The SEC Network, launched by ESPN last month, could soon generate nearly $1 billion in revenue and help boost the Walt Disney Co.’s bottom line, according to an analyst report.
Sports is among the strongest segments of the TV business, and investing in a new network with the most powerful conference in college football, appears to be a big bet.
Todd Juenger of Sanford C. Bernstein notes that the SEC Network is being carried by every major distributor other than Cablevision Systems and had 62 million subscribers at launch.
While Disney has not disclosed how much it is getting in affiliate fees—or any other financial details about the channel--Juenger estimates that distributors in states with SEC schools are paying about $1.30 to $1.40 per subscriber for the network. In non-SEC markets, Disney is getting 25 cents or so.
Juenger figures that about 40% of SEC Network’s subs are paying the higher rates, giving the network about $588 million in affiliate fee revenue. That should increase over the next few years.
Based on the ESPN model, Juenger expects the SEC Network to generate about 30% of its revenue from advertising, or $252 million, though it will probably take some time to get to that level.
When Disney and ESPN negotiated carriage for the SEC Network, it also secured other benefits including added carriage for other Disney Channels and distribution of the company’s Watch apps, which also generate revenue.
The SEC will get $294 million of the revenue the channel generates, and operations cost are about $300 million, according to Juenger. That means earnings before interest, taxes, depreciation and amortization could be $246 million. That would make the channel worth anywhere from $2.5 to $3 billion.
For Disney, the SEC channel could add $1.44 to $1.71 in earning per share, he says.