Good morning. Live sports has become a strategic battleground for media companies and technology platforms competing for consumer attention and advertising dollars. Disney CFO Hugh Johnston also sees it as a driver of customer lifetime value.
Johnston didn’t mince words about the state of live sports. “It’s just on fire,” he said during a question-and-answer session at the Goldman Sachs Communacopia + Technology Conference on Wednesday. “People just can’t get enough of it, and our advertisers can’t get enough of it.”
It’s a strategic bet Disney has been building for years: Live sports isn’t just a content category anymore; it’s connective tissue for Disney’s broader consumer ecosystem, from ESPN to Disney+.
In its fiscal Q3, Disney’s Sports segment, primarily ESPN, generated $4.5 billion in revenue, up 4% year over year, driven by subscription and affiliate fees and advertising, the company reported last month. Entertainment SVOD, which includes Disney+ and Hulu, grew 11% to $5.53 billion. Across the two segments, advertising revenue topped $2.8 billion, with sports advertising up 5% offsetting a 1% decline in Entertainment advertising.
That divergence helps explain why Johnston is leaning into sports. As general entertainment advertising softens, live sports remains a reliable draw for both viewers and advertisers.
“In terms of sports rights, we’re actually pretty well locked up through 2029 or 2030,” Johnston said. He cited “creative deals” with the NBA, NFL, MLB and NHL, giving ESPN its “base load” of marquee content for years.
But Disney (No. 44 on the Fortune 500) isn’t trying to obtain rights to every sports property. Johnston specifically cited Formula 1 and UFC as properties that had become too expensive, saying Disney chose to put its spending elsewhere. The message from the CFO: Own the rights that matter, but at prices that protect ESPN’s margins.
“Sports to drive ad dollars and engagement is absolutely a core part of Disney’s business,” Morningstar Senior Equity Analyst Matthew Dolgin told me. Sports also helps keep ESPN important to the pay-TV bundle and gives Disney a way to attract consumers to the ESPN app who don’t subscribe to traditional pay TV.
Integrating sports more deeply into Disney’s streaming ecosystem is more complicated, Dolgin said. Disney has begun putting some ESPN content on Disney+ and offers bundles combining ESPN, Disney+ and Hulu, aiming to boost overall streaming subscriptions and engagement.
Advertisers are sorting into winners and losers
Johnston also offered a glimpse into the advertising environment. Technology and AI advertisers are “doing very, very well,” along with political spending and health care. Consumer packaged-goods companies, restaurants and telecom carriers are facing more pressure.
The telecom example illustrates a broader trend: Advertisers are concentrating budgets around a small number of must-see events rather than spreading spending broadly. For Disney, whose ESPN strategy is built around those unmissable moments like College GameDay, the NBA Finals and Monday Night Football.
And that’s potentially a significant tailwind, as long as ESPN keeps landing the biggest games.
Sheryl Estrada [email protected]
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