On Disney’s Q4 earnings call late last week, CEO Bob Iger introduced ESPN’s new DTC streaming service, ESPN Plus (ESPN +). ESPN+ will launch next spring with a fully redesigned app; offering scores and highlights, the ability to stream the network’s linear cable channels and more than 10,000 live sporting events. Iger’s comments failed to clarify if the Bam-Tech powered service will require subscribers to maintain a cable TV subscription and no pricing information was disclosed; though it is expected that the service will cost less than Netflix.
Howie Long-Short: Disney (DIS) reported fiscal Q4 revenue declined 3% YOY (to $12.8 billion) and net income declined 1% (to $1.75 billion). The company’s media segment was hit particularly hard, with net income down 12% YOY (to $1.48 billion); the 6th straight quarter that figure has dropped. ESPN contributed to the decline with affiliate revenue growth unable to offset increased programming expenses (i.e. NFL, NBA broadcast rights) and a YOY loss in ad revenue. Despite the negative news, Iger remains optimistic about sports network saying, “the brand is strong. The quality of their programming is strong. There are always opportunities to improve, but we like where ESPN is these days.” Shareholders aren’t going to be happy with DIS’ worst calendar year performance since 2008 (-1.5% YTD), but there is no question that the quality of ESPN’s programming remains elite. Bowl season and the College Football Playoffs will showcase that.
Fan Marino: On October 31st, we wrote that ESPN was likely to lay off 40-60 employees after Thanksgiving. New reports indicate that number could now exceed 100, with SportsCenter on-air talent said to be among those who will be affected. ESPN’s primetime viewership (i.e. games) remains flat, but their total day audience declined 3% YOY during fiscal Q4; so, it isn’t like the existing line-up is setting the world on fire. As I’ve said before, if ESPN must cut costs; start with the on-air talent. The audience is tuning in for the game or the highlights, not the broadcasters or anchors.
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