ESPN Brings More Profit to Disney Than Entire Entertainment Division; Most Revenue Comes from Carriage Fees
New data from Axios shows why Disney doesn’t want to divest itself completely of ESPN, and why its position as a profit engine is precarious.
ESPN is a critical part of Disney’s corporate puzzle. The cable channel was rated as a “must-have” by 74% of cable subscribers according to recent data, and Disney is hard at work attempting to create a streaming version of the channel that won’t require a cable subscription, intended for launch by 2025.
- ESPN drives more annual profit than Disney’s entire Entertainment segment, including streaming, theatrical and TV.
- The channel pulled in more than $10 billion just in carriage fees in 2022.
- Disney is full steam ahead on its plans to emphasize streaming going forward and may be nearing a deal to sell its Indian operations.
All About the Benjamins
The importance of ESPN to Disney is hard to overstate, but a new report from Axios outlines just how much the company relies on the channel. The report shows that in 2022, ESPN brought in $2.9 billion in net profits just by itself. For comparison, Disney’s Entertainment segment (which includes Disney+ and Hulu, as well as its TV and movie studios and linear TV channels like ABC and FX) netted $2.1 billion in profits. None of this net gain came from Disney streamers, which still lose the company millions of dollars per quarter; CEO Bob Iger has told investors the company projects its streaming services will be profitable in 2024.
Most of ESPN’s revenues came from carriage fees ($10.79 billion in 2022) as opposed to advertisements ($4.4 billion), which indicates that while ESPN is bringing in good money for Disney, the revenues won’t translate when the company launches a streaming version of the channel in 2025. That explains why Disney is reportedly looking for multiple strategic partners to help it bring a streaming version of ESPN to market; without the huge influx of revenue it gets from cable TV carriage fees, Disney will have a big gap in profits unless it can make up that money elsewhere.
The gaudy numbers show why Disney thinks of selling ESPN as a last resort. It also shows why the company will have to charge a premium price when the ESPN streaming platform does launch (think $30 per month or higher). There’s simply no other way for the company to claw back the money currently brought in by cable carriage fees.
Global Problems Require Global Solutions
One of the measures Disney is considering as it tries to identify the key parts of its business is selling off its Indian operations. Initial reports seemed to suggest that the company wanted to divest itself of its Indian streamer Disney+ Hotstar, but just this week it was revealed that Disney may be nearing an agreement to part with its entire Indian division, including linear TV channels.
CEO Bob Iger identified Disney’s linear channels as not “core” to its operations over the summer, indicating that ABC and its cable networks could be sold. Media mogul Byron Allen has made it clear he's interested in purchasing some of these assets, but has indicated Disney is simply not ready to take the plunge and sell them quite yet.
As things currently stand, it appears that ESPN is one of the core assets that Disney will do whatever it can to hold onto. That makes sense, given that the channel brings in more profit than Disney’s entire Entertainment division, but whether Disney’s hopes of an ESPN streaming platform will be fully realized remains to be seen.
Disney+
Disney+ is a video streaming service with over 13,000 series and films from Disney, Pixar, Marvel, Star Wars, National Geographic, The Muppets, and more. It is available in 61 countries and 21 languages. It is notable for its popular original series like “The Mandalorian,” “Ms. Marvel,” “Loki,” “Obi-Wan Kenobi,” and “Andor.”