Disney Wants Leagues as ESPN Partners, But Are They Interested?

It’s clear to the four major U.S. professional sports leagues that Disney’s ESPN is potentially interested in them taking an equity stake in the network. What isn’t yet clear to CNBC is why the leagues would do it.

The National Basketball Association and Major League Baseball have both questioned a partnership with ESPN if Disney’s goal is to mitigate or replace payments to leagues for sports broadcast rights with equity in ESPN, according to people familiar with the talks.

Disney executives and league officials agree that strategic partnership discussions are in the pure “idea” phase and may not amount to anything, said the people, who asked not to be named because the talks are private. Talks have had few specifics, said the people, but may heat up as ESPN attempts to reach a rights renewal deal with the NBA. Disney’s exclusive negotiating window with the NBA ends April 2024.

Disney is considering ways to save cash as it tries to shore up its balance sheet. The media giant’s streaming division continues to lose money — with $512 million lost in its most recent quarter — and the company would like to pay down its $44.5 billion in debt. Disney also likely owes at least $9.2 billion to Comcast for its minority stake in Hulu.

Agreeing to a deal where ESPN trades equity for sports rights could potentially save Disney billions of dollars that it can then use for other strategic ventures. ESPN struck a deal earlier this week with Penn Entertainment, which will provide it with $1.5 billion in cash over the next 10 years.

But the leagues also need cash, especially as the regional sports network business is under threat. Teams pay players in large part from the sports rights fees. ESPN’s bids serve an essential role in how the leagues earn money. The organizations can generate competitive bids for packages of games because ESPN is almost always a potential buyer.

Disney CEO Bob Iger said during Disney’s earnings conference call Wednesday that the company is “not necessarily looking for cash infusion” if partners could provide other assets — such as content — as the company transitions ESPN to a direct-to-consumer business. Sources say Disney is targeting 2025 as a potential launch date for an unbundled-from-cable ESPN streaming service. While ESPN+ exists today, it doesn’t include ESPN’s most valuable live sports such as Monday Night Football and most NBA playoff games.