Walt Disney’s Bob Iger reprized his role as the company’s CEO in late November ‘to make big changes’ including parting ways with ESPN and ABC, Wells Fargo analysts predicted in a company note on Dec 20.
According to bank analysts, Iger will shift the mass media and entertainment company’s focus to content and cost rationalization while spinning-off broadcast network ABC and cable sports channel ESPN.
Spinning off the two networks is the best path forward and a probable late 2023 event, leaving the Walt Disney Company an attractive pure play intellectual property company, the bank predicted.
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While ESPN has been the cash cow of the pair, linear and sports trends are diverging from the core IP. In addition, the sports network is not owned-IP or global like Disney, so “we think severing the company is increasingly logical,” the analysts stated.
In September, activist investor Dan Loeb called for a spinoff of the channel, but later reversed course after better understanding ESPN’s potential to generate ad and subscriber revenues as a standalone business.
Former CEO Bob Chapek said at the time that Disney has a plan to restore ESPN to its “growth trajectory.”
ESPN+ grew 42% for the year ending Oct 1 to 24.3 million subscribers. Disney+ was up 42% to 164.2 million subscribers.
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The Disney Channal and ESPN both had 74 million linerar subscribers.
ESPN is owned 80% by Disney and 20% by Hearst Corporation.
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The analysts also stated they think ESPN and ABC are integrally linked, and linear trends are moving away from their streaming contemporaries, while owned IP monetizes differently versus licensed IP in sports and will lead to the eventual spinoff of ESPN and ABC.
A spin-off of ESPN by Disney has been long discussed by investors, the Wells Fargo note stated, while rationale for considering the spin is not financial engineering but portfolio improvement
.In September, activist investor Dan Loeb called for a spinoff of ESPN but later backed off, after understanding the network’s ability to generate ad and subscriber revenues.
Then CEO Bob Chapek said the company has a plan to restore ESPN to its “growth trajectory.”