In a challenging turn of events for Disney-owned ESPN, the latest financial data paints a grim picture for the sports network, with profits plummeting by a staggering 20 percent in the first nine months of this year. Despite implementing cost-cutting measures, including a wave of layoffs, ESPN continues to grapple with financial hardships.
According to a report on Disney’s financials, revenues for Disney’s sports division for the first nine months of fiscal 2023 amounted to $13.2 billion, reflecting a 1.3% drop compared to the same period in FY 2022 when it stood at $13.37 billion. Furthermore, Disney’s sports media business reported an operating income of $1.48 billion as of July year-to-date, significantly down from $1.85 billion during the same time frame last year.
The network’s struggles have been further compounded by the recent round of layoffs, which saw numerous high-profile personalities shown the door. Prominent figures such as Jalen Rose, Vince Carter, Keyshawn Johnson, Max Kellerman, Steve Young, Suzy Kolber, Rob Ninkovich, Chris Chelios, and Neil Everett, among others, found themselves on the chopping block.
One notable factor influencing the downturn of traditional television networks like ESPN is the phenomenon of “cord-cutting.” Millions of consumers are opting to abandon their cable packages in favor of streaming services, leading to a precipitous drop in cable TV viewership. In July 2023, broadcast and cable TV usage in the U.S. fell below 50 percent for the first time.
Simultaneously, the costs associated with sports broadcasting have been on the rise, even as viewership and revenues decline. ESPN, for instance, was compelled to shell out nearly $3 billion for the rights to broadcast Monday Night Football, playoff games, and other football-related events. This presents an existential threat to the sports entertainment industry as we know it.
The American Tribune recently reported on Disney’s financial woes, with the entertainment giant hemorrhaging an astounding $4 million every day and an annual loss approaching $1.5 billion. Additional reports suggest that the current CEO, Bob Iger, who returned to the company to rejuvenate its performance, is feeling “overwhelmed and exhausted” by the monumental task of rebuilding the company.
In recent years, Disney has struggled with disappointing box office results for its theatrical releases, massive losses incurred by its Disney+ streaming service, and dismal park attendance figures in the face of skyrocketing inflation.
Since taking the helm at Disney once more, Iger has spearheaded cost-cutting initiatives to the tune of $5.5 billion, resulting in mass layoffs affecting approximately 7,000 employees. Year to date, Disney’s stock price has plummeted by roughly 5 percent, while the S&P index has surged by approximately 13 percent. Disney’s investors are increasingly questioning Iger’s ability to steer the company in the right direction.
Prominent activist investor Nelson Peltz has been vocally critical of Disney’s financial management in recent years, describing the company’s performance as “leading to a rapid deterioration in its financial performance from a consistent dividend-paying, high free cash flow generative business into a highly leveraged enterprise with reduced earnings power and weak free cash flow conversion.”
“Disney missed revenue projections and witnessed a substantial drop in Disney+ subscriptions, further compounding the woes of the beleaguered entertainment company. With ‘Haunted Mansion’ becoming a disastrous flop and declining park demand, prospects do not seem to be improving any time soon,” remarked Outkick.
Additionally, Disney has faced criticism for its perceived inclination to infuse a “woke” agenda into its content, a move that some believe may have exacerbated its financial troubles as consumers turn away from such content.
As ESPN confronts this challenging landscape, it remains to be seen how the network will navigate these turbulent waters and attempt to regain its footing in the competitive world of sports entertainment.
