Disney's future, a hot topic among Hollywood elite
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[August 14, 2023]
By Dawn Chmielewski
(Reuters) - Hollywood's favorite parlor game of the week: What will Bob
Iger do next?
From Culver City to New York City, the U.S. media and entertainment
industry's powerbrokers are spinning scenarios about the future and the
possible breakup of the industry's most powerful conglomerate.
Walt Disney chief executive Iger, who returned to the company in
November for a second stint, triggered the vigorous industry chatter in
mid-July when he suggested during a CNBC interview that the company's
television businesses, including its stations and cable channels, "may
not be core to Disney."
His remarks spurred a frenzy of activity among bankers and private
equity players, who began evaluating whether they should "make a move,"
one banker, speaking on condition of anonymity, told Reuters.
"He's signaling to investors," said the banker. "It starts people
thinking."
Iger fueled the conjecture last week during Disney's third-quarter
earnings call with investors, when he said the company is mulling
strategic partnerships for its marquee sports brand, ESPN, and has
received "notable interest," though Disney planned to retain control.
The three businesses that will drive the greatest growth over the next
five years, he said, are the company's film studios, theme parks and
streaming video.
One top media executive envisioned Iger spinning off the ABC broadcast
network, local TV stations and Disney's 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 Disney would spin off the
television asset to its shareholders as a separate, publicly traded
company by 2024, with private equity potentially playing a role.
A fourth media executive who has run traditional and digital media
companies said Disney may need to attract outside investors in ESPN so
that it can competitively bid for increasingly expensive sports media
rights, such as for NBA games, which expire after the 2024-25 season.
That would potentially free up cash for Disney to acquire NBCUniversal's
stake in Hulu, assuming full ownership of the streaming service next
year. Under an agreement reached in 2019, NBCU parent Comcast can
require Disney to buy the Hulu stake, or Disney can require NBCUniversal
to sell it, as early as January 2024, at a market value of at least $5.8
billion.
Disney declined to comment.
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The Walt Disney Company CEO Bob Iger
attends the Nominees Luncheon for the 95th Oscars in Beverly Hills,
California, U.S. February 13, 2023. REUTERS/Mario Anzuoni/File Photo
THE 'FULL BEWKES'
The fourth executive, along with other senior media figures who
spoke with Reuters, said Iger is likely crafting options, retaining
ownership of ESPN, with the opportunity to shed it in the future to
position Disney as a more attractive acquisition target.
The executive likened the strategy to one executed by former Time
Warner CEO Jeff Bewkes, who sold off parts of the media
conglomerate's business before selling its core film and television
unit to AT&T in an $85.4 billion deal that closed in 2018, said the
veteran executive.
"You sell the parts, then sell what's left," said the veteran.
"That's the full-Bewkes."
That may well be Iger's end-game, these executives speculated. To
make it attractive for the only likely buyers big enough to digest a
Disney - Apple or Alphabet's Google - Iger would need to prune
Disney down to just the parts that preserve its global intellectual
property portfolio, while separating out its cash-generating legacy
businesses like TV.
"There's no way a FAANG company is going to buy his company when he
has all these cable channels, a broadcast network and a cable sports
network," said the executive, using an acronym for the five major
U.S. technology companies, Facebook (now Meta), Apple, Amazon,
Netflix and Google. "It's not the business they're in, and it's
unlikely the government would ever allow it."
Amazon, fresh off its $8.5 billion acquisition of MGM last year,
would not likely be interested in such a deal, said one source
familiar with the matter. And Facebook is not viewed as interested
in traditional media assets.
Needham and Co analyst Laura Martin floated the investor appeal of
Apple acquiring Disney, writing in March that the combination of
great content and strong distribution would create value. This idea
continues to circulate in Hollywood.
"Obviously, anyone who wants to speculate about these things would
have to immediately consider the global regulatory environment,"
Iger said, when asked about the possibility during the investor
call. "I'll say no more than that. It's just - it's not something
that we obsess about."
In that, he may be alone.
(Reporting by Dawn Chmielewski in Los Angeles; Editing by Kenneth Li
and Richard Chang)
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