Disney is open to finding an ESPN strategic partner

Disney CEO Bob Iger on ESPN: Passionate about sports but open to new strategic partner

Disney It is open to potentially selling its equity stake in ESPN and is seeking a strategic business partner as it prepares to transition the sports network to broadcast, CEO Bob Iger said Thursday.

Disney CEO David Faber told CNBC’s David Faber in an interview Thursday in Sun Valley, Idaho that the linear TV business has gotten worse in the past year than Iger expected. Disney announced yesterday that Iger has extended his contract as CEO through 2026. He returned to run Disney last year after stepping down as CEO in 2020.

Disney said it is in early talks with potential partners that could enhance its ESPN streaming service by expanding distribution and adding content. He refused to name specific partners. Disney currently owns 80% of ESPN. Hearst Communications owns the remaining 20%.

Disney has refused to put its core ESPN content on its ESPN+ streaming service as it continues to generate billions of dollars in revenue annually through traditional cable television. Still, millions of Americans cancel their cable subscriptions every year, and that number has accelerated in recent years.

“The challenges are bigger than I expected,” Iger said. “The disruption of the traditional television business is the most remarkable. If anything, the disruption of that business has occurred to a greater extent than I know.”

A wider broadcast offer

Iger said he is more confident in his thinking about when ESPN will launch its full direct-to-consumer offering. He declined to say when that would happen.

Iger’s comments about finding a strategic partner indicate he believes ESPN can do better in the streaming environment if it integrates with sports content from other companies. CNBC reported earlier this year that ESPN wants to be the hub for all live sports programming if it agrees to partnerships with other media companies.

ESPN became the crown jewel of Disney’s asset portfolio in the early 2000s, paying increasingly exorbitant sums to pay-TV providers for the rights to carry the network. The popularity of sports programs, including Monday Night Football, made this possible.

But in the traditional cable TV business model, ESPN made money per cable subscriber — regardless of whether a person watched. In the world of streaming, only serious sports fans can purchase a service. This makes it even more important to put as much quality programming on the platform as possible – especially if it costs more than entertainment streaming services.

NFL commissioner Roger Goodell on sports streaming, expansion and the future of ESPN

NFL Commissioner Roger Goodell on Thursday called Iger’s comments about the future of ESPN and the inevitability of its transformation into a direct-to-consumer platform a positive for the league.

He pointed to the NFL’s “Thursday Night Football” exclusive deal with Amazon’s Prime Video, adding that the possibility for ESPN was considered when the final rights deal was signed.

“When we did this a few years ago, we thought about it in the context of our ESPN deal,” Goodell told CNBC’s Julia Boorstin. “So we think that’s going to be a positive change for our consumers. I think our content is going to be a big part of that.”

Disney has agreed to pay about $2.7 billion a year for “Monday Night Football” in 2021, CNBC previously reported.

In addition to finding a strategic partner for ESPN, Iger said he is open to selling or spinning off Disney’s legacy cable networks, including FX and NatGeo and its broadcast group ABC Networks. Iger said Disney will be “expansive” in its thinking about its legacy cable and broadcast assets outside of ESPN.

Iger also said Disney plans to buy Comcast’s minority stake in Hulu as planned. The two companies reached an agreement in 2019 that allowed Disney to buy Comcast’s minority stake at fair market value.

This was reported by CNBC at the beginning of this year Comcast CEO Brian Roberts floated the idea of ​​Disney selling ESPN as part of the Hulu negotiations while Disney’s previous CEO, Bob Chapek, was still running the company. Disney declined these offers at the time.

Other potential partners for Disney could theoretically be included apple, Google or Amazon, three companies with large balance sheets that have global streaming aspirations and already own sports content. Amazon has exclusive rights to the National Football League’s “Thursday Night Football.” Google’s YouTube TV will be the new home for the NFL’s “Sunday Ticket” starting this season. Apple currently owns the rights to broadcast “Friday Night Baseball” and all Major League Soccer games.

—CNBC’s Jessica Golden contributed to this article.

Disclosure: Comcast is the parent company of NBCUniversal, which includes CNBC.

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