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Greg Ruben/Axios

Walt Disney shares fell more than 1.5% after investors learned the full scope of ESPN's troubles. How bad is it?

  • Revenue: Disney's Media Networks unit, led by the ESPN franchise, saw revenues fall 2% to $4.4 billion,vs investor expectations of $4.53 billion. Disney CEO Robert Iger faulted ESPN for the revenue decline, citing a loss in advertising dollars combined with an increase in production costs for a new NBA agreement and contractual rate increases for NFL programming.
  • Subscriptions: ESPN lost more 2 million subscribers in FY 2016, bringing their total subscriber number to 90 million, down 10% from 2011. According to Nielsen, ESPN lost over half of a million subscriptions in November 2016 alone and the pattern extends across the board to ESPN2 and ESPNU.
  • Advertising: ESPN's ad revenue was down 7% in Q4. Disney executives blame the decline on lower impressions and rates, both of which they say were impacted by a timing shift of college football playoff games. So far this quarter however, ESPN's ad sales are pacing up compared to last year.

What's next: Expect to see more ESPN content provided through streaming services, like Hulu and Netflix, in 2017. Iger told investors that his confidence in ESPN lies in deals the network has made with OTT (over the top) streaming service providers, like Hulu. He also conceded to investors that the standard advertising model ESPN and other Disney-owned networks rely on is no longer working.

Why it matters: Disney executives are acutely aware of how much "cord-cutting" — people ditching cable subscription packages for streaming services — is affecting their business, which is why they are taking strategic steps to pivot their strategy to streaming. In the call with investors, Iger touted Disney's $1 billion investment in MLB's streaming division called BamTech, which they have previously said will work with Disney to create an ESPN-branded subscription streaming service.

Go deeper

45 mins ago - Politics & Policy

Stalemate over filibuster freezes Congress

Illustration: Sarah Grillo/Axios

Senate Majority Leader Chuck Schumer and Mitch McConnell's inability to quickly strike a deal on a power-sharing agreement in the new 50-50 Congress is slowing down everything from the confirmation of President Biden's nominees to Donald Trump's impeachment trial.

Why it matters: Whatever final stance Schumer takes on the stalemate, which largely comes down to Democrats wanting to use the legislative filibuster as leverage over Republicans, will be a signal of the level of hardball we should expect Democrats to play with Republicans in the new Senate.

Dave Lawler, author of World
1 hour ago - World

Biden opts for five-year extension of New START nuclear treaty with Russia

Putin at a military parade. Photo: Valya Egorshin/NurPhoto via Getty

President Biden will seek a five-year extension of the New START nuclear arms control pact with Russia before it expires on Feb. 5, senior officials told the Washington Post.

Why it matters: The 2010 treaty is the last remaining constraint on the arsenals of the world's two nuclear superpowers, limiting the number of deployed nuclear warheads and the bombers, missiles and submarines which can deliver them.

Updated 2 hours ago - Technology

Facebook refers Trump ban to independent Oversight Board for review

Photo: Alex Edelman/AFP via Getty Images

Facebook's independent Oversight Board has accepted a referral from the platform to review its decision to indefinitely suspend former President Trump.

Why it matters: While Trump critics largely praised the company's decision to remove the then-president's account for potential incitement of violence, many world leaders and free speech advocates pushed back on the decision, arguing it sets a dangerous precedent for free speech moving forward.