Disney CEO Bob Iger said Tuesday with the release of the company’s latest earnings report that the company’s conversion to a streaming-based media business wasn’t going to be a “linear” path. He definitely wasn’t kidding.

The company’s results for its fiscal second quarter of 2024 showed just how mixed—and sometimes messy—of a situation that large-scale transition still is. Disney said that it posted a first-time quarterly profit for its direct-to-consumer operations, with the exception of ESPN, moving the company closer to its prior projection of full DTC profitability by the end of the fiscal year. But subscriptions for ESPN+ retreated for the second straight quarter and third time in four quarters, and now stand at 24.8 million—the level it was at early last year. ESPN+ also posted a $65 million operating loss for the quarter, more than overtaking the $47 million gain for the rest of Disney’s DTC businesses.

Disney sought to tag the ESPN+ subscriber decline to normal seasonality, particularly with the latest quarter following the conclusion of the 2023 college and pro football seasons. But before last summer, ESPN+ showed more than five years of uninterrupted subscriber growth. 

Amid that choppiness, Disney shares fell 10% in early Tuesday trading, rolling back a chunk of a broader gain of more than 28% so far this year. That retreat happened despite a 1% growth in revenues and a 30% jump in diluted earnings per share that beat analyst projections, as well as a recent win in a shareholder proxy battle. 

There was some other upside in the streaming results, however, as Disney said its average revenue per user for ESPN+ rose 3% from the first quarter to $6.30. 

In other developments from the Disney earnings release and call with financial analysts:

• Iger said he was “confident” of completing a long-term rights renewal with the NBA, essentially confirming recent reports that ESPN was advancing significantly on a new deal. He also lauded the league’s long-term trajectory, saying “this is a sports product with growth ahead of it, with great demographics. We feel really good about the potential package that we will end up with, basically enabling ESPN to continue to shine in the television sports business.”
• The CEO also touted the continued value of ESPN in a rapidly changing media landscape, and in particular lauded the power of the live programming it offers. “There’s nothing like ESPN in the sports world and their hand is solid for the next decade,” Iger said. 
• ESPN will be featured by the end of the year on a tile within Disney+, with it providing access to select live games and studio programming to U.S. subscribers. That presence with Disney+ also represents something of a precursor to the availability of a full DTC version of ESPN that will debut in the fall of 2025. “It’s a start of essentially conditioning the audience on Disney+ and Hulu that sports are going to be there,” Iger said. Once that full DTC version of ESPN arrives, ESPN+ will be embedded within the flagship product for those subscribers but also will still be offered separately. 

Password Crackdown

Disney plans a crackdown on streaming subscription password sharing, not unlike the similar process recently pursued by chief rival Netflix. Iger praised Netflix’s efforts in this area and called that company a “gold standard” in streaming. 

“We feel quite bullish about [the password effort],” Iger said. “Obviously, we’re heartened by the results that Netflix has delivered in their password sharing initiative, and believe that it will be one of the contributors to [financial] growth.”

Facing immense pressure to hold on to the company’s NBA rights, Warner Bros. Discovery CEO David Zaslav is now conveying a different tone regarding the league. 

In November 2022, Zaslav stunned both the sports world and investor community by proclaiming, “We don’t have to have the NBA.” Fast-forward roughly 18 months, and Zaslav’s discussion of the league is definitely not the same. 

“We continue to be in constructive negotiations with the NBA,” Zaslav said Monday at the Milken Institute Global Conference in California. “It’s a great league. The TNT team does a terrific job. And we love the NBA.”

There’s obviously plenty of subtext in what Zaslav was saying before, and still is now. Back in 2022, the NBA rights negotiations for the next term beginning in ’25 had yet to fully begin. Zaslav, meanwhile, would hardly be the first network executive to try to tamp down public expectations of a future rights deal, and he said then that WBD’s approach to the NBA would need to be “very disciplined” and a “deal for the future.”

Much has changed, however, since then. An exclusive negotiation period for both WBD and fellow incumbent rights holder ESPN has now expired, and recent reports point to Comcast’s NBC Sports making an aggressive effort to acquire an NBA rights package, along with separate efforts by ESPN as well as online retail and streaming giant Amazon.

WBD does have matching rights within its current NBA deal, providing a level of protection in these negotiations. But the possibility of the company losing its relationship with the league after 40 years has already seeped into rising questions about the future of TNT’s Inside the NBA and the status of star broadcaster Charles Barkley. WBD’s stock, meanwhile, has lost nearly one-third of its value so far this year, with a drop of nearly 10% last week driven in part by reports the network could lose the NBA rights. 

‘A Big Deal’

Zaslav also touted the power of sports, and the NBA particularly, as a uniting force in society, not unlike the bullish forecast for the league offered Tuesday by Disney CEO Bob Iger. 

“Sports [are] a big deal because … it’s a shared experience,” Zaslav said. “We’re all watching the [playoff game between] the Knicks and the Pacers tonight. We’re all watching the Super Bowl together. [Sports] reminds us that we have so much more in common than what differentiates us.”

The subject of the NBA rights is almost certain to arise when WBD releases quarterly earnings Thursday.