Disney Seeks Strategic Partner for ESPN

From a Wall Street Journal story by Robbie Whelan and Dean Seal headlined “Disney Seeks Strategic Partner for ESPN”:

Walt Disney will likely seek a strategic partner in its ESPN sports business and is considering selling off other traditional TV assets, Chief Executive Robert Iger said.

In an interview with CNBC, Iger said the entertainment company’s legacy TV networks, including ABC and FX, “may not be core to Disney” and could be unloaded as the traditional television model continues to be upended by streaming.

The announcement came after the company said it would extend Iger’s contract through 2026.

“We just have to be open minded,” Iger told CNBC journalist David Faber in an interview from Sun Valley, Idaho, where Iger is attending a business conference. The distribution and business model that underpins traditional TV “is definitely broken and we have to call it like it is,” he said.

Disney said Wednesday that Iger agreed at the request of the board to remain as CEO through 2026, an extension that it said offered continuity and more time for succession planning. The company’s declining traditional TV business is one of several challenges Iger has contended with since returning to Disney late last year.

Operating income from traditional TV networks fell by 35% to $1.8 billion in Disney’s most recent quarterly earnings report, the steepest decline in at least three years. The results were a sign that the business is crumbling much faster than the company or investors expected as cable TV cord-cutting picks up.

While Iger is open to selling some of Disney’s TV assets, the company will likely seek a strategic partner for ESPN to help it transition to a direct-to-consumer model. He said the company has had some conversations with potential partners.

The so-called linear TV business was once the bedrock of Disney’s sprawling entertainment empire in terms of profits. Carriage fees and advertising revenues generated by the division buoyed Disney’s earnings and allowed the company to spend heavily on other businesses such as streaming that were in their early, more capital-intensive growth phases.

At a tech summit in September of 2022, just a few months before Iger returned to the role of Disney CEO at the request of the company’s board, Iger said that cable, broadcast and satellite TV were “marching towards a great precipice and it will be pushed off. I can’t tell you when, but it goes away.”

As streaming services, including live TV offerings from the likes of Disney’s Hulu and Alphabet’s YouTube service, have proliferated, viewers have started canceling their cable subscriptions more rapidly. In 2023, there were 60.5 million U.S. households with cable TV packages, according to Statista, down 40% from a decade earlier.

Iger said Disney will go through a process to determine the fair market value of Hulu, the streaming service it has control over, but shares ownership with Comcast. Disney aims to buy the remaining one-third stake from Comcast next year, Iger said.

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