The Walt Disney Company revealed its financial results for the second quarter of fiscal year 2024, which keeps the company on track to garner more than $8 billion of free cash flow for the year. This windfall was driven by a profitable entertainment direct-to-consumer business that Disney hopes will drive future growth for the company. As a whole, quarterly revenue equated to $22.08 billion with total segment operating income of $3.85 billion. Disney began separating financial results for different segments of its business following a strategic restructuring last fiscal year, which includes the sports sector with ESPN.
For the three months ending on March 30, 2024, revenue for ESPN rose 3% year-over-year to $4.21 billion. Yet its operating income registered a year-over-year loss of 9% to $799 million, something Disney attributes to diminished advertising revenue and more programming and production costs for the College Football Playoff in airing additional games. Moreover, Disney attained lower affiliate revenue in this category because of fewer subscribers; however, those losses were partially offset by increases in contractual rates.
Within the quarter, ESPN registered several viewership milestones across its portfolio of live sports rights. The network’s divisional playoff game between the Houston Texans and Baltimore Ravens averaged 32.4 million viewers, making it the most-watched NFL game in the history of the network dating back to 1987.
Moreover, ESPN’s presentation of the NCAA Division I Women’s Basketball Tournament broke several records, including a championship game between South Carolina and Iowa averaging 18.7 million viewers across ABC and ESPN. This represents the most-viewed college basketball game on record and the best basketball audience for ESPN since 2017. The tournament as a whole averaged 2.2 million viewers across ESPN platforms, which is up 121% from the 2023 iteration of the tournament.
The Walt Disney Company (ESPN/ABC) has reportedly reached a framework of a deal to retain media rights to the NBA for $2.6 billion annually. While no details are finalized, John Ourand of Puck News reports that the media conglomerate is prepared to forsake its Friday night national NBA games and keep the NBA Finals. Earlier in the year, the company renewed its media rights for the College Football Playoff and extended its broadcast deal with the National Collegiate Athletics Association for eight more years.
Disney is preparing to launch two direct-to-consumer options implementing ESPN, the first of which will be a joint streaming venture with FOX Corporation and Warner Bros. Discovery. The company will then introduce an ESPN direct-to-consumer streaming platform, currently known as “Flagship,” in either August or the fall of 2025, as previously announced by Disney chief executive officer Bob Iger.
During Disney’s quarterly earnings call on Tuesday, Iger stated that ESPN+ would continue to exist as its own service even after the launch of the network’s direct-to-consumer platform. Paid subscribers for the quarter declined by 2% year-over-year to 24.8 million, while average monthly revenue per paid subscriber augmented 3% to $6.30. Disney correlates the rise in the latter metric to an increase in retail pricing and higher advertising revenue.
Additionally, an ESPN title will be made available within the Disney+ streaming service by the end of the year. This functionality will grant access to “select live games” along with studio programming that can be watched within the Disney+ interface for all U.S. subscribers. Upon its launch, the ESPN Flagship streaming service will also be part of the Disney+ bundle. The company narrowed its year-over-year direct-to-consumer losses for the quarter by 97% to $18 million.
Within his dialogue, he explained that the network is pivoting “toward digital without abandoning linear” and would begin to condition viewers that sports programming would be on Disney+. Linear network revenue for The Walt Disney Company was down by 8% to about $2.77 billion. The company registered operating income of $752 million in the category, a 22% decline from the fiscal second quarter last year.
