The Walt Disney Company posted a record quarter, in revenue terms, last night. The company has been around since the 1920s, so this is a not insignificant achievement, and its shares have surged about 7% this morning.
The driving force behind the business in recent years has been ESPN. Disney bought 80% of the sports programming network in 1996. At the time, Disney’s networks division (which also includes ABC and the Disney Network) was actually slightly smaller than its theme parks business (think Disney World and Disneyland).
But since then, as the above chart shows, the media networks division has powered ahead, and it now dwarfs both the theme parks and the film studios on which the Disney empire was founded.
There is little doubt among analysts that ESPN is behind this. During the last quarter, earnings from cable networks (of which ESPN is easily the biggest) were up 34% to $1.3 billion, more than a third of the company’s total earnings. Ad revenues at ESPN were up 10% last quarter. But ESPN makes most of its money off of affiliate fees (fees paid by cable companies to carry ESPN’s channels). An estimated $5 from every cable bill goes into ESPN’s pockets.
Arguably, it’s a major reason why cable bills keep rising. But because it has no direct billing relationship with its customers, ESPN avoids any of the blame (that gets heaped on Time Warner Cable, Comcast and other cable providers) and continues to rake in business.