November 8, 2023

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We’re fully in the midst of reporting season for quarterly earnings, and one trend is immediately clear: Expectations are high that the four-month actors’ strike that helped shut down Hollywood production is nearing a resolution. Such a deal, following a recent pact with the writers’ union, would greatly ease the financial burdens on networks — pressures only partially addressed by leaning more into sports. Once Hollywood is fully back up and running, expect heavy cross-promotion between networks’ sports assets and entertainment programming.

— Eric Fisher [[link removed]]

Disney’s Iger Touts ‘Significant’ Interest In ESPN [[link removed]]

Ron Chenoy-USA TODAY Sports

Disney CEO Bob Iger said the company is in discussion with “a number of different entities” on an ESPN equity partnership — one of the most anticipated deals in all of sports media.

As the company reported its fiscal fourth-quarter earnings, Iger said negotiations are continuing with multiple entities on potential pacts that would aid Disney in offering a full direct-to-consumer version of ESPN.

“There’s significant interest out there. There are obviously complexities to it, but not hurdles that are so high that we can’t jump over them,” Iger said in an earnings call. “We’re continuing to explore it, and I would imagine we’ll have more to say about this in the coming months.”

That equity discussion, initiated [[link removed]] this past summer, has involved several major pro leagues [[link removed]], Amazon [[link removed]], and Verizon [[link removed]], among others, and is increasingly focusing [[link removed]] on the NFL and NBA.

Disney’s “inevitable” plan to offer that DTC version of ESPN also remains on track, with a target debut date of 2025.

“Our plan is to have a soft landing, which is continuing to make ESPN available as part of the [cable] bundle … and at the same time on a true a-la-carte basis, serving the consumer in both a traditional way and in a new way,” Iger said.

Bristol Results

Core financial results at ESPN showed broad-based growth during the quarter, which coincided with the start of pro and college football seasons.

Overall sports revenue for Disney — a key part of its new reporting structure [[link removed]] — was flat at $3.9 billion, but operating income rose 14%, due in part to lower programming, production, and marketing costs. Those results were part of two straight years of growth in domestic ESPN revenue and operating income.

ESPN+ subscriptions, which dropped [[link removed]] for the first time in Disney’s fiscal third quarter, resumed their growth pattern in the latest period, rising from 25.2 million to 26 million, though average monthly revenue per user dipped for a second straight quarter to $5.34.

The figures highlighted a more optimistic quarter for Disney in which revenue grew 5% to $21.2 billion, operating income rose 86% to nearly $3 billion, and overall direct-to-consumer losses decreased 74% from $1.48 billion in the same quarter a year ago to $387 million.

“While we still have work to do, these efforts have allowed us to move beyond this period of fixing and begin building our businesses again,” Iger said.

FROM THE NEWSROOM

Disney Mulls Equity Deal With NFL, NBA for ESPN

Sources tell Front Office Sports that talks are heating up between the Walt Disney Co. and the NFL and NBA about taking an equity stake in ESPN. For now, things remain wide open, and analysts say no deal has been signed.

Read more of this report by Front Office Sports senior writer Michael McCarthy here [[link removed]].

Sports A Bright Spot For Endeavor Amid Ongoing Turbulence [[link removed]]

Jason da Silva-USA TODAY Sports

Endeavor has no shortage of pressing issues, including a stock that is still down nearly 11% since its 2021 initial public offering, an actors’ strike cutting heavily into its Hollywood business, and new consideration [[link removed]] of going private.

But the company’s sports properties continue to be standouts on its balance sheet.

In third-quarter earnings released Wednesday, Endeavor said its owned sports properties segment — which includes its majority interest in WWE and UFC parent entity TKO Group Holdings, as well Professional Bull Riders — posted a 19.3% increase in revenue to $479.7 million. Endeavor’s sports data and technology segment, led by IMG Arena and OpenBet, grew 167.2% in revenue to $124.8 million.

Those numbers exceeded Endeavor’s overall 10% revenue rise to $1.34 billion and a net loss that deepened from $12.5 million to $116 million.

Endeavor CEO Ari Emanuel declined to offer any additional details on the potential privatization, which last month sent Endeavor shares upward in expectation of a deal. But he cheered TKO’s progress as its own company [[link removed]], as it reported a 32% increase in quarterly revenue to $449.1 million but saw net income fall to $22 million from a comparable $129.7 million a year ago.

“Over just the first frame of our integration efforts, WWE and UFC have set live-event records, announced [[link removed]] international expansion plans, increased [[link removed]] media rights fees, and confirmed [[link removed]] a significant new global partnership,” Emanuel said.

More TV Dealmaking

Less than two months after WWE completed a five-year, $1.4 billion rights agreement with NBC for the U.S. rights to SmackDown, the pro wrestling property made another big TV deal.

The latest move was a five-year pact [[link removed]] with the CW Network to show developmental circuit WWE NXT. The latest deal represented a 70% jump in rights fees compared to the prior deal with USA Network, reportedly [[link removed]] now worth in the neighborhood of $25 million annually.

For the CW, the deal adds to prior rights pacts with the Atlantic Coast Conference, NASCAR, LIV Golf, and “Inside The NFL.”

SPONSORED BY SPONSORUNITED

The Evolving World of Sports Sponsorships

Sponsorships [[link removed]] are essential in the business of sports.

Brands that align with sports entities get a platform to reach a massive and highly engaged audience and the goodwill that comes with associating with the most beloved entertainment properties in the world. On the other side, teams, leagues, and players see financial gains that keep their companies thriving and bring new eyes to sports at the same time.

Tune in on November 14 at 1 p.m. ET for our next virtual summit, the Future of Sports: Sponsorship [[link removed]], presented by SponsorUnited. Hear senior executives from major organizations, including Google, Angel City FC, Klutch Sports, Crypto.com, and more discuss the pivotal role that sponsors play across the entire business of sports.

Register here [[link removed]].

Yeezy Sales Generate $374M In Weak Quarter For Adidas [[link removed]]

Shutterstock

Adidas didn’t post a strong earnings report for its most recent fiscal quarter — but its association with controversial rapper Ye, formerly known as Kanye West, continues to stoke high interest among consumers.

Sales of the brand’s Yeezy shoes brought [[link removed]] in $374 million during Adidas’ third quarter. After initially parting ways with the rapper in the wake of his antisemitic comments, Adidas had more than $1 billion worth of Yeezy stock [[link removed]] remaining. The most recent report brings the total revenue from Yeezy sales past $800 million since the relationship ended.

Instead of destroying the remaining Yeezy merchandise, Adidas decided to continue selling it and donate the proceeds to anti-hate groups. The company has yet to decide whether it will sell [[link removed]] the remaining $320 million of stock next year or write off the inventory as a loss.

Overall, Adidas reported a significant decline in operating profits year-over-year, down 27.5% to $438 million — with the Yeezy saga a major factor in the business losses. Total revenue was down 6% to $6.41 billion, including a 10% dip in North American sales.

Adidas stock remains relatively flat, down less than 2% but not falling below $90, as of Wednesday afternoon.

Conversation Starters The White House hosted a roundtable [[link removed]] on college athlete rights — with plans to discuss revenue sharing, athlete organizing, and more. The NBA’s midseason tournament is underway — but its custom courts [[link removed]] have been stealing the show. Udonis Haslem has played with the Heat for two decades. Now, he’ll join Miami’s front office [[link removed]] as VP of Basketball Development. Editor's Picks Nike Sues New Balance, Skechers Over Flyknit Technology [[link removed]]by Doug Greenberg [[link removed]]Nike has previously sued Adidas, Puma, and Lululemon for the same infringement. Settlement Concludes Latest Challenge to MLB’s Antitrust Exemption [[link removed]]by A.J. Perez [[link removed]]The trial was slated to begin on Nov. 13 before the settlement was reached. France Joins Race To Host 2030 Winter Olympics With Official Bid [[link removed]]by David Rumsey [[link removed]]The IOC will determine a host country in 2024. Careers in Sports

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