All About the Benjamins

NHL sells 10% stake in Disney Streaming Services

NHL exercises right to sell $350 million stake in Disney Streaming Services

What’s Happening: On August 3, 2021, the NHL exercised its right to sell its interest in the Walt Disney Company for $350 million. This is the entirety of its 10% stake in the Disney Streaming Services subsidiary, which manages Disney’s “technology platforms that power the company’s streaming services, like Disney+ and ESPN+.” According to Disney’s 2021 Q3 Report, “the transaction is expected to close prior to the end of fiscal 2021.”

Year over year (YOY) revenues for Disney increased 45% as of Q3 2021, going from $11.8 billion to $17 billion, but the company has not reached its pre-pandemic revenue of $20.3 billion in Q3 of 2019. While total subscribers increased YOY to Q3 of 2020 (+27%) and 2021 (+21%), revenue per subscriber decreased (-10%) for Disney+ from Q3 2020 to 2021 and (-15%) for ESPN+ from Q3 2019 to 2021.

Did the NHL make a good call on the sale? Only time will tell.

Why It Matters: While the NHL still has plenty of money coming in, including its seven-year media rights agreement with Disney for a reported $2.8 billion, the league was certainly hard-hit by the pandemic. According to Forbes, league revenue went down 14% in 2019-20, totaling $4.4 billion. With no fans in the seats for a chunk of the year and somewhere around 35% of total NHL revenue coming from gate receipts, this isn’t surprising. In the words of NHL Commissioner Gary Bettman, during the pandemic, “It would be cheaper for us to shut the doors and not play. We are going to ... lose more money at the club level and at the league level by playing than by not playing. But the owners unanimously are OK with that because they know how important it is for our fans and for the game.”

The Bigger Picture: It’s difficult to know how things will pan out for the NHL this coming season. At the Daily Faceoff, Frank Seravalli says hockey-related revenue is expected to be “in the $4.8 billion range for the upcoming 2021-22 season.” But at this point, coronavirus cases are surging in the United States, and this is likely to continue given a comparatively lower vaccination rate and more permissive government policies. Conversely, while Canada has a comparatively higher vaccination rate and lower cases, it has been much more restrictive with swift and heavy-handed lockdowns.

Given a wide geography and varying regional approaches to COVID-19, it’s almost certain that fan attendance will be inconsistent during the coming season; that is, you could see the Tampa Bay Lightning with a full arena, while the New York Rangers’ Madison Square Garden could be empty. Even with permissive attendance policies in Winnipeg and Toronto for vaccinated fans, Canadian provincial and/or federal governments might put their feet down say “no.”

If we had to put our money on it, we would bet on a similarly bad year for game attendance and the NHL’s pocketbook. That being said, we do believe we’ll still see a return to normal divisions, cross-border team travel, and regular season schedules.

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