What’s for Sale at Disney?

I recently posited that Bob Iger had started an “Everything must go!” sale for The Walt Disney Company’s digital assets.

The timing of his announcement and the location where he made it shouldn’t be lost on anyone, either.

Iger picked the perfect moment and place to begin vital negotiations. Let’s talk about the where and why of it and what’s for sale at Disney.

Iger Sends a Message

Bob Iger joined a tarmac full of billionaires at Sun Valley, Idaho, last week.

As CEO of The Walt Disney Company, Iger “vacationed” at Allen & Company’s exclusive annual event.

As an FYI, Allen & Company is a family-run investment fund.

Their Sun Valley event has evolved into an annual pilgrimage for the financial elite, and it holds an odd place in Disney history as well.

Michael Eisner famously started negotiations here that eventually led to the acquisition of Capital Cities/ESPN.

So, that means the event holds a special place in Bob Iger’s heart as well. That merger signifies the moment he joined Disney.

Over the past two decades, Sun Valley’s so-called “summer camp for billionaires” has earned its reputation as the go-to spot for mergers and acquisitions (M&A).

Comcast once purchased NBCUniversal here, and Jeff Bezos decided to buy the Washington Post after an offer was made at Sun Valley.

Deals get done during this event, and Bob Iger knows this. So, he arrived with a plan.

At the break of dawn on Thursday, July 13^th, Iger performed a live on-air interview with CNBC, and he knew exactly what he wanted to say.

Iger stressed that all of Disney’s linear television assets, the ones he called “no-growth businesses,” are available.

Disney’s Liquidity Problem

Also, Disney is seeking investors for ESPN. Iger remains committed to live sports, but he recognizes that his company faces a challenge there.

The richest man in Asia, Mukesh Ambani, outbid Disney for IPL cricket streaming rights, which sounds trivial to Americans.

However, Disney+ has lost four million subscribers already and is expected to lose at least eight million more this quarter because of that one issue.

For this reason, Iger hopes to entice someone like Apple to invest in ESPN.

That’s what happened at Sun Valley. Iger stealthily kicked off those negotiations during a live broadcast on CNBC.

At that moment, Iger told everyone at Sun Valley that he was open for business.

Iger’s move is akin to when you hold a garage sale or sell something on eBay.

You’re hoping to get rid of old junk you don’t want in exchange for cash.

Then, you’ll turn around and go on a spending spree with your new money.

That’s what we’re witnessing here, although the numbers are a lot bigger.

In Disney’s case, the “old junk” is a bunch of businesses that don’t necessarily fit Disney’s plans.

Iger described them by saying they “may not be core to Disney.” So, you’re probably wondering what that is.

I’ve got a guess about several products that are up for grabs. Let’s quickly examine them.

Star India

The IPL cricket rights I just mentioned were an integral part of Star India, a former Fox asset that Disney acquired in 2019.

Iger, who was still CEO at the time, hoped to build Disney inroads in India and other countries like Indonesia, Malaysia, and Thailand.

Remember the rumors regarding a Disney theme park in Malaysia or nearby Singapore?

Disney Cruise Line will use the latter country as a hub in Southeast Asia.

This market is percolating. However, the loss of IPL cricket rights has proven devastating to Disney+ subscriber totals.

Financially, this isn’t a problem at all, as Disney earned a paltry 59 cents (!) per subscriber here, but it’s a bad look on Wall Street when the company loses customers.

Recent reports suggest that Disney seeks an investment partner for this, and it’d be hysterical if Mukesh Ambani were that person.

After all, the richest man in Asia is the one who lit $2.9 billion on fire to attain IPL cricket rights to boost his cellular phone business.

Disney wants someone like him with cash to burn to enhance Star India’s liquidity. If Iger can’t find that, he may sell.

This asset should be worth at least $10 billion and probably $15+ billion should Disney decide to offload it.

Identifying an exact number is always challenging since it depends on the strength of the market at the time as well as the number of interested buyers.

When Disney sold the regional sports RSNs, it netted less than half of projections…yet that still proved to be an overpay by Sinclair.

National Geographic

Iger loved the idea of acquiring National Geographic so much that he made it a Disney+ tile.

At the top of Disney+, you’ll see clickable tiles for Disney, Pixar, Marvel, Star Wars, and…National Geographic.

In terms of current market value, one of those isn’t like the others.

NatGeo’s 2022 revenue was right at $500 million, which isn’t bad, but let’s be real.

Ant-Man and the Wasp: Quantumania qualifies as a huge disappointment for earning $476 million.

The costs for the two entities are nowhere near the same, but you get the point.

Still, from a historical perspective, excluding Disney itself, NatGeo matters the most. So, the fit is there.

Also, Disney’s decision to highlight it on Disney+ indicates that Iger believes it’s got viable streaming opportunities.

However, when Disney removed a bunch of shows, several of them were NatGeo projects.

Disney recently laid off the magazine’s writing staff, too. You don’t need to know anything about business to recognize the signs here.

As a prestige brand, National Geographic is probably worth several billion dollars.

Disney would probably rather use that for a more streaming-aligned asset.

ABC and Linear Cable Channels

In October 2022, Nexstar Media did something historically significant when it purchased a network television channel.

Few noticed since it was The CW, though. As the newest and least popular network, The CW always faced an uphill climb.

The channel’s odd ownership alliance included Warner Bros. and Paramount, and even in the best of times, it didn’t really make sense.Then, cable cutting ruined linear television as a business model. So, when The CW went on the market, the best offer was a paltry $54 million.

Disney faces the same problem, as it owns several parts of what Iger described as a “no-growth business.”

I’m talking about cable channels like Freeform, FX, FX Movies, the Disney Channel family, the ESPN family, and ABC.

While most of the people reading this have cut the cord, the current linear television model isn’t dead. Sure, it’s dying at an alarming rate, but it’ll hang on indefinitely.

We can use broadcast radio, landlines, and magazines/newspapers as examples of how this process should work.

Currently, estimates suggest that 72 million people still subscribe to cable television, and that number should remain over 50 million into 2025.

So, there IS value in owning linear television channels right now, just not long-term. That’s where the eBay scenario becomes a factor.

Iger has just loudly proclaimed that Disney is open to selling any of the components of its last-generation media empire.

There are interested parties for these channels, as demonstrated by the fact that Tyler Perry is currently negotiating to pay as much as $3 billion for BET.

Perry understandably wants a discount, but this and Byron Allen’s 2018 purchase of The Weather Channel underscore the lasting appeal of linear television.

How These Sales Would Impact Disney

I honestly don’t know how much Disney could get for linear television channels like the FX lineup.

Similarly, I don’t know how/why anyone would value channels strongly identified with the Disney brand like Freeform.

However, most people believe that there are four (not five) network television channels, and one of them, Fox, lacks the history of the others.

An investment fund feasibly could see value in purchasing ABC…and for a lot more money than you’d expect.

Should that happen, Disney would turn around and use its new revenue for two things.

First, Iger has explicitly stated that Disney will buy Hulu. And that choice makes sense, given his other proclamations.

Disney wants to eliminate virtually all its connections to old media. Simultaneously, it will strengthen its fledgling streaming services.

Hulu claims 48.2 million subscribers and could cross 50 million in an August announcement.

For comparison, Peacock only lists 22 million, while Starz has reached 26.3 million.

So, Hulu claims the same subscriber total as those two services combined. Disney understandably wants those customers.

The people still watching on ABC irrefutably have value, especially during live sports events like the recent NBA playoffs.

At some point, we know ESPN will permanently switch to streaming.

When that happens, Disney’s previous broadcast model won’t align with its current/future one.

Iger’s plan calls for selling those outdated parts to build something new and equally strong for the 2030s and 2040s as cable/network television has been for the last 20 years.

How much will Disney get for these decaying assets? We’ll find out soon after the billionaire summer camp ends!

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Feature Photo:cnet.com