Activist investors tend to speak in their own lingua franca of euphemisms. When Nelson Peltz launched his initial proxy fight with Disney earlier this year, he intimated that he merely wanted a board seat in order to better understand the company’s non-public financials so that he could be helpful—so that The Smiling Crocodile, as he has been known, could simply and amply diagnose areas of deterioration and best ascertain opportunities for potential growth. What a mensch. “I don’t need to overwhelm them,” Peltz told CNBC in January. “I don’t need more than one person on the board.”

Of course, Peltz’s pressure did overwhelm Disney, perhaps for the best. Bob Iger, who returned to the company in part to tame The Smiling Crocodile, eventually agreed to cut $5.5 billion in costs, eliminate roughly 7,000 jobs, and restructure the company so that ESPN would operate as its own division, distinct from the entertainment unit that houses the streaming services, linear TV networks, and production studios. One upshot of that restructuring: nine months later, Peltz isn’t the only one who can see how poorly Disney’s entertainment business is faring. 

On Wednesday, Disney revealed that ESPN delivered more than $16 billion in revenue and $2.9 billion in profit in fiscal year 2022. By comparison, the entertainment division brought in $39.6 billion in revenue but just $2.1 billion in profit. (My partner Bill Cohan has a brilliant breakdown of ESPN’s business and valuation coming on Sunday in his Dry Powder private email. Sign up here if for some reason you live off the grid and don’t already subscribe.) Given that this is the first time ESPN’s numbers have ever been broken out publicly, much attention has been lavished on its performance and durability, even if roughly two thirds of that revenue is dependant on dissipating affiliate fees (and, indirectly, on the ever more expensive costs of broadcasting live sports). But the real story is the sorry state of the linear networks.