Bob Iger Starts an Everything Must Go Sale at Disney
Within hours of extending his contract as CEO of The Walt Disney Company, Bob Iger appeared on CNBC.
We already knew the broad strokes of why Iger had chosen to stay at Disney, and let’s be clear that one of them is because he treasures the job.
Photo: DIsney+
Still, Iger took the opportunity to speak about the future of his company and pontificate on various aspects of his media empire.
In short, Bob Iger delivered a State of Disney address as a way of assuring investors that the company’s brightest days are ahead.
Photo: DIsney+
Here’s everything we just learned and what it foreshadows about Disney’s next two years.
Spoiler: Iger just quietly announced what he’s selling and what he intends to buy! Everything that’s linear must go!
Image: Disney
A Change Is Coming
Since Disney acquired ABC in the 1990s, it has relied on revenue from linear networks to turn a profit.
When I speak of linear networks, I’m referencing Disney’s network/cable media empire, which consists of channels like ABC, ESPN, and Disney Channel.
Photo: Newsweek
Outside observers and casual fans will never fully appreciate how strong and consistent this division has been. It’s a pillar of Disney revenue generation.
From 2012-2014, Disney’s linear networks earned an average of $20.8 billion, with an operating income of $6.92 billion.
Photo: simplemost.com
In 2021 and 2022, that average was $28.2 billion, with an operating income of $8.46 billion.
Given all that revenue, you can understand why Iger has always prioritized Disney’s content machine. It’s the secret sauce that drives Disney’s success.
In a world where cost-cutting has caused cascading problems with linear television, Iger may have accepted his fate.
During the CNBC discussion, Iger described his company’s linear business by saying it “may not be core” to Disney.
Photo:visitorlando.com
We’re talking about a division that had previously been every bit as core to Disney as theme parks or movies…maybe even more!
Folks, Iger just showed up on CNBC and dropped a bombshell that Disney is open for business.
Disney CEO Bob Iger opens the door to selling the company’s linear TV assets: "We have to be open-minded and objective about the future of those businesses." https://t.co/PtrArV7x2Y pic.twitter.com/El7xGLJuCP
— CNBC (@CNBC) July 13, 2023
That’s Iger telling everyone with money on the planet that Disney is willing to sell any and all linear network assets like ABC in the right deal.
You should be hearing sirens and alarms right now as you read that. Iger is warning everyone that he’s about to change the company’s core dynamics.
(Photo by Kimberly White/Getty Images for Vanity Fair)
In fact, Disney’s CEO adds that he’s discussing strategic partnerships for other assets…like ESPN.
The Name of the Game Is Cash
What should you take from that statement? Let’s add a bit of context.
Iger answers the first serious question in this interview by stating that Disney must ensure that: “Our cost structure reflects the economic realities of the business. That includes disruption.
“The transformative work is dealing with businesses that are no-growth businesses and what to do about them.”
Yes, that’s Iger acknowledging that the era of linear television has ended, which we’d all known. Still, it’s a harsh statement to admit.
The CEO follows that statement by hinting strongly that Disney will do whatever is necessary to strengthen its growth businesses.
Throughout this interview, Iger makes it clear that streaming and theme parks are Disney’s new pillars, although we all know that storytelling is as well.
So, Iger is acknowledging that Disney will make deals to sell the parts the Board of Directors no longer deems valuable to the company’s future.
Disney CEO Bob Iger did not rule out selling off some of the entertainment giant’s linear TV assets in an interview on CNBC Thursday, as the company struggles to transition from the traditional television model to streaming. pic.twitter.com/MrMNFpxA0U
— Forbes (@Forbes) July 13, 2023
At some point soon, it sure sounds like Disney intends to sell all its linear programming to the highest bidder.
A long-speculated move involving ESPN could come even sooner. Will that maneuver involve a spinoff or a sale?
Photo: AFP
Based on Iger’s comments, a spinoff sounds exponentially more likely, although his tone suggests that nothing is off the table now.
Iger has spent the last eight months examining the board, and he’s come to realize that streaming businesses all face the same issue.
They haven’t earned enough money yet, which has devalued them.
Photo: ESPN
Iger seems to recognize that an opportunity exists here…if he can find the cash..
Right now, Disney isn’t liquid enough to buy anything. Should the company sell some assets, that situation would change rapidly. And therein lies the game.
Photo by Chip Somodevilla/Getty Images
What Is Disney’s New Plan under Iger?
Consolidation is coming to streaming services. We all know this because too many of them are collapsing under the weight of their own investments.
Monetizing streaming is about as simple as keeping your child focused at Main Street, U.S.A. It ain’t happening right now.
So, several companies like Paramount and Lionsgate are undervalued. Iger’s comments hint that he knows this but cannot take advantage yet.
Should Disney sell ABC and other linear channels, it would get 10 cents on the dollar compared to what it would have ten years ago…and maybe even less.
However, that’s still money Disney could use to buy, say, Paramount (current market cap of $10.9 billion) and/or Lionsgate (current market cap of $2 billion).
I suspect Iger wants Disney to get leaner so that it could enter another acquisition phase.
Photo: DirectTV
Think of this scenario as a professional sports team trading a superstar to acquire some blue-chip prospects. That’s Iger’s thought here.
However, the one thing that Disney won’t do is sell Hulu to Comcast.
Photo: THIERRY CHESNOT/GETTY IMAGES
After several feints and misdirection earlier this year, Iger came out and said that Disney is ready to negotiate a full Hulu purchase right now.
Unless Comcast pushes back on the issue or demands too much money, that topic feels like a foregone conclusion.
During the interview, Iger states:
Comcast
“I spent a lot of time looking at that as part of the future of our streaming business and ultimately concluded that we would be better off having Hulu than not having Hulu.”
So, that’s that. We’re watching the CEO of Disney effectively declare the era of linear television dead and entirely commit to Disney+/Hulu.
Source: techhive.com
Iger is ready to sell the linear television scraps and buy something new with the money.
That’s the signal he just gave Wall Street and any investor still seeing value in those assets.
About the Parks
Photo: orlandoattractions.com
Iger also provided several comments regarding your and my favorite subject, theme parks.
You can watch the full discussion here:
The most significant takeaway involves the pushback that Iger provides when the journalist asks him about a recent report.
Remember how July 4th crowds were surprisingly modest? The journalist understandably wanted to know the cause.
Crowds at Magic Kingdom
As part of the question, the interviewer wondered whether the Florida Feud is hurting Disney.
Iger aggressively rejected this sentiment. He pointed out the extreme heat in Florida that week, as I had in my analysis at the time.
I’m not usually a fan of blaming the weather for anything, but 110-degree temperatures and 200-acre theme parks aren’t an ideal mix.
Iger adds a comment that I’m embarrassed to admit I’d never considered, either.
Because Florida opened early, its theme parks experienced heavier traffic in 2022 than other locales.
In fact, that was true of the state’s entire tourism industry.
Now that all the states have opened, people can travel anywhere, which is different than it was during early 2022.
Credit: Breeze Airways
I wouldn’t expect that to be a big factor in comparing July 2022 to July 2023, but Disney’s big data knows things nobody outside the company could ever understand.
Iger reiterates that the parks are doing quite well, just not as well as 2022. And he throws in the state tourist taxes that I’ve discussed in other articles.
What Iger Said Today
Overall, Iger used his CNBC platform to announce two things: 1) the headline about flagging park attendance is inaccurate and 2) Disney is open for business.
We’re going to see some BIG moves in the company over the next couple of years, likely starting with the purchase of Hulu and the sale of Star India.
Photo: Washington Post illustration; Jordan Strauss/Invision/AP; iStock
You’re gonna wanna stay tuned because everything you thought you knew about Disney is about to change. It’s out with the old and in with the new!
Photo: MickeyBlog
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