$2.9 billion: That’s how much operating income ESPN, the legacy sports television network, made in fiscal year 2022, according to financial data that Disney broke out separately for the first time on Wednesday. Until last week, ESPN’s exact financial performance was a mystery. Now, with those numbers in hand, Wall Street can finally take a stab at determining what ESPN is worth these days, as Bob Iger weighs the costs of owning and operating a still massively profitable but swiftly declining business. To share some idea of the decline, I’m told that between 2012 and 2018, ESPN made $22 billion in profits, with $4.4 billion being the most it made in one single year.
So what is the true value of a linear TV network that appears to have made $2.9 billion in operating income last year but that once upon a time made $4.4 billion? That’s the kind of question that investment bankers fantasize about as they imagine their millions in advisory fees. A few Wall Street research analysts have already proffered valuations of ESPN in the weeks leading up to Disney’s release of the segment data. Over at Wedbush Securities, the analysts valued ESPN at $50 billion, with the caveat that $50 billion might be the price that, say, Apple would pay for ESPN in a takeover. In other words, ESPN with a twist of takeover premium. (Not gonna happen.) Brandon Nispel, a research analyst at KeyBanc, took a more sober accounting, and pegged ESPN as worth $30 billion, or 7.8x an estimated $3.8 billion in EBITDA—way too high, it turns out. (“Though we do view it as a melting iceberg,” he said.) Our friend Rich Greenfield, at LightShed, put a value “closer to $20 billion” on ESPN, according to CNBC.
How does the $2.9 billion of 2022 operating income (excluding a nine-figure loss from Star India) compare to Nispel’s $3.8 billion EBITDA estimate? First, the $2.9 billion, according to Disney, is “operating income,” which most bankers usually think of as EBIT—earnings before interest and taxes—as opposed to EBITDA, which is earnings before interest, taxes, depreciation and amortization. Add back the $90 million of ESPN’s depreciation and amortization that Disney shared in the financial release, and you get to EBITDA in 2022 of $3 billion. Fair enough.