Disney’s Iger Mulls ESPN Stake Sale Amid TV’s ‘Broken Model’
Disney CEO Bob Iger on Thursday said the company may consider selling off an ownership stake in ESPN as it begins preparations for the inevitable transition from linear TV to a streaming-first model.
Speaking to CNBC’s David Faber at the annual Allen & Co. billionaires’ summit in Sun Valley, Idaho, Iger said Disney cherished its 43-year-old brand, but would consider dealing in a new partner. “Sports stands very, very tall in terms of the ability to convene millions and millions of people all at once,” Iger said. “We’ve had a great business and we want to stay in that business. That said, we’re going to be open minded there, too—not necessarily about spinning ESPN off but about looking for strategic partners that can either help us with distribution or content.”
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While Iger did not provide specifics as to how such a partnership might work, he did say that Disney has engaged in preliminary conversations with potential investors. Disney owns 80% of ESPN, while Hearst holds the remaining 20%. The publisher bought out RJR Nabisco’s stake in the sports network for some $175 million back in 1990, when ESPN’s subscriber count was below 60 million households.
At its peak, ESPN reached more than 100 million pay-TV homes, although the rise of streaming video platforms and a concomitant wave of cord cutting have since reduced the channel’s head count to 73.3 million, as of this past April. To maintain its position as the nation’s top sports destination, ESPN must balance the imperatives of making more of its content available via streaming platforms while preserving as much of its legacy affiliate revenues as possible. At its current rate of $9.42 per sub per month, ESPN in 2023 is on track to book $8.29 billion in revenue before even a single ad unit is factored into the mix.
“There is an inevitability, by the way, to taking ESPN direct-to-consumer,” Iger said, echoing a sentiment he first expressed during Disney’s February earnings call. “We haven’t said when, but we do know that it will happen. … I think I’m much more certain about when, but I’m not prepared to say when that is.”
Among the more likely candidates to team up with ESPN are Amazon, Apple and Google, all of which of late have been ramping up their respective sports investments. Amazon is heading into its second season as the exclusive purveyor of the NFL’s Thursday Night Football package, while Google’s YouTube is gearing up for its first go-around with the out-of-market NFL Sunday Ticket premium. For its part, Apple last fall locked in a 10-year, $2.5 billion deal to stream MLS matches.
Sports-betting brands such as DraftKings, FanDuel, Caesars Sportsbook and BetMGM might also be a good fit, as may be the jack-of-all-trades powerhouse Fanatics.
Iger was blunt in his assessment of the fading pay-TV business, telling Faber, “The distribution model…is definitely broken.” At the same time, while he has no intention of putting ESPN on the auction block, Iger said other TV assets may no longer be essential to Disney’s bottom line. Among the networks that may be put up for auction are the 80-year-old broadcaster ABC and a collection of cable channels that includes FX and National Geographic, both of which Disney acquired in 2019 as part of its $71.3 billion acquisition of 21st Century Fox.
In conjunction with Disney’s $2.6 billion renewal with the NFL, ABC is scheduled to air Super Bowl LXI in 2027. If ABC is still in the Disney fold at that time, the network will have the opportunity to host its first NFL title tilt since Al Michaels and the late John Madden signed off from the Super Bowl XL broadcast in 2006.
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