As ESPN and parent company Disney prepare to go through several major transitions in the coming year, the sports media giant took a sizable financial hit during the most recent quarter and is projected to have more in the coming year.
Disney’s sports segment, consisting mostly of ESPN, reported $4.9 billion in revenue for its fiscal first quarter, up 1% from the comparable period last year. Operating income, however, fell 23% to $191 million. Disney said early Monday that last fall’s bitter carriage fight with YouTube TV, which included a 15-day blackout on the No. 4 U.S. pay-TV distributor, created a drag on sports segment operating income of about $110 million.
That figure, representing more than $7.3 million per day during the blackout, is well in excess of previous estimates of a weekly $30 million loss from the dispute.
The future outlook has challenges, too: Disney reported that the company’s fiscal 2026 outlook includes a further decline in sports segment operating income of about $100 million due to higher rights costs. That expense could widen over the long term if the NFL opts out of its current domestic agreements, including with ESPN, as it’s expected to do.
Those sports-related issues stood in contrast to a quarterly report that beat analyst expectations overall. Disney reported total quarterly revenue of $26 billion, up 5%, and operating income that fell 9%, less than projected, to $4.6 billion. In particular, Disney’s experiences segment that includes its theme parks posted record-level revenue and operating income.
Despite the financial choppiness, Disney also lauded a sports programming calendar that included a College Football Playoff title game that drew more than 30 million viewers, the event’s second-best audience ever, and an ESPN record audience of 38 million for a recent NFL divisional playoff game between the Texans and Patriots.
Future Issues
Disney executives, meanwhile, addressed several factors that will reshape much of the company over the coming year.
- NFL deal: ESPN closed a large-scale transaction with the NFL that gives the league a 10% stake in the sports media giant, while NFL Network will be folded into ESPN and become part of the network’s direct-to-consumer offering. Disney said the NFL agreement has an estimated fair value of about $3 billion, suggesting a roughly $30 billion value for all of ESPN. After July 2034, if certain performance targets are hit, ESPN has an option to reacquire the NFL’s equity in exchange for a 10-year security at 70% of the then-fair market value of the NFL’s interest in ESPN. Additionally, the NFL has an option at a similar time, to acquire up to an additional 4% in ESPN at a purchase price equal to 70% of the then-fair market value.
- Super Bowl: The 2026 NFL season will culminate with Super Bowl LXI next February in Los Angeles, and ESPN has already planned an elaborate handoff for what will be a landmark event for the network. “This is a huge opportunity for ESPN,” said Disney CEO Bob Iger, referencing the upcoming game and the enhanced NFL programming coming with the league deal.
- Succession: Disney did not offer any specifics Monday on who will succeed Iger to lead the company, even as speculation rises around the topic. Iger’s current contract expires Dec. 31, 2026, and he is expected to hand over day-to-day reins of Disney well before then. Disney Experiences chair Josh D’Amaro has been widely mentioned as a leading candidate for the CEO role.
“The good news is that the company is in much better shape today than it was three years ago, because we have done a lot of fixing. We’ve also put in place a number of opportunities,” Iger said. “Trying to preserve the status quo is a mistake, and I am certain that my successor will not do that. I think we’re handing [off] a good hand, in terms of the strength of the company, [with] a number of opportunities to grow.”
