Afternoon Edition

November 14, 2024

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As cable continues its inexorable descent, ESPN has become laser-focused on a direct-to-consumer platform—christened Flagship—that would reach consumers directly and potentially preserve its monetization model. During Disney’s earnings call today, CEO Bob Iger did not mince words, saying “this will be the best product the consumer has ever seen in sports.”

How crucial is Flagship to ESPN’s future, and how could it look to innovate?

— Eric Fisher [[link removed]], David Rumsey [[link removed]], and Colin Salao [[link removed]]

Bob Iger Calls ESPN’s Upcoming Flagship the Best Sports Product Ever [[link removed]]

Raymond Carlin III-Imagn Images

Expectations were already quite high [[link removed]] for the forthcoming, direct-to-consumer version of ESPN. Disney CEO Bob Iger took them into the stratosphere early Thursday in the company’s latest earnings call.

“In my opinion, this will be the best product the consumer has ever seen in sports,” Iger said of the streaming service, known broadly and colloquially as ESPN Flagship, in the call with industry analysts.

The streaming service, long targeted for a fall 2025 debut [[link removed]] to coincide with next year’s college and pro football seasons, stands as a critical endeavor for not only ESPN but all of Disney. Looking to navigate the broader media industry disruption that has hit the company hard, Disney intends to take ESPN’s content and combine it with a series of enhanced features, including multiscreen viewing, full integration with ESPN Bet, ticketing, merchandising, fantasy content, and advanced statistics, among others.

Artificial intelligence will also be used to provide a heightened level of personalization for each subscriber’s experience.

“When you apply technology to the presentation of sports, almost anything is possible,” Iger said. “This will be designed to serve the consumer in the most compelling way ESPN has ever served the consumer.”

Much of the oversight of the forthcoming product, however, will ultimately lie with the next Disney CEO. Iger is set to step down at the end of 2026, and board member James Gorman was appointed in August to lead a succession committee. A Wall Street Journal report this week said the search is now moving beyond a group of internal candidates [[link removed]] that has included ESPN chairman Jimmy Pitaro.

Broader Results

Disney, meanwhile, reported $22.6 billion in total revenue for its fiscal fourth quarter, up 6% from the comparable period a year ago and beating analyst projections. Operating income rose 23% to $3.7 billion, boosted significantly by the company’s entertainment division.

Perhaps more notably, the company also made a somewhat rare move to issue earnings guidance not just for its fiscal 2025 but the next three years, projecting growth through 2027, and by double-digit percentages in both 2026 and 2027.

“We have emerged from a period of considerable challenges and disruption well positioned for growth and optimistic about our future,” Iger said.

The sports division, led by ESPN, had a flat revenue figure of $3.9 billion, and operating income fell 5% to $929 million, with higher programming and production costs related to college football cutting into the unit’s earnings. On both a quarterly and annual basis, ESPN’s domestic operations remain profitable while its international activities act as a drag on the balance sheet.

ESPN+ subscriptions increased 3% to 25.6 million, restoring a growth pattern to that streaming product after it had spent nearly a year in essentially a flat position [[link removed]]. The product also posted its second straight quarter of profitability, and Disney’s overall DTC business posted $321 million in operating income, reversing a comparable $387 million loss in this period a year ago while growing revenue 13% to $6.3 billion.

A long-planned ESPN tile on Disney+, also bringing sports content to a broader set of consumers, is now set to debut Dec. 4.

DSG to Emerge From Bankruptcy: New Game Plan, MLB Deals in Place [[link removed]]

Detroit Free Press

One of the most tumultuous sagas in sports media has reached an endgame, at least for now, as Diamond Sports Group will exit bankruptcy after receiving court approval Thursday for its confirmation plan.

After 20 months of Chapter 11 protection, the regional sports network operator gained formal clearance to reemerge as a viable company. That path, at many points very much in doubt, became clear late Wednesday after Major League Baseball withdrew its objection to the restructuring [[link removed]].

“This is a pretty significant day for this company,” DSG attorney Brian Hermann said during the 90-minute hearing. “When we entered bankruptcy, I’d love to be able to tell you that I knew with confidence that we would reorganize this business. I thought we would, but I couldn’t tell for certain. We took a pretty twisted journey to get here, with a potential wind down as an option. But we are here to reorganize this business, and we are going to reorganize this business.”

Judge Christopher Lopez agreed, saying, “This case was no layup.” Ultimately, he found that DSG has a path back toward viability and called the company’s situation “a model” for how reorganization can happen, even in a tough situation with disagreeing parties. It also showed the U.S. Bankruptcy Court’s lean toward helping companies restructure themselves instead of dissolving wherever possible.

“Reorganization is a good thing,” Lopez said. “It saves jobs. It helps people see through tough times.”

Lopez also referenced the ability to still watch teams’ local games, adding, “It’s important if you’ve had a stressful day, and you want to root for your team, and go home and enjoy the game with your family.”

How Did It Happen?

There were several key building blocks in DSG’s elongated restructuring. Among them were a retooling, then a slashing of the company’s debt from nearly $9 billion at the start of its bankruptcy to about $200 million now, and a resolution of legal disputes with parent company Sinclair Inc [[link removed]]. DSG also struck deals recently with FanDuel and Amazon that give the RSNs a new name [[link removed]] and a big distribution pipeline [[link removed]].

Additionally critical was a fundamental reshaping of its programming lineup. The company is now tied to 13 NBA teams, eight NHL teams, and six MLB clubs, and each of those deals carries a pair of key components: revised rights fees and digital rights.

That pool of 27 clubs is down sharply from the 42 teams DSG aired in when it first purchased the RSNs in 2019—and shedding some of those deals came abruptly and with significant pain to those franchises and their leagues. But DSG now believes it has a properly structured business, and one much more aligned with a fast-changing and more digitally oriented media industry.

It’s also a far smaller business, as a recent analysis values the business at $600 million to $1 billion [[link removed]], a fraction of its $10.6 billion valuation from five years ago.

“Our plan is to transform the sports media industry,” DSG CEO David Preschlack said in his testimony.

MLB Retooling

Perhaps the most dramatic element in this case arrived the night before Thursday’s hearing where MLB not only withdrew its objection, but DSG also gained clarity that it will have revised deals for 2025 with at least six baseball teams: the Angels, Braves, Cardinals, Marlins, Rays, and Tigers. Rights talks are also still ongoing with the Royals.

“With one of the largest territories in professional sports, this agreement is an important step forward in creating more access to our games for our fans who live across Braves country,” said Atlanta president and CEO Derek Schiller of the team’s new deal.

This all marks a big shift after the league had spent the entire bankruptcy proceedings as one of DSG’s foremost critics. DSG even went so far as to invite some of the MLB clubs it initially dropped, including the Padres and Diamondbacks, to return to working with the company.

“These are incredibly different remarks than I thought I’d be making 24 hours ago,” said Andy Goldman, another DSG attorney, upon discussing the rapid run of baseball-related developments in the case.

After the hearing, MLB announced a new relationship with the Reds and will produce and distribute that team’s local games. Cincinnati was unable to strike a revised deal with DSG and sold its interest in FanDuel Sports Network Ohio back to the company for just $1. The team will join the Diamondbacks, Padres, Rockies, and most recently the Brewers, Guardians, and Twins [[link removed]] in the league-run structure.

A fair chunk of the hearing also involved an objection from the U.S. Trustee, which oversees the administration of bankruptcy cases, on largely procedural grounds relating to third-party consent. Lopez overruled that objection.

SPONSORED BY CHAMPS

Get Cozy This Season in Nike Tech

Champs Sports is all about Sport for Life, especially during the holidays. As the center for Sport Style, Champs Sports offers a curated seasonal lineup that’s ready for all of life’s moments. And if you’re searching for styles that double as the perfect gifts, look no further than the newest Nike Tech collection [[link removed]].

Featuring updated versions of two Swoosh classics—the Full-Zip Windrunner Hoodie and matching Joggers—the latest Nike Tech collection is all you need to spend quality time in comfort.

Give the gift of comfortable Sport Style with the new Nike Tech collection [[link removed]], available now at Champs Sports. Find it in store or online at Champs Sports [[link removed]].

NBA Cup Opener Sees Big Ratings Boost As Star Power Dominates [[link removed]]

Cary Edmondson-Imagn Images

A week after Steph Curry boosted NBA viewership [[link removed]], his former Splash Brother’s return to Golden State provided another huge ratings bump.

Night 1 of the 2024 Emirates NBA Cup, the second iteration of the league’s in-season tournament, drew an average of 1.93 million viewers Tuesday on TNT, up 71% versus last year’s comparable doubleheader.

The nightcap—which featured Mavericks wing Klay Thompson’s first game back in the Bay Area against Curry and the Warriors since a sign-and-trade in July—averaged 2.14 million viewers, an 84% increase from last year’s second game between the Clippers and then-defending champion Nuggets.

The first game of Tuesday’s slate featured the Knicks and Sixers, in what served as the season debut for 2023 MVP Joel Embiid, who returned from injury and a three-game suspension [[link removed]]. The game drew 1.71 million viewers, 58% more than last year’s Spurs vs. Thunder matchup.

The start of the NBA Cup [[link removed]] added intrigue to Tuesday’s matchups, together with the flashy, albeit polarizing, court designs [[link removed]], but the viewership increase once again shows that stars and storylines drive ratings for the league. Curry’s season debut last week against the Celtics on ESPN averaged 2.14 million viewers—the most since the opening week of games.

Before two positive ratings days featuring the Warriors, NBA viewership had dipped to start the year. Most games in the first two weeks saw double-digit percentage declines in viewership [[link removed]].

So far this season, TNT’s average viewership is at 1.8 million, a 3% decline compared to this point last year. ESPN has averaged just 1.31 million viewers through its first 12 games, down about 28% from 1.8 million last year.

The next slate of nationally televised NBA Cup games will be Friday on ESPN, with LeBron James and the Lakers visiting Victor Wembanyama and the Spurs, followed by the Grizzlies facing the Warriors.

STATUS REPORT Four Up

Gregory Fisher-Imagn Images

C.J. Stroud ⬆ The Texans quarterback leads jersey sales of all NFL players between April 1 and Oct. 31. Rounding out the top five [[link removed]] are Bears quarterback Caleb Williams, Chiefs quarterback Patrick Mahomes, Lions defensive end Aidan Hutchinson, and Commanders quarterback Jayden Daniels.

Indianapolis ⬆ The city will continue hosting the NFL Scouting Combine through 2026, under a new agreement announced Thursday. Indianapolis has hosted every combine since 1987, but it has had to compete with bids from other cities since 2021. The NFL has considered taking the combine on the road—as it does with the draft—but has yet to move it from its longtime home.

EA Sports NHL 25 ⬆ All six Professional Women’s Hockey League teams will be included in the game launching Dec. 5 [[link removed]]. The PWHL is coming off its inaugural season in 2024. The league is reportedly looking to add two new franchises by the 2025–2026 season [[link removed]].

Golden State Valkyries ⬆ The WNBA expansion franchise debuting next season has sold 20,000 season tickets for its inaugural season, the team announced Tuesday [[link removed]]. In July, the Valkyries became the first WNBA team to surpass 15,000 season tickets sold for one season [[link removed]].

SPONSORED BY GAINBRIDGE

Caitlin Clark Surprised With Parity Week Grant

Caitlin Clark was surprised [[link removed]] on Tuesday with the 22nd Parity Week by Gainbridge® grant while participating in The ANNIKA driven by Gainbridge at the Pelican Golf Club’s LPGA Tour event in Belleair, Fla.

Group 1001 president and CEO Dan Towriss presented a $22,000 grant to the Caitlin Clark Foundation during the State of The ANNIKA press conference. Parity Week by Gainbridge® has now awarded 22 grants and $172,000 in total funding to organizations around the country that support girls and women through sports and education [[link removed]].

The initiative is a collaboration between Gainbridge®, Parity, and the Women’s Sports Foundation®. Clark, a Gainbridge® ambassador, also played in the pro-am of the LPGA Tour event on Wednesday with world No. 1 Nelly Korda and LPGA Hall of Famer Annika Sörenstam. Learn more [[link removed]] about Parity Week.

Conversation Starters Barstool Sports announced on social media that it signed former NFL head coach Jon Gruden to a multiyear deal. Check it out [[link removed]]. Miami QB Cam Ward treated his offensive linemen to dinner and bought each player a custom chain [[link removed]]. Chicago Magazine recreated a scene from Ferris Bueller’s Day Off with Blackhawks star Connor Bedard at the Art Institute of Chicago. Take a look [[link removed]]. Editors’ Picks NFL Warns Teams About Political Game Day Rules [[link removed]]by Margaret Fleming [[link removed]]The league forbids displaying personal messages on game day. Why One WNBA GM Left for Unrivaled [[link removed]]by Margaret Fleming [[link removed]]She’s joining her Lynx star’s new league after 11 seasons in Minnesota. Are NBA, TNT Sports Negotiating Settlement of Lawsuit? [[link removed]]by Michael McCarthy [[link removed]] and A.J. Perez [[link removed]]Sources said a settlement that precludes a lengthy trial makes sense for both sides. Advertise [[link removed]] Awards [[link removed]] Learning [[link removed]] Events [[link removed]] Video [[link removed]] Podcast [[link removed]] Written by Eric Fisher [[link removed]], David Rumsey [[link removed]], Colin Salao [[link removed]] Edited by Matthew Tabeek [[link removed]], Or Moyal [[link removed]], Catherine Chen [[link removed]]

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