Clear schedules, full lineups, Disney hopes Monday Night Football won't lose
A core piece of Disney's puzzle pops up
Disney’s next win isn’t in the form of theaters slowly reopening or attendance at its parks slightly improving — it’s Monday Night Football.
Monday Night Football on ESPN is back tonight, and with it a new wave of advertising revenue and, hopefully, flocks of viewers. The return of the NFL brought with it highs and lows for NBC. The network announced that it sold out of advertising space for its Thursday Night Football game that kicked off the return of the NFL. Most 30-second spots sold for nearly $900,000, according to reports. Not bad. But ratings for the game were down 12.3% from last year’s kickoff game. That’s not great. Still, it was the most watched sporting event over the last few months — and there’s hope amongst everyone that more people will tune in to Sunday and Monday’s games.
But Monday Night Football’s return to ESPN is more than just advertising space, additional signups, and affiliate fees — it’s the small return to normalcy for one of Disney’s most lucrative divisions. In 2019, Media Networks — this includes ESPN alongside FX, ABC, Disney Channel, etc — made up nearly 40% of operating income, while revenues for the division grew 13.3% to $24.8 billion. In 2018, Disney’s cable division made up 70 percent of the overall media networks revenue, with ESPN being the biggest driver.
Still, ESPN isn’t immune to the cable slashing we’ve seen consumers participate in over the last several years. There are more than 80 million cable subscribers in the United States, but that number continues to dwindle. Looking at ESPN’s figures (before the pandemic hit and sports in general went awry), the cable channel saw a 4.5% decrease in subscribers. That’s more than Disney’s reported 4% drop in Q4 2019 and 2.5% drop in Q3 2019. Disney acknowledged that it saw lower revenue in Q1 2020 because of “an increase in programming and production costs and lower advertising revenue,” although that was “partially offset by higher affiliate revenue,” according to its earnings report.
Or, in layman's terms, even though people weren’t watching ESPN as much as they once were, and weren’t subscribing to ESPN as much as they once were, Disney was still seeing some revenue growth because of affiliate fees — the bread and butter of the network. The biggest driver of why ESPN can continue to charge high affiliate fees? Football. The NFL is one of the few cable success stories, with the NFL boasting a 5% increase in viewership last season.
Everyone won, but ESPN’s Monday Night Football really came out on top, recording an 8% increase for the second straight year. The network also averaged 12.57 million viewers over 16 weeks. The NFL is always important — this year, it’s vital. Football is a far more attractive bet for advertisers looking to spend money than basketball, baseball, and hockey combined, the New York Times reported.
“In a normal year, over the weeks of the entire NFL regular and post-season (ex. Super Bowl), the NFL delivers 28% of the national audience impressions at NBC, CBS and ESPN and 60% of FOX’s impressions,” analyst Michael Nathanson wrote in an investors note last week. “However, given the lack of new Fall 2020 scripted content and the continued impact of SVOD viewing on linear viewing, the share might be even bigger this time around.”
It’s an interesting moment for football. With a lack of general entertainment on the broadcast networks this fall, lingering cable subscribers are likely to devote more of their time to football. Sports and news remain the two main reasons cable subscribers pay, and with the NHL set to end, roughly, in early October and the NBA likely finishing its season in mid-October, there are two major leagues that control attention: the MLB and the NFL. From an anecdotal perspective, with multiple major cities still imposing in-restaurant and in-bar restrictions, people who want to catch NFL games in bars (like I do) and no longer can, may see cable as a potential worthwhile buy this season. A big maybe. If that’s the case, however, ESPN can capitalize.
The NFL’s upcoming season is coming at an integral time for ESPN and the league in general. Disney will be looking to see what the season does for ESPN, and the company at large, in a multitude of ways. Advertising revenue is likely to increase, as affiliate fees remain as steady as can be expected right now (Disney offset ESPN’s 2.5% decline in subscribers by raiding affiliate fees 7%, the company noted in its 2019 annual report). Disney can do this because the NFL is still such heavily desired programming, but the future of Monday Night Football could be up in the air. For Disney, having another ratings bump will publicly and privately reaffirm how necessary owning Monday Night Football is to their Media Networks division — one that’s still very important and lucrative to the company.
Contracts for NFL TV rights are coming up for renewal in 2021, and up first is Monday Night Football. The last time that ESPN picked up Monday night rights, both the network and the industry were in much different places. ESPN was paying more (via a cost per thousand minutes) to the NFL to carry games than broadcast networks, according to Nathanson’s report. This was somewhat due to ESPN’s affiliate fees being 10x higher than retransmission fees (“fees paid by cable, satellite, and streaming platforms to retransmit local TV broadcast signals to their platforms,” according to The Real Economy Blog). That’s no longer the case. As cord cutting continues, and the NFL remains one of the only reasons people are keeping their subscriptions, the NFL is going to drive up its fees, impacting everyone — Disney included.
“Although we don’t see a real competitor for Monday Night Football and think the value of that window has diminished, we forecast ESPN will pay an average of $500 million more per year in return for the new rights to an annual playoff game, a Super Bowl every four years and the rights to simulcast Monday Night Football to ABC,” Nathanson wrote.
In pre-pandemic times, there was some thought that Disney might try to buy even more of the NFL landscape by bidding for Thursday Night Football. The NFL is still a lucrative business for broadcasting giants, and ESPN owning Monday night has been good for Disney’s media division. Then the pandemic hit, and just about every one of Disney’s verticals was impacted hard. Take that purchase off the table.
But the NFL isn’t the only major football investment that Disney has, however, and that’s another big part of this conversation. The broadcasting rights to college football are split between a few different carriers, but ESPN is one of the biggest. Both Fox and ESPN have “multiyear TV rights for Big Ten football games and Pac-12 football and basketball, for which they paid a combined $5.64 billion,” the Wall Street Journal reported in August when both Big Ten and Pac-12 voted to postpone their seasons.
The Southeastern Conference, which has deals with ESPN and ViacomCBS, is continuing but with reduced play. Then there’s the Atlantic Coast Conference, which airs games on ESPN, and “will stay flexible and be prepared to adjust as medical information and the landscape evolves,” the Journal reported. And The Big 12, also on ESPN, will have a revised fall schedule but warned they could cancel at any time depending on if people get sick.
This isn’t great, especially for ESPN. The Journal notes that ESPN generated $418 million in revenue from regular season games, with postseason games bringing in $389 million. Though ESPN (and other networks) can offset some of that advertising loss from not paying rights fees that broadcasters pay the various leagues (approximately $1.5 billion annually, according to Bloomberg Intelligence), college football also accounts for why ESPN can charge higher affiliate fees and what drives subscriber growth. If college football can’t continue, or even operate at the level it once did, ESPN loses out.
All of which puts additional pressure on Monday Night Football to perform. Without college ball, and people at home still looking to get their football fix, Monday Night Football is an even bigger deal for Disney this year than in years past. Before, Monday Night Football was a big piece of a puzzle, an important cog in the overall House of Mouse machine. This year, it’s everything. Monday Night Football could be key to helping Disney’s Media Networks division one of its biggest, rebound in a way they need — not fully profitable, but enough to feel, just for a second, like things are back.
That is, however, if games aren’t impacted by the virus spreading among teams like it did in the MLB. And that is a daunting fear hanging over every aspect of this season. Not just for media networks and the league fearful over their billion dollar investments, but as always, for the human lives rushing out on the field every week. We must remember that first and foremost.
Studios
Mulan took home $23.2 million in its opening weekend in China. That’s not great for Disney. For additional context, The Lion King made $54 million in China when it debuted last year, according to CNN’s Frank Pallotta. Mulan’s release has been caught up in and likely damaged by controversies on top of mixed reviews of the film. I keep thinking about Studio Chairman Alan Horn telling The Hollywood Reporter in February that if “Mulan doesn’t work in China, we have a problem.” (CNN)
Media coverage of Mulan is banned in China after controversy over filming in Xinjiang continues. (The DisInsider)
Chris Hemsworth promises that Thor: Love and Thunder will be “more fun” than Ragnarok — which, as a Taika Waititi stan and Ragnarok obsessed person, says a lot. Hemsworth also told Elle Man that he has no plans to walk away from the Thor franchise as long as Marvel wants him around. (Elle Man)
Sigourney Weaver shared a photo from the set of Avatar 2 (a movie that’s been in production for a while now), and it’s a joy. We can only assume this is part of an underwater sequence. And, hey, look, I still believe Avatar 2 is vaporware, but if Sigourney is having a good time, that’s all that matters to me. (Twitter)
Streaming
Entertainment Weekly’s annual Fall TV preview is out (a wild thing considering this year’s Fall TV is reliant on streaming exclusives and gently used programming), and the main focus is on The Mandalorian’s second season. There are a bunch of new photos to hype up Star Wars fans, and more details about what to expect. Yes, I am excited for Giancarlo Esposito’s Moff Gideon, thanks for asking! (Entertainment Weekly)
A little scoop from me this week over at The Verge: Disney+ is currently testing a group watch feature in Canada. The company confirmed to me that the goal is to roll it out more broadly this fall. Disney+ is far from the first to get in on group watch features, but this will be a good way for me to force six of my friends to watch Iron Man 2. (The Verge)
Friends of the newsletter The DisInsider put up a very cool exclusive report this week — Bette Midler, Sarah Jessica Parker, and Kathy Najimi are in talks to reprise their roles for the Hocus Pocus sequel hitting Disney+. (The DisInsider)
Disney+ is rebooting Doogie Houser for reasons that I don’t quite understand. This time around, however, the show will focus on a 16-year-old girl named “Lahela ‘Doogie’ Kameāloha, a mixed race 16-year-old girl, juggling a budding medical career and life as a teenager,” according to a press release. The press release adds that “Guiding Lahela (and also complicating things) is her family, including her spit-fire Irish mother who’s also her supervisor at the hospital, and her Hawaiian “Local Boy” father struggling to accept that his daughter is no longer his little girl.”
Clouds, a film about a 17-year-old boy who lands a record deal while battling cancer, is the newest original movie to hit Disney+. It will land on the streamer in October. (The DisInsider)
In case your kids were just getting over singing Frozen 2 songs around the house, don’t worry — Disney+ is releasing a new Olaf short. The new short will explore Olaf’s origins (the moments right after Elsa created him and before he ever met Anna and Kristoff in the forest), according to a press release. And, yes, I would expect a catchy new song. Once Upon a Snowman will stream on Disney+ on October 23rd.
Parks
Disneyland has canceled its Candlelight Ceremony that takes place in December every year because of the pandemic, according to the OC Register. The company was “unable to commit to the monthslong planning process for the Candlelight Processional without a clear understanding of when theme parks can reopen from the State of California,” the Register reported. (OC Register)
Disney is hoping to have 50% of its resorts and hotels open by the end of the fiscal year, according to chief financial officer Christine McCarthy. (Reuters)
NBA Bubble update: I’m a sad writer this week as a longtime Raptors fan. Watching my boys go home after a Game 7 defeat to the Boston Celtics is hard, but they played well and Boston is one hell of a great team. We still stan Kyle Lowry in this house.
In other bubble news, general managers and team staffers have pointed to the lack of travel as a positive for many players who are playing extremely well this playoff season. That makes sense! No travel means players aren’t as tired, and a bubble effect means they may be insulated from picking up random germs, too! (ESPN)
Media Networks
FX chief John Landgraf gave a talk addressing the network’s upcoming shows and how the FX brand works as a hub on Hulu. (The Verge)
Pose creator Steven Canals is working on a new project for ABC that I’m very excited to see. Called In The End, the show examines how to embrace the thing most people try to ignore — death. (The Hollywood Reporter)