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Disney's (DIS) ESPN Sells Its Majority Stake in X Games

Zacks Equity Research
·4-min read

Disney DIS recently announced that ESPN is selling its majority stake in X Games to the private-equity firm, MSP Sports Capital.

X Games is the extreme-sports competition franchise of ESPN that introduced competitive skateboarding, snowboarding and freestyle BMX to the mainstream audience.

MSP Sports will now hold a majority stake in X Games and handle the day-to-day operations of the competition, while ESPN will retain a minority stake and a non-controlling position and will serve as the domestic linear broadcast partner under a multi-year agreement.

The next X Games event, which will be the winter session, is scheduled to be held in Aspen from Jan 27-29 and will air on ESPN and ABC.

ESPN to Expect Growth From Long-Term Partnerships

The decision of ESPN to reduce its stake in X Games comes as a strategy to improve its top line. Though X Games had gained popularity and seen growth ever since its launch, the millennials and Gen Z aren’t looking forward to watching skateboarding and snowboarding competitions on broadcast TV.

The E-Games or Online gaming platforms have been a threat to such sports as it is gaining more traction among the youth, especially after the Covid outbreak, during which all forms of offline sports, including X Games, had been called off.

ESPN is now focusing on streaming more popular live sports like hockey, soccer and baseball, which is expected to drive growth in the long haul. The renewal of the Major League Baseball sports rights deal through 2028 and the agreement with Spanish club football’s first division, La Liga, strengthens its sports content offerings.

ESPN’s long-term partnership with the National Football League (“NFL”) is also noteworthy, where it has agreed on a five-year rights deal with the NFL to broadcast the league’s Monday night Wild Card playoff game through the 2025 season.

ESPN has also recently entered into a partnership with the sports betting firm, DraftKings DKNG. DraftKings has been one of the leaders in the wagering business in the United States and this potential deal will allow the sports broadcaster to capitalize on the growing wave of legalized sports betting.

In August, the Premier Hockey Federation (“PHF”) announced ESPN to be the exclusive home of the PHF in the United States for the 2022-23 and 2023-24 seasons. The two-year agreement with ESPN features live coverage of the PHF regular season, special events and the Isobel Cup Playoffs in the United States, streaming live on ESPN+.

The Walt Disney Company Price and Consensus

The Walt Disney Company Price and Consensus
The Walt Disney Company Price and Consensus

The Walt Disney Company price-consensus-chart | The Walt Disney Company Quote

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These partnerships are expected to increase ESPN’s user base and should bode well for investors. ESPN+ had 22.8 million paid subscribers at the end of third-quarter fiscal 2022, a net increase of about 0.5 million from the second quarter. The average monthly revenues per paid subscriber for ESPN+ also increased 2% year over year to $4.55.

ESPN Faces Tough Competition

Despite its multiple attractive partnerships, ESPN, which currently has Zacks Rank#3 (Hold), faces stiff competition from Fox Corporation’s FOXA Fox Sports and Comcast’s CMCSA NBC Sports. Shares of Disney, the parent company of ESPN, have fallen 32.5% year to date against the Zacks Consumer & Discretionary Sector, which declined 37.6%.

You can see the complete list of today’s Zacks #1 Rank stocks here

Fox’s investment in Flutter has benefited its sports business division. Together, they entered into a national media and sports wagering partnership in the United States. The partnership offers the FOX Bet Super 6 national free-to-play game, which has generated a user base of more than 6 million registered accounts as of June 2022.

NBC Sports gains great traction from the coverage of Sunday Night Football, led by executive producer Rob Hyland and director Drew Esocoff. NBC Sports recently announced that it will present more than 30 hours of live golf coverage this week across three events on the GOLF Channel, Peacock and NBC Sports digital platforms, headlined by the PGA TOUR’s Butterfield Bermuda Championship from the Port Royal Golf Club in Bermuda.


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Comcast Corporation (CMCSA) : Free Stock Analysis Report
 
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DraftKings Inc. (DKNG) : Free Stock Analysis Report
 
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