smallest turnout ever for Woods heading into a major. 

NEWS YOU NEED FROM SPORTS BUSINESS DAILY

• During this crisis impacting the sports business, we want everyone to be up-to-date on the latest news and information. Select stories from Sports Business Daily are free, outside the paywall, for the foreseeable future. Below are today's headlines:
   
  
  • Patrick Mahomes Grows Portfolio, Becoming Equity Partner In BioSteel
  • MLS Eyes Resuming Season In Home Markets Later This Month
  • Big 12 Chooses Nine-Plus-One Model With Home Non-Conference Slate
  • Bettman Says Lack Of Positive Tests Reaffirms League's Plans
  • Cardinals Still Hope To Resume Season After COVID-19 Outbreak

SBJ UNPACKS -- THE ROAD AHEAD

• Check out the most recent editions of our "SBJ Unpacks" podcasts around COVID-19:
  
  
  • Mike "Doc" Emrick, the iconic voice of the "NHL on NBC," joins John Ourand to talk all things NHL restart.
    
    
  • Magic CEO Alex Martins on playing in the bubble and what could come next for his team and the NBA.
    
    
  • MSG Networks’ Kevin Marotta on the net’s new fan-engagement initiatives.
    
    
    

Something related to coronavirus and sports business catch your eye? Tell us about it. Reach out to Austin Karp (akarp@sportsbusinessjournal.com) and we'll share the best of it.