Disney (DIS) may have reported Q1 2023 earnings back in February, but it continues to send shockwaves across the wider streaming and entertainment sector following comments made by several high-up executives and personalities.
"I do not make this decision lightly," CEO Bob Iger said of his decision to cut approximately 7,000 jobs on the February earnings call. The layoffs would reduce up to an estimated $5.5 billion in costs and are likely to affect all verticals.
DON'T MISS: Disney CEO Iger Has a Bold Answer on ESPN's Future
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Will Disney Layoffs Affect ESPN?
We've known for a while now that Disney is planning layoffs, though the house of mouse hasn't indicated exactly where it could pull those 7,000 jobs from. It's likely the cuts will come from most, if not all of Disney's three main groups: Parks, Entertainment, and ESPN.
One of ESPN's biggest faces, "First Take" host Stephen A. Smith, speculated the cuts could come to his circle.
"Have you all been paying attention to the business landscape? Disney itself announced that over 7,000 employees are going to be let go," Smith said on his "K[no]w Mercy" podcast. "ESPN is under the Disney umbrella. They’re going to have cuts coming."
"Hell, for all I know, I might be one of them," he continued. "Now, I doubt that. But it’s possible. No one knows."
ESPN declined to comment on the possibility of layoffs in its specific vertical.
ESPN Is Well-Positioned to Weather a Market Downturn
While Disney's layoffs are likely to affect ESPN in some capacity, the severity is still largely unknown.
For its part, though, ESPN has been disciplined when it comes to rights spending. The network's six-year deal with the Big Ten will expire in 2023 and won't be renewed.
It also completely walked away from the MLS, which is now available exclusively for Apple (AAPL) TV Season Pass subscribers. Similarly, NFL's "Sunday Ticket" will move to YouTube -- a deal worth over $2 billion per season.
ESPN isn't blank-checking a multitude of deals in the name of viewership as the wider streaming scape gets increasingly crowded. As nearly every streaming, tech, and entertainment juggernaut cuts jobs, ESPN is actually maintaining remarkable restraint -- and it's got plenty of other valuable long-term deals to rely on in the meantime.
Take, for example, its three-year deal with Formula One (F1), which runs commercial-free through 2025. The F1 bet is smart; Nielsen ranks it as the second-top sports property in the world behind the NBA. In the U.S., viewership increased 58% year-over-year in 2021. Globally, it's bigger than the Champions League, NFL, Wimbledon, MLB, and EPL.
Speaking of Wimbledon, ESPN hosts every single tennis match on its platform through 2035 following a 12-year extension signed in 2021. Perhaps its decision to let other players vie for U.S.-facing properties (as with Amazon's (AMZN) recent NFL deal) as it pivots to more globally-appealing sports may be just the ticket for longer-term growth.
In other words, the sports vertical is adopting a lean-but-smart approach to weather wider macro downturns. As an incumbent in the space, it certainly has the brand recognition to hunker down and do so. And some less capital-intensive sectors may prove to be goldmines in the meantime.
"Despite headwinds...ESPN ratings were up 8% in 2022 from the previous year and 14% in prime time," a source tells The Street, adding the network has "smart long-term investments" to carry it through.
"Not to mention our huge leading presence on social [media]," which may be a low-cost way to keep viewers engaged and attract younger demos.
"ESPN remains a top 3 most followed (surpassed 30 million mark) and engaged (2.6 billion) brand on TikTok."
