Disney CEO Bob Iger wants ESPN minority partners, but a deal won’t be easy

Disney CEO Bob Iger took the unusual step of paying former executives Kevin Mayer and Tom Staggs a consulting fee to help them solve a complicated problem: what to do with ESPN.

Mayer and Staggs are CEOs of Candle Media. Both men are close to Iger and have been informal advisers to him in the past. They work with ESPN president Jimmy Pitaro on strategic options for ESPN and, to a lesser extent, Disney’s other linear cable networks.

Iger is looking for new ways to launch ESPN as cable cancellations accelerate in the US. In years past, ESPN could still generate revenue growth by increasing program fees for pay-TV distributors. Comcast, Charter and DirectTV.

That dynamic no longer exists. As ESPN revenue declines, it will become a bigger anchor in Disney’s bottom line. This prompted Iger to explore various strategic alternatives.

Iger told CNBC’s David Faber last month that he is more certain about when ESPN will launch its direct-to-consumer product. ESPN’s best programming still belongs to its linear cable TV package. Disney offers many of its lower-rated live games on its ESPN+ streaming service, which costs $9.99 a month.

When ESPN decides to offer an unbundled subscription service, it will likely lead to more people ditching pay TV. That’s why ESPN waited so long to go direct-to-consumer.

Iger declined to say last month if he plans to offer ESPN directly to the consumer. That likely won’t happen until 2023 or 2024, according to people familiar with the matter.

An ESPN spokeswoman declined to comment.

Iger wants to find minority partners to buy equity stakes in ESPN. CNBC reports that the sports network has had early talks with the National Football League, Major League Baseball and the National Basketball Association about the concept. last month.

The National Hockey League has also been involved in the talks, according to people familiar with the matter. An NHL spokesman declined to comment.

Selling part of ESPN to four professional sports leagues would be unprecedented. Leagues are focused on moving their products into the streaming-dominated landscape. ESPN’s involvement and the network’s expertise in building an all-sports subscription service could help the leagues create a unified product and drive a new economy beyond the traditional TV package.

But the deal could also upset their existing media partners and create potential conflicts of interest. If the leagues had equity stakes, they would have a vested interest in ESPN’s success. It can’t help leagues maximize the valuation of sports rights, which have traditionally risen due to bidding wars between media and technology companies. ComcastNBCUniversal, Fox, Paramount Global, Warner Bros. Discovery, apple, Alphabet and Amazon.

If ESPN can’t find a suitable deal for its minority partners, it wouldn’t rule out a complete turnaround of the network, according to a person familiar with the matter.

Iger has resisted leaving ESPN in the past, telling CNBC he wants to stay in the sports business. Mayer, who was executive vice president of corporate strategy at Disney before running the streaming business, was more open-minded about divesting ESPN when he previously worked at Disney, according to people familiar with the matter.

Mayer left the company in 2020 to take the CEO position at TikTok. He declined to comment.

Iger told Faber last month that he was “absolutely” not interested in spinning off ESPN as a separately sold company. The focus for Mayer, Staggs and Pitaro is finding a way for Disney to retain a majority stake in ESPN, according to people familiar with the matter. Disney currently owns 80% of ESPN, while Hearst owns 20%.

Iger is looking for partners that bring advantages to ESPN in content or distribution. It remains unclear whether another strategic company would be interested in taking a minority stake in ESPN. If Disney were a majority owner, it would control the network’s fate.