WatchESPN earning "tens of millions" in ad revenues

A spokesman for Disney has indicated that while multiplatform (mobile) advertising remains a relatively small portion of Disney's overall business, the WatchESPN app is already generating significant revenues.

"The [WatchESPN] app is an opportunity for [ESPN] to generate more advertising revenue, and they are in fact selling ads for the watch app, but the numbers, even though they are in the probably tens of millions of dollars at this point, they are still relatively small when compared to their total, both advertising revenue and their total revenue," Disney CEO Bob Iger told analysts on the company's second-quarter earnings call. "But we believe that they will continue to grow," he added.

 Disney also indicated that the upcoming WatchABC app could add a new revenue stream for ABC's owned & operated broadcast stations.

Overall, Disney reported earning $11.6 billion overall in the second quarter of 2013, up 4% from the same time last year.  The various cable networks accounted for $2.1 billion of that amount, a gain of more than 10%.  ESPN and A&E networks reported big increases in affiliate (carriage) fees and ad revenues, which offset declines in ABC Family networks.

Source -  Disney: WatchESPN generating "tens of millions" in ad revenues,  FierceCable

ESPN Rates and Revenues Update

Terms of Time Warner Cable's 2010 deal with ESPN are coming out, and are reaffirming it's dominance among cable network revenue producers.  The information came to light when revealed in court earlier this week as part of the Dish vs. ESPN lawsuit, and reflect the contract terms from September, 2010.  While the terms may have changed or been renegotiated, it's unlikely that the rates have been reduced.

  Under the 2010 agreement, the affiliation fee for ESPN would reach $5.40 per Time Warner subscriber per month by the middle of 2013, reaching $7 per subscriber (per month) in 2017, and $8 around 2020.  Looked at in terms of annual fee inflation, ESPN's price would increase about 6.5% annually.  Dish sought information about Time Warner's deal with ESPN because it's supposedly the lowest rates for ESPN carriage rights.  In other words, that's the minimum and the costs for other multichannel providers may well be higher.
  ESPN currently reaches about 100 million U.S. TV households, almost all through some multichannel service that's paying for the rights to carry ESPN.  Applying those per sub monthly fees over a year for 100 million subs, and you quickly generate some serious cash.  The math suggests that ESPN will earn at least $6.5 billion from subscription fees this year, at least $8.4 billion in 2017, and around $9.6 billion by the end of the decade.  And those numbers don't include earnings from advertising or what's generated by the other ESPN brands.  ESPN clearly generates a lot of revenues and cash flow, even within the huge Disney empire.  In fact, these suggest that the analyst's assumption in the previous post (2011 revenues just under $4 billion) are on the low side.
  ESPN is the golden goose of TV, the gift that keeps on giving, the stock you wish you'd bought 40 years ago.  (Pardon the cliches). 

  At this point, the only thing that seems likely to dramatically change ESPN's revenues track is if the FCC mandated that multichannel video program distributors offer access only through a la carte pricing - that is, consumers would have to order and pay for each network/channel separately.  At $5.40 per month, that would push ESPN's price to $64.80 a year - but if ESPN wanted to keep their revenues level, the subscription price under a la carte would need to be much higher, to compensate for those choosing not to subscribe to ESPN, and to make up for lower advertising revenues resulting from the smaller audience reach.  That's the downside to a la carte pricing - you wouldn't have to "pay" for channels and networks you don't want, but you'd have to pay a lot more for the channels you do want.  Not even ESPN is that valuable - so such a move would almost certainly result in a sizable and significant decline in revenues.

Source -  ESPN Set To Pass $7 Sub Fee In 2017, TVBlog

How big a deal is ESPN?

An earlier post on the DISH-ESPN conflict over rights fees got me wondering... Just how big a deal is ESPN?

  Some online checking suggests its quite a big deal for corporate owner Disney.  One financial analyst called ESPN "Disney's Reliable Cash Cow."  His look at Disney's annual reports suggests that the ESPN networks represent about 43% of Disney's operating income.
  According to the annual report, Disney's Media Networks business segment contributes about 46% of total revenues.  The next biggest sector, Parks & Resorts, contributes 29%.  Media Networks also reports the highest operating margin at 38%; in contrast, Parks & Resorts posts a 10% operating margin.  So looking at operating income, 67% comes from Media Networks.
  Looking within the Media Networks segment, Broadcasting networks account for 15% of operating income, and Cable networks 85%. comments from Disney executives and notes in the 2011 annual report suggest that ESPN accounts for roughly three quarters of Cable networks revenues.  If that same proportion holds true for operating income, that means that ESPN accounts for roughly 63% of Media Networks operating income, or about $3.93 billion (43% of total operating income of $9.13 billion).  Since the Cable Networks has an operating margin of 41% (much higher than any other Disney business segment), the estimates above are likely on the low side.
  And the Cable Networks and ESPN numbers are growing, with operating margins improving year-to-year, affiliate fees growing 9%, and advertising revenues up 14% (driven mainly by higher ad rates on ESPN's channels). Not to mention growing audience numbers.

This trend should continue. ESPN has contractual agreements with the world's greatest sports events, including NFL, NBA, and MLB games, Wimbledon, the Indy 500, NASCAR, college sports, and cricket. And to put the icing on the cake, ESPN recently renewed its contract to get the rights to 17 Monday Night Football games every year between 2014 and 2021. ESPN's great live sports and unmatched coverage should continue to reward Disney investors over the next decade.

That suggests ESPN will continue to be a reliable source for revenues, even with rapidly increasing rights fees for major sports that are resulting from the increasing competition from new & emerging sports cable networks.  (Fox, NBC, and CBS are all making major investments in content for their increased number of sports cable networks.)

Source - ESPN: Disney's Reliable, Cash Cow,  The Motley Fool