Disney is scheduled to report fiscal fourth-quarter earnings on Wednesday, November 8. The family media company continues seeking out strategic partnerships for ESPN — valued at $24 billion — while also naming PepsiCo (PEP) veteran Hugh Johnston as its next CFO starting in December.
Morning Consult Media and Entertainment Analyst Kevin Tran explains why renewed broadcasting rights with the NBA could further bolster ESPN’s value under Disney.
“Rights increases are generally something that’s anticipated by the NBA, and something that is hoped for by the league, as well as league stakeholders,” Tran tells Yahoo Finance. “But I think that what’s going to be interesting for the next round of NBA rights negotiations is just how many more packages will be carved up.”
Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.
Seana Smith: Lots to unpack here ahead of these results. Let’s start with ESPN. We know that’s going to be a focal point here in the earnings results later this week. How do you see or how should Disney– how can it solve its ESPN problem?
Kevin Tran: Yeah. It’s a great question. With ESPN, previously, Disney has talked about the challenges with linear TV, in general. But sports, as a whole, still remains something of a valuable asset. And there’s been multiple buyers floated as potential suitors for the ESPN asset. But I think that as long as Disney is able to lock down valuable rights for ESPN moving forward, that will help generate interest that could help Disney.
So, for example, we know that ESPN has a broadcast deal with the NBA. And that rights deal is set to expire at the end of the 2024-’25 season. That will be something very important for Disney, as well as other companies to try and lock down a portion of games for.
Morning Consult research shows that NBA games are something that uniquely appeals to Gen Z. So in July, 40% of Gen Z adults said that they had a favorite athlete in the NBA, which our data showed was a share higher than that of any other major league or sport.
Brad Smith: That makes it amazingly critical to retain those rights. How much more do you think it could cost Disney, if they were able to do so?
Kevin Tran: Rights increases are generally something that’s anticipated by the NBA. And something that is hoped for by the league, as well as league stakeholders. But I think that what’s going to be interesting for these next round of NBA rights negotiations is just how many more packages will be carved up.
So it’s generally accepted or expected that during these next rounds of negotiations, the main broadcast partners, Warner Brothers, Discovery, as well as Disney may accept a smaller sliver of games to be able to still be prudent with the financial investment associated with locking down live games. And with potentially smaller packages going to Warner Brothers, as well as Disney, that opens the door for a player like an Amazon or another streaming player to carve out a streaming exclusive package in a way that we haven’t seen previously. Yahoo Finance