Disney’s $13B sports bet – Jan. 24, 2003

The cable group saw operating profits equal $1 billion, or almost as much as produced by the company’s parks and resorts and about three times as much as produced by its movie studios. 11 attack was still significantly affecting travel to the company’s theme parks. It enables you to get higher advertising rates as well. It signed football commentator John Madden away from Fox for its Monday Night Football crew before this year.

Even though the network had yet to sell out of Super Bowl time by Thursday, the company is seeing its biggest one-day payday with this Sunday’s game — a record average $2.1 million for the 61 30-second spots during the game, plus the pre-game and post-game shows.

For the just completed fiscal first quarter, which ended Dec. is wagering more on sports than any other company in history.

The implications of the sports strategy are not small even for a major media conglomerate. Its two broadcast deals with the NFL pay the league $1.1 billion a year over eight years for Monday Night Football on ABC, Sunday Night Football on ESPN, and three Super Bowls during the life of the deal.

“ESPN is a very viable and important brand generating important cash flow,” said Dixon.

“The $131 million from the Super Bowl doesn’t hurt,” he said. They might not be making money on a network basis, but they’re making money.”

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The company that has the broadcast rights to this year’s Super Bowl has more than $13 billion committed in various broadcast rights fees to major sporting events for its ABC and ESPN networks. For the fiscal year that ended Sept. It picked up the National Basketball Association rights when the league’s long-time broadcaster NBC balked at the losses caused by rights payments. 30, media networks accounted for about 38 percent of revenue and about a third of operating income. Meanwhile ABC posted a $36 million operating loss.

But Dixon believes that the rights fees have topped out and will soon start to decline. It paid top dollar when the Bowl Championship Series was set up to determine a college football championship. “But the total revenues from the Super Bowl this weekend will cover less than 1 percent of Disney’s commitments to sports rights.”

Sports was one of the few ratings winners for the networks, producing its only Top 10 show in Monday Night Football. It also is using the show to help launch its new late-night comedy talk show, “Jimmy Kimmell Live,” which has its debut after the game, hosted by a member of the Fox NFL pregame team of recent years.

“Disney has got a pretty good sense of valuation of those rights from a lot of dimensions,” said Jeffrey Logsdon of Gerard, Klauer, Mattison & Co. “You saw Fox (FOX: Research, Estimates) in 2002 took a better than $900 million charge due to losses from sports rights fees. Cable networks at the company, of which the ESPN family of networks is the lion’s share, now account for almost as much revenue as ABC. It’s a lousy strategy for ABC alone, but a great strategy for Disney.”

Walt Disney Co. You’ve yet to see Disney take a charge. But poor prime-time programming at ABC, which finished fourth in some key ratings measures, reduced both results.

Dixon said he believes that even with the success at ESPN that Disney is overpaying for some of the current sports rights deals.

The company has rushed in where other broadcasters now fear to tread. “Once you get all this programming, you begin to reinforce the brand. 31, analysts surveyed by earnings tracker First Call expect Disney’s earnings per share to be 15 cents, unchanged from a year earlier when the Sept. Its fiscal second-quarter earnings, which would include both the Super Bowl and Oscars, is expected to be 14 cents a share, up from 13 cents a year earlier.

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“The net result [of the subscriber fees] is that Disney is alone among the large media companies today in capturing disproportionate revenues from sports fans that enables them to pay higher sports fees than anyone else,” said UBS Warburg media analyst Christopher Dixon. Other analysts aren’t so sure that the company is overpaying.

The company has an advantage in competing with the other networks due to its ESPN networks, which in addition to advertising get per-subscriber payments from cable operators who can’t afford not to provide the all-sports networks to its customers.

NEW YORK (CNN/Money) -