The Disney Sports JV Could Be in Trouble

I've been talking with someone who covers sports for a living and has insight into what might be happening with the Disney sports deals that are a not-insignificant part of their future stock valuation. Here are his thoughts:

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Where I think this ties in with Disney goes directly to the potential issue of Disney having Hulu and ESPN. There is a lot in the periphery, but in short the most business savvy team owners are selling at a time when a massive injection of cash is on the way. There’s been a steep decline in viewership except in the WNBA. Caitlin Clark should be thanked every day for that. Mark Cuban made an odd statement, “we can see the landscape of sports changing” but the new deals should be reassuring.

The proposed “Sports Hub” combining multiple broadcasters seems to be what started the scrutiny of Disney’s potential legal trouble. The Celtics just won the championship and are now apparently up for sale. The Pegulas in Buffalo are looking at divesting away from their sports interests as well. Part of this is because Comcast/Universal kicked Bally’s off of their service. The NBA is scrambling to get those markets onto broadcast. Disney owned all those markets under Fox and sold them for 8 billion so the name change from Fox to Bally hit.

Streaming just isn’t getting the numbers it needs to leave broadcast altogether. Iger has said in the past 3 or 4 calls that ESPN wants to be DTC in 2025. Valiant has the numbers on proposed sub costs, but it could be $50 just for ESPN and they would lose cable/dish subscriber revenue (just like Disney pulling content off of Netflix and any other service but their own).

It’s not sustainable, and the hit could be quick. IF Disney gets the Bell Telephone treatment of the 80’s, something has to go. 

This could put them in a spot where they have to choose between Hulu and ESPN. That would put nearly every NBA, NHL and MLB market in some sort of limbo. Residents of MN are asking for the Governor to step in because comcast users have missed over 50 MLB games already. There is a bad feeling when owners who have good cash flow will drop out. I know how complicated this sounds, but the timing of it all together is putting sports in a weird space.

I don’t know how the proposed “hub” from Hulu combining all those broadcasts didn’t raise flags along the way. The owners like Cuban aren’t conservative at all. The current leadership is very friendly to Iger so to have this opened up now is even more odd. So much hangs on the success of ESPN and Disney’s Hulu acquisition. Comcast just pulled a broadcast package from TNT so ESPN had to pay extra to keep the NBA “gold” rights.  The natural move for the 20 or so markets losing their regional provider would be for ESPN to step in and get them back. The optics are terrible for that. If there’s a change in leadership in Washington that wouldn’t make the odds better in the ability to keep all those assets together.

“Behind the Line” sports does a great job on the business side of what’s happening at ESPN. That host would be a great interview on what’s happening (calls himself KC, I think he’s based in Louisiana). Disney’s acquisitions may have done a good deal of damage and they may have trouble keeping ESPN. Something has baseball, basketball and hockey all looking at options and owners looking at the exit.