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Disney Continues To Bet Big On Its ESPN Sports Content Deals: Will It Pay Off For Shareholders?

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Disney Continues To Bet Big On Its ESPN Sports Content Deals: Will It Pay Off For Shareholders?

Walt Disney Co.'s (NYSE: DIS) ESPN segment has been known as the top sports media network for years. In order to keep the crown, Disney continues to shell out billions of dollars to land and renew sports media deals.

Will it continue to pay off for shareholders?

What Happened: ESPN announced new deals for baseball, football and soccer last week, a continuation of a busy five months of deals signed by the sports network.

ESPN announced a slimmed-down Major League Baseball (MLB) deal. The seven-year renewal keeps MLB content, such as Sunday Night Baseball, on ESPN through 2028. The deal includes a 30-game regular season, including 25 Sunday Night games, which is down from the current 90 games. ESPN will have the exclusive rights to Wild Card series for the MLB Playoffs.

La Liga, the top soccer league in Spain, will come to ESPN with a new $1.4 billion eight-year deal, making it the most lucrative overseas soccer deal signed for the U.S. It becomes a swap of sorts as ESPN did not renew Serie A rights. ESPN will be able to broadcast La Liga games on ESPN/ABC and also on its ESPN+ streaming service.

See also: How to Buy Disney Stock

ESPN signed a new $105 billion eleven-year NFL rights deal. At $2.55 billion annually, it is the most expensive of the NFL deals. The four networks that renewed deals spent $89.5 billion. Adding in the Amazon.com Inc. (NASDAQ: AMZN) deal for Thursday Night Football puts the NFL rights deals at $105 billion of those recently announced.

Other deals from Disney include the rights to bring NHL content back and have SEC basketball and football content beginning in 2024.

Related Link: If Sports Content Is King, Sinclair’s DTC Model Could Be A Home Run

Why It’s Important: The MLB deal gave ESPN rights to its highest viewed content, such as Sunday Night Baseball and the Wild Card games. The new deal lowers ESPN’s annual fees from $700 million to $550 million while still keeping the best content.

The NFL deal was a huge one for ESPN and Disney and could show the strength in negotiating power the entertainment giant has. The NFL had 71 of the top 100 most-watched broadcasts in 2020. While ESPN pays the most annually for the NFL deals, it keeps the highly successful Monday Night Football series and gains some flexibility in changing out matchups based on performance.

The biggest news could be the return of ABC into the Super Bowl rotation, as the last one it aired was in 2006. ABC will broadcast the Super Bowl in 2026 and 2030.

Now Disney will be able to enjoy the massive success of Super Bowl advertisements for which it can sell 30-second slots and also use the event to highlight its own programming in commercials and with a strong lead-in after the game.

ESPN+ had 13.8 million subscribers at the end of the first quarter, up 75% year-over-year. The average revenue per user was $4.55, up 7% year-over-year.

The continued sports rights deals could create great content for ESPN+ that can help the streaming platform grow and continue being a good add-on in bundles with Disney+ and Hulu.

DIS Price Action: Walt Disney shares are down 2.18% to $169.92 on Monday morning at publication.

(Photo: Oliver Cardell from Pixabay)

 

 

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