There is good news bad news for The Walt Disney Company as far as its quarterly earnings, results for which released on Thursday, are concerned. The good news is that media and entertainment behemoth has reported a 27% jump in operating income from all segments – entertainment, sports and experiences.
However, the company’s overall revenue for the quarter ending December 31, 2023, remained nearly flat at $23.55 billion, compared with $23.51bn in the same quarter previous fiscal.
In the sports segment, the overall revenue of the company was up by 4% to $4.8bn, out of which, the revenue from Star India was $399 million, up by 71% in Q1 FY24 from $233 million in Q1 FY23.
The operating loss in sports in Q1 FY24 was recorded at $103 million, 37% down from $164 million last fiscal.
So on to the bad news. Disney’s India business continues to be a drag on its overall revenue picture. Disney Star’s sports segment saw its operating loss balloon 144% to $315 million (Rs 2,583 crore) as of December 2023 from $129m (Rs 1,057 cr) in the year-ago quarter.
“(Disney’s overall) Sports operating income improved versus the prior year due to strength at ESPN, partially offset (emphasis ours) by lower results at Star India, driven by higher rights costs from airing of the ICC Cricket World Cup,” the management said in the earnings call.
Disney Star held the TV and digital media rights for the 2023 edition of the World Cup in which 10 teams played 48 matches between October 5 and November 19, 2023. While linear broadcast of the matches was across its Star network of channels, it also streamed the matches for free on its Disney+ Hotstar platform to maximise reach.
The press release highlighting the earnings said: The increase in operating loss at Star was due to the airing of the ICC Cricket World Cup in the current quarter compared to the ICC T20 World Cup in the prior-year quarter, which resulted in (a) An increase in programming and production costs attributable to higher average costs per match and more matches aired and (b) Advertising revenue growth due to more units delivered and an increase in average viewership, partially offset by a decrease in rates (again emphasis ours).
Whatever the bean counters at Disney are saying after the fact, here are some bald truths:
1. India hosted the ICC Cricket World Cup 2023 after a gap of 12 years. And it was for the first time that India was the exclusive host.
2. There was a national frenzy built up around the event with the Central government fully engaged in the effort.
3. The home team reached the final.
To put it plainly, this was the BEST possible scenario for Disney Star as far as extracting maximum possible revenues from the event was concerned, so there is simply no way to sugar coat the results but to accept that the price was “simply not right” as far as the network’s payout to the ICC was concerned.
The once-in-four-year tournament is estimated to have brought in Rs 2,000-2,200 cr in combined ad revenue on TV and digital platforms compared to Rs 1,350 cr in the 2019 edition.
POSTSCRIPT: The Wall Street Journal’s recent report that Disney has reached an agreement to sell 60% of its India business to Reliance Industries Ltd-controlled Viacom18, at a valuation of $3.9 billion or Rs 33,000 cr, significantly below the parent company’s initial expectation of $10bn, has been partly explained looks like.
(Exchange rate: $1m = Rs 8.2 cr)
