- Disney has expressed interest in attracting an outsider investor to purchase an equity stake in ESPN.
- According to Bovada, Apple is the strongest contender to purchase a majority stake in ESPN.
- Apple’s betting odds lead a field that includes Amazon, Google, and Saudi Sovereign Wealth.
If oddsmakers are correct at Bovada, Apple is set to venture into the sports network industry with a purchase of ESPN. According to the latest odds, Apple is the favorite at -110 to buy a majority stake in ESPN in 2023 or 2024.
At -110 odds, Apple has a slightly better than 50 percent probability of purchasing a majority stake in ESPN. Following Apple, Amazon is the next likeliest company to invest in ESPN, at +350.
-110 represents an implied probability of 52.4 percent, while Amazon’s odds have an implied probability of 22.2 percent. The odds significantly tail off after Amazon.
Global investment and management firms Apollo, KKR, and Saudi Sovereign Wealth are tied for the third-best odds at +1200. Verizon has shown some interest in purchasing a stake in ESPN, but they are not currently offered as a betting option.
ESPN Could Be Valued At More Than $20 Billion
Last month, ESPN revealed its finances publicly for the first time. In the SEC filing, the sports network and media giant disclosed its revenue and operating income.
According to the filing, ESPN generated roughly $16 billion in revenue and $2.9 billion in operating profit in 2022. The domestic markets were the primary drivers of ESPN’s profits.
Of the $16 billion in revenue, $14.6 billion came from domestic business for ESPN. Affiliate fees made up the majority of the revenue at $10.8 billion.
Following affiliate fees, advertisers were responsible for $4.4 billion in revenue. The subscription-based ESPN+ raked in $1.1 billion for the company.
Disney’s move to publicly reveal ESPN’s finances was a strategic attempt to lure potential partners to purchase a stake in the network. Specifically, Disney is searching for a minority partner who can contribute to its content and distribution plan.
The ultimate goal for Disney is a direct-to-consumer service for ESPN. Regarding a partnership with Apple, Disney CEO Bob Iger mentioned how important direct-to-consumer streaming services are to the company.
“If they come to the table with value that enables ESPN to make a transition to its direct-to-consumer offering, then we’re going to be very open-minded about that,” said Iger to CNBC.
According to the financial report filed with the SEC, ESPN is more important for Disney’s bottom line than the other components of its entertainment business combined.
This includes the entire movie and television division at Disney, including Marvel Studios and Disney+. Disney is currently in the process of buying one-third of Comcast’s shares of the Hulu streaming service for a minimum of $8.6 billion.
Disney Would Welcome Sports Leagues As Partner
Ideally, Disney wants to partner with a major professional US sports league. While it would benefit Disney, purchasing an equity stake in ESPN may not be the wisest move for a league.
The NBA and MLB have raised questions regarding Disney’s primary intent. Particularly, they are concerned with Disney limiting or eliminating payments to their leagues.
In other words, a league that owns a stake in the company would no longer receive payments from Disney, as part of their current contract. This strategic direction could potentially save Disney billions of dollars.
However, major sports leagues primarily use money from ESPN and other networks to pay players. If it is eliminated as part of an ownership arrangement, leagues run the risk of losing billions of dollars.
That proposition might seem too risky for leagues that are fine with the current set-up. This does not appear to be the most realistic scenario for Disney. Do not expect a sports league to buy equity in ESPN in the foreseeable future.
It’s worth noting that Iger wants Disney to keep a majority stake in ESPN. Currently, Disney owns 80 percent of ESPN, while the Hearst Corporation owns the remaining stake.
As a result, if Disney wants to retain 51 percent of ESPN, 36 percent would be sold to a partner. The prop bet posted at Bovada applies to a majority stake in ESPN. We will see if Disney changes course and sells more than originally intended.
