Disney-NFL Deal One of ESPN’s ‘Most Important Steps’ Since 1987, Iger Says

The morning after the Walt Disney Co. and the NFL formally announced their blockbuster equity-for-assets swap, Bob Iger told investors the deal may well be the biggest thing to hit ESPN in nearly 40 years.

Speaking to analysts during Disney’s third-quarter earnings call Wednesday, the CEO characterized the partnership as “one of the most important steps ESPN has taken really since they went from half-a-season to a full season of the NFL back in 1987.”

Per terms of the deal, the NFL will take a 10% stake in ESPN in exchange for a portfolio of media assets that includes the linear cable channel NFL Network and the popular RedZone Channel.

“The result of these agreements will give ESPN more NFL games than they’ve ever had before,” Iger said during the pre-market call. “Basically, there will be 28 windows; previously there were 22. That obviously is of major significance, in terms of both ESPN, but also in terms of the audience.” Iger went on to confirm that NFL Network “will be fully included in, or ingested within, the ESPN direct-to-consumer app,” which is set to launch on Thursday, Aug. 21.

Also included in the deal is NFL Fantasy, which will be merged with ESPN’s own fantasy football offering. The process of securing federal regulatory approvals could push the official close of the pact to around this time next year. (While a vote by NFL owners is pending, that process is expected to be a formality.)

Not included in the deal are a clutch of digital properties, including NFL.com, the league’s 32 team-branded sites and NFL+.

A few hours after the primary agreement was announced, ESPN confirmed that it has extended its stewardship of the NFL Draft through 2030. Once the deal closes, Disney’s share of ESPN will settle in at 72%, while Hearst Corp. will retain an 18% stake in the business.

“From an economic perspective, with this exchange of assets, it will be accretive in the first year after it closes,” Iger said. “So the revenue that we will derive from distributing NFL Network and other NFL properties will obviously increase our revenue and increase our operating income for the ESPN business. That does not even factor in a potentially lower churn rate for the ESPN app once we go to market and once the NFL games are all included. And obviously there’s advertising value as well.”

Disney’s sports segment closed out the April-June quarter with $1.01 billion in domestic operating income, which marked a 7%, or -$71 million, decline versus the year-ago period, a reflection of higher programming and production costs related to contractual rate increases for the NBA and various college sports rights. Stateside ad sales were up 3% to $1.1 billion on the quarter, while total revenue at the sports segment grew 3% to $3.93 billion. Affiliate revenue slipped 1% to $2.21 billion.

Sports accounted for 18% of Disney’s global revenue haul in the period. The theme parks and experiences unit generated 38% of Disney’s Q3 revenue.

On the direct-to-consumer front, streaming revenue grew 6% to $6.18 billion, as Disney+ added 1.8 million subscribers, bringing its overall headcount to 127.8 million customers worldwide. Hulu grew 1% to 55.5 million subs.

Separately, ESPN on Wednesday announced that premium WWE events (including WrestleMania, SummerSlam and the Royal Rumble) will be staged on its eponymous app as part of a five-year, $1.63 billion deal. That agreement will kick in next year.

Disney shares were down 3.52% to $114.08 in early trading.