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The four main professional sports leagues in the United States are aware that Disney’s ESPN may be interested in them purchasing an equity position in the network.
Why the leagues would do so is yet unclear.
According to persons familiar with the discussions, the National Basketball Association and Major League Baseball have both questioned a relationship with ESPN if Disney’s objective is to reduce or replace payments to leagues for sports broadcast rights with shares in ESPN.
The people, who asked not to be identified because the negotiations are private, said that Disney executives and league officials concur that the discussions of a strategic alliance are still in the purely “concept” stage and may not result in anything.
There haven’t been many specifics in the conversations, according to the people, but things might change as ESPN seeks to renew its NBA rights. The exclusive period of negotiation between the NBA and Disney ends in April 2024.
In an effort to strengthen its balance sheet, Disney is thinking of methods to save money. With a loss of $512 million in its most recent quarter, the media giant’s streaming segment is still losing money, and the business would like to pay down its $44.5 billion in debt.
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How Disney Could Save Billions with ESPN Deals
Disney probably owes Comcast at least $9.2 billion for its small interest in Hulu.
Disney could potentially save billions of dollars by approving a deal where ESPN exchanges shares for sports rights, money that it might then spend for other strategic endeavours. This week, ESPN and Penn Entertainment reached a deal under which ESPN will receive $1.5 billion in cash over the following ten years.
Yet, the leagues also require money, particularly since that the regional sports network industry is under jeopardy. Teams mostly use the sports rights money to compensate their athletes. ESPN’s bids are crucial to the leagues’ ability to make money.
Due to ESPN’s near-constant availability as a possible bidder, the organisations are able to produce aggressive bids for packages of games.
When transitioning ESPN to a direct-to-consumer business, Disney CEO Bob Iger stated during the firm’s earnings conference call on Wednesday that the company is “not necessarily looking for cash infusion” if partners might give other assets, such as content.
According to sources, Disney is eyeing 2025 as a potential debut date for an ESPN streaming service that is unbundled from cable. Even though ESPN+ is available today, it does not offer the majority of NBA Playoff games or Monday Night Football, two of ESPN’s most lucrative live sports.
According to those with knowledge of the situation, Disney has notified the leagues that it is also in separate discussions with key investors who can help with distribution.
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Source: CNBC
