The future of Disney, a hot topic among Hollywood’s elite

The future of Disney, a hot topic among Hollywood's elite

by Dawn Chmielewski

(Reuters) – Favorite Hollywood parlor match of the week: What will Bob Iger do next?

From Culver City to New York City, US media and entertainment industry brokers spin scenarios about the future and potential collapse of the industry’s most powerful conglomerate.

Walt Disney CEO Iger, who returned to the company in November for a second assignment, sparked vigorous industry debate in mid-July when he suggested during an interview on CNBC that the company’s television businesses, including its stations and cable channels, “may not Be the essence of Disney.”

His remarks sparked tremendous activity among bankers and private equity players, who began assessing whether they should “make a move,” a banker who spoke on condition of anonymity told Reuters.

“He’s referring to investors,” said the banker. “It makes people think.”

Iger raised the guess last week during Disney’s third-quarter earnings call with investors, when he said the company was considering strategic partnerships for its preeminent sports brand, ESPN, and had received “notable interest,” even though Disney planned to retain control.

He said the three companies that will see the most growth over the next five years are movie studios, amusement parks and video broadcasting.

A senior media executive envisioned Iger spinning off ABC’s broadcast network, local television stations, and Disney-affiliated cable networks such as Disney Channel or FX as a separate company, loading it with an appropriate level of debt.

Another veteran media executive predicted that Disney would spin off its shareholders’ TV assets as a separate, publicly traded company by 2024, with private equity likely to play a role.

A fourth media executive who runs traditional and digital media companies said Disney may need to attract outside investors in ESPN so it can compete for expensive sports media rights, such as NBA games, that expire after the 2024-25 season.

That could potentially provide funds for Disney to take over NBCUniversal’s stake in Hulu, assuming full ownership of the streaming service next year. Under an agreement reached in 2019, NBCU’s parent Comcast could ask Disney to buy the Hulu stake, or Disney could ask NBCUniversal to sell it, as early as January 2024, for a market value of at least $5.8 billion.

Disney declined to comment.

“full appeals”

The fourth CEO, along with other prominent media figures who spoke with Reuters, said Iger would likely forge options, retaining ownership of ESPN, with the opportunity to dispose of it in the future to position Disney as a more attractive acquisition target.

The veteran executive said the executive likened the strategy to one implemented by Jeff Beukes, the former CEO of Time Warner, who sold parts of the media group’s business before selling its core film and television unit to AT&T in an $85.4 billion deal that closed in 2018.

“You sell the parts, and then you sell the rest,” said the veteran. “This is the full Bewkes.”

This could be the end game for Iger, these executives speculated. To make it attractive to the only potential buyers with enough size to accommodate Disney — Apple or Google’s Alphabet — Iger would need to cut Disney down into the parts that maintain its global intellectual property portfolio, while spinning off legacy cash-generating businesses like television.

the CEO said, using an acronym for the Big Five US tech companies, Facebook (now Meta), Apple, Amazon, Netflix and Google. “This is not the business they’re in, and it’s unlikely the government would ever allow it.”

Amazon, after its $8.5 billion acquisition of MGM last year, said one of the people familiar with the matter would likely not be interested in such a deal. Nor is Facebook seen as interested in traditional media assets.

Laura Martin, an analyst at Needham and Co, brought up the investor appeal for Apple to acquire Disney, writing in March that the combination of great content and strong distribution should create value. This idea continues to circulate in Hollywood.

“Obviously, anyone who wants to speculate on these things should immediately think about the global regulatory environment,” Iger said, when asked about the possibility during the investor call. “I won’t say more than that. It’s just—it’s not something we obsess over.”

At that, he might be alone.

(Reporting by Don Chmelewski in Los Angeles; Editing by Kenneth Lee and Richard Chang)

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