Reports of ESPN’s Demise Have Been Greatly Exaggerated

Reports of ESPN’s Demise Have Been Greatly Exaggerated

ESPN analyst Lisa Salters comments on the Washington Wizards vs. Cleveland Cavaliers game at the Verizon Center in Washington, D.C. (Keith Allison/CC)
ESPN analyst Lisa Salters comments on the Washington Wizards vs. Cleveland Cavaliers game at the Verizon Center in Washington, D.C. (Keith Allison/CC)

[YAHOO.COM]

Disney (DIS) reported first-quarter earnings this week, and the numbers were fantastic across the board—well, almost. Profit was up 32% to $2.9 billion, an all-time quarterly record for the mouse house. It primarily has “Star Wars: The Force Awakens” to thank.

The force was not as strong with Disney’s television division, of which ESPN is the largest piece. Operating income at the division fell 6% (even though revenue rose 8%) and subscriptions to ESPN were down. But the screaming headlines (“ESPN’s woes gatecrash Disney’s earnings party,” “ESPN woes cast shadow”) misrepresent the situation just slightly. As Disney CEO Bob Iger said, “Predictions that many have made are more dire than they should be.” Yes, that is a self-serving assessment, but he is not wrong.

Lost in the headlines are some points that, while minor, collectively add up to a reasonable explanation for the channel’s numbers this quarter: Ad revenue fell at A&E, another network in Disney’s TV division (meanwhile, ESPN ad revenue grew 25%); costs at ESPN were higher than in the same quarter a year ago because of the timing of the College Football Playoff games, which in 2015 were played in Disney’s second quarter; and ESPN didn’t show NASCAR events for the first time, after NBC replaced it in 2015 as the TV rightsholder.

Disney CFO Christine McCarthy said that if not for the timing of the college football games, the loss of NASCAR, and the rising value of the dollar, operating income for ESPN this quarter would have grown as much as revenue did.

Sure, those may sound like excuses, and the fact that CEO Bob Iger addressed ESPN on the earnings call in as much detail as he did suggests that he’s rattled, and feels pressure to defend the network. But he said that since the quarter ended, ESPN has actually seen an “uptick” in subscriptions.

ESPN is facing the fight of its life as cord-cutting proliferates and as paid cable subscription is a harder sell than ever. No one disputes that. But the idea that the “worldwide leader in sports” is going away any time soon is silly. And there is a lot that ESPN is doing right.

Finish reading the story at ESPN.com.