Disney’s sports business, anchored by ESPN, continues to deliver steady revenue growth, but rising content and rights costs are increasingly weighing on margins.
In Q2 FY26, the company reported sports revenues of $4.6 billion, up 2% year-on-year, supported by higher subscription and affiliate fees. The increase was driven by “higher effective rates” and contributions from the NFL transaction, even as subscriber trends remained under pressure.
However, profitability declined during the quarter. Operating income fell 5% to $652 million, reflecting a sharp increase in programming and production costs.
Also read: Disney’s ad revenues rise as streaming overtakes linear TV in monetisation shift
Disney attributed the pressure to multiple factors, including “contractual rate increases” and the timing of sports rights payments, particularly across college sports and NBA deals. The company also flagged higher costs linked to new rights agreements and increased sales and marketing spending.
Advertising performance added to the pressure. ESPN’s ad revenues declined 2% year-on-year, driven by “fewer impressions” and the absence of certain marquee events compared with the prior-year quarter.
Read more: Disney leans into AI as new CEO positions Disney+ at the centre of its ecosystem
Looking ahead, Disney expects these cost pressures to persist. The company said sports segment operating income is likely to decline by approximately 14% in Q3, citing a “double-digit percentage increase in programming expenses,” including the timing of new rights deals.
Despite near-term margin headwinds, Disney remains bullish on the long-term growth potential of its sports business. The company highlighted the strategic importance of ESPN’s direct-to-consumer expansion, noting that revenue from digital subscribers is beginning to offset declines in the linear ecosystem.
Also read: Disney doubles down on franchise flywheel as IP powers growth across streaming, parks and retail
Management also pointed to strong advertiser demand for live sports, emphasising that premium inventory, especially around major events, continues to attract interest in a fragmented media environment.
The results underscore a broader industry reality: while live sports remain one of the most reliable drivers of audience scale and advertising demand, the rising cost of content rights is making profitability increasingly difficult even for market leaders like Disney.
First Published on
‘ The preceding article may include information circulated by third parties ’
‘ Some details of this article were extracted from the following source www.storyboard18.com ’
