Disney is betting it all on sports next year.
During its earnings call on Thursday morning, Disney announced plans to bring ESPN+ content to Disney+ starting on December 4, and hinted at what Flagship, its forthcoming ESPN streaming service, will look like.
Beyond this news, Disney reported a 6% year-over-year increase in revenue to $22.6 billion for the quarter, as well as a 3% increase in yearly revenue to $91.4 billion for 2024.
(For context, Disney reports its earnings on a fiscal year structure rather than a calendar year, so it categorizes July through September as the fourth and final quarter of 2024.)
Entertainment DTC revenue also rose, up 15% YOY to $5.7 billion thanks in part to a 14% increase in ad revenue (although the total number was not disclosed).
From zero to DTC hero
Disney’s combined DTC streaming businesses, which include entertainment and sports categories, reached profitability for the first time last quarter.
This momentum has continued. Disney’s entertainment-focused DTC business generated $253 million in operating profit, while the combined DTC business posted $321 million for the quarter.
A better-than-anticipated 4.4 million new Disney+ subscribers also joined this quarter, upping the total to 174 million Disney+ and Hulu subscriptions.
Disney’s prepared management remarks suggest that more than half of new users in the US chose the ad tier upon sign-up, which “bodes well” for further DTC profitability in the future.
On the call with investors, however, CEO Bob Iger put the percentage of new ad-supported users closer to 60%, noting that 37% of US users and 30% of global users are ad tier subscribers.
But ad revenue is expected to be stronger in 2025, said senior VP and CFO Hugh Johnston, and Iger highlighted Disney’s ability to sell inventory through Google’s DV360 and The Trade Desk.
Iger also attributed the company’s DTC success both to new Disney+ and bundled Hulu content, as well as the phenomenon of new installments begetting interest in previous ones, such as the rise of streaming numbers for “Zootopia” in anticipation for “Zootopia 2” later this year.
ESPN can go the distance
Sticking with content, beginning on December 4, ESPN+ will also be included in Disney’s current streaming bundle, meaning ESPN+ content will be available on Disney+ the same way Hulu content is featured.
This bundle expansion will set the scene for ESPN Flagship when it launches in fall 2025. Unlike ESPN+ in its current form, the new service will reportedly have access to all of ESPN’s content across multiple different channels, as well as integrated sports betting capabilities.
When asked how this new product will “move the ball forward” (the question-asker apologized for the pun, but it’s a good one), Iger said that it will be “ESPN like it has never appeared before for the consumer.”
Iger also waxed poetic about the potential for “highly customizable,” AI-personalized experiences, although this sounded more like a hypothetical than a real promise for the product.
“When you apply technology to the presentation of sports, almost anything is possible,” he said.
Regardless of what ESPN Flagship ends up looking like, Disney leadership is excited for the revenue opportunities that live sports – which Iger called “extremely attractive to advertisers” – will have when paired with the company’s existing ad tech.
Johnson also remarked that he’s confident the new service will be additive to the business from a revenue perspective by 2026.
