Disney: More Affiliate Fee Headroom for ESPN

CFO Rasulo Remains Confident of Channel’s Growth Potential

Walt Disney Co., chief financial officer Jay Rasulo said he was confident about the affiliate fee growth prospects for its ESPN sports brand, even as multichannel video service providers continue to push back against higher programming costs.

ESPN is traditionally the highest-priced cable network – according to SNL Kagan estimates it receives an average monthly affiliate fee of $4.76 per subscriber per month. While operators have railed against high sports programming costs and even Disney chairman and CEO Bob Iger said back in August that he was cautious about future rate increases at the sports juggernaut, Rasulo said there is ample room for growth.

At the Bank of America Merrill Lynch Media, Communications and Entertainment conference in Beverly Hills, Calif., Thursday Rasulo pointed to the popularity of live sports – 99.4% of sports on TV are still watched live, indicating how attached sports fans are to ESPN. HE added that advertisers love the channel because of the demographics it represents and MSOs love the channel because it drives more broadband subscriptions than any other network.

“It’s just a powerhouse,’ Rasulo said. “When we walk into a negotiation, there are literally 70 services on the line, one of which is the affiliate fees of ESPN. We are very confident we can continue to grow ESPN as a business, continue to grow its top line and its bottom line.”

Rasulo also defended ESPN’s deal to extend its rights deal with Major League Baseball, paying an estimated $750 million, or double that of its previous deal. Rasulo said that while it may look as if ESPN doubled its costs in the deal, it also received more programming – including 10 more games, a relaxing of some local blackout rules, the addition of a wildcard playoff game and hundreds of hours of broadband content.

“This is consistent with our thrust,” Rasulo said. ESPN wants to be there and if you want to be there you have to have the rights. We feel great about this sport.

Rasulo also reiterated Disney’s past estimates that retransmission consent and reverse compensation revenue will be between $400 million and $500 million by 2015.

“There is no reason that revenue doesn’t fall to the bottom line,” Rasulo said.