Will Disney Ditch Cable? Here’s What We Know.

First, NBCUniversal did it.

Now, Warner Bros. Discovery has thrown its name into the hat.

At this point, most Wall Street executives are looking at Disney and wondering not if, but rather when.

So, will Disney finally ditch cable? Here’s why so many investors deem it a foregone conclusion.

Warner Bros. Says, ‘Never Mind’

In 2022, Warner Bros. Discovery announced sweeping changes to consolidate two streaming services.

Warner Bros. and Discovery would join forces at the behest of the new CEO of the corporation, David Zaslav.

Zaslav had previously run Discovery and identified an opportunity to take control of Warner Bros., one of the most iconic Hollywood studios.

In simplest terms, a minnow swallowed a whale.

Zaslav was immediately proven to be in way over his head, and we’re learning just how much right now.

The executive’s primary initiative when he joined Warner Bros. Discovery (WBD) was that merger I mentioned.

Zaslav had run the low-quality but high-margin business at Discovery.

He inexplicably believed that this was the same as operating a business on the scale of Warner Bros.

The CEO merged his cheap, forgettable cable programming like Naked and Afraid, Moonshiners, and Property Wars with the existing Warner Bros. content library.

We’re talking about classic HBO shows such as The Sopranos, The Wire, and Game of Thrones.

Zaslav, in his infinite wisdom, honestly believed that the trashy Discovery content would perform just as well as the pedigreed, century-old Warner Bros. programming.

That was not a smart bet.

The company took on a massive amount of debt while inexplicably trying to destroy the value of HBO.

Before Zaslav, the Warner Bros. streaming service was known as HBO Max.

Zaslav stripped HBO from the name in hopes of not needing to pay for pricey HBO content.That was then, and this is now.

YOU Could Have Done Better Than Zaslav

Warner Bros. Discovery just admitted they have lost this game and have reset to a previous save point.

We’re going back to 2021, the pre-Zaslav salad days of Warner Bros.

WBD has already announced that it will change the name of Max back to HBO Max soon.

That probably has something to do with the fact that the only content people watch is the HBO stuff.

Also, this seems like a good time to mention that Warner Bros. earned about $39 billion last year.

Just to be clear, that wasn’t their profit. That was their total revenue.

WBD’s current debt is $38 billion. The company is in a world of financial hurt, bordering on complete ruin.

So, WBD has done the same thing that poorly-run corporations love to do.

They’re going to spin off part of their company into a new corporation, one they’ll saddle with a lot of their debt.

If that sounds familiar, you’ve been paying attention. We had a similar conversation last November.

That’s when NBCUniversal announced it would spin off most of its debt into a new entity called VERSANT.

What’s VERSANT? In simplest terms, it’s the future site for the linear television graveyard.

That’s where these old media conglomerates plan to dump the bodies as well as the debt.

I realize I’m being vague, so here are the specifics.

Comcast owns a streaming media service known as Peacock.

It’s… not doing great.

While most major streaming services are turning a profit, Peacock remains a substantial revenue loser.

ANYBODY Could Have Done Better Than Zaslav

Comcast, the corporate owner of NBCUniversal, is tired of all its losses.

That’s partially because NBCUniversal’s linear networks, conventional cable channels like USA Network, Syfy, and E! are earning less money.

Soon, they won’t be profitable at all.

So, in a move that would make any Disney villain proud, Comcast will dump much of its debt (nearly $100 billion) and any programming it doesn’t like into its spinoff, VERSANT.

WBD plans to do the same with its linear programming, including TNT, TBS, and truTV.

While WBD will create its own spinoff, this entity will likely merge with VERSANT at some point.

Notably, WBD is keeping the good stuff, just like Comcast.

For WBD, that means anything profitable that people actually want to watch.

Goodbye, Discovery content.

Comcast is doing the same thing in a more shameless way. It’s ditching every cable channel BUT Bravo.

Would you like to guess which cable channel makes the most money for Comcast?

Okay, it’s technically either MSNBC or CNBC, but Comcast would like to be rid of all news gathering organizations right now.

All this is well and good, but you’re looking at it and wondering what it has to do with Disney.

That’s when I point you back to the article last November.

Iger > Zaslav

Disney CEO Bob Iger and CFO Hugh Johnston went on CNBC and derisively dismissed the possibility of a similar spinoff just eight months ago.

While I know for a fact from studying Disney’s earnings reports that its strategy is sound, many analysts believe Disney will eventually do the same thing.

In the wake of WBD’s announcement to forget everything they’ve done over the last three years, Wall Street and Hollywood moguls lined up to Monday Morning Quarterback Zaslav’s failures.

Here’s the relevant quote from the article:

“Spinning out the cable channels ‘is a huge problem off [Zaslav’s] plate. It gives it to Gunnar [Wiedenfels, WBD’s CFO],” said yet a third top media executive. “Everyone is doing it — Lionsgate, Comcast, now Warner Bros. – and the last person who’ll figure it out is [Disney CEO] Bob Iger.”

While the source is nameless, let’s be clear.

That’s a top media executive telling the founder of the prestigious publication The Wrap that Iger will do this at some point.

Fair or not, the perception right now is that Iger is being stubborn, because he started his career in linear broadcast television.

In fact, Iger entered Disney as the president of Capital Cities, the company that owned ABC and ESPN.

Still, Disney currently lists long-term debt of $39 billion.

It’s not in the same spot as WBD, because Disney will earn at or near $100 billion this year.

Even so, Disney would like to shave down its debt, which is why a spinoff sounds so appealing.

Will Disney Finally Ditch Cable?

Disney could theoretically shave half or possibly more of its debt by ditching its linear networks.

That entity would likely merge with VERSANT, mirroring what happened with broadcast radio 25 years ago.

The idea is too tantalizing to ignore indefinitely.

At some point, Disney appears likely to follow the paths of Comcast and WBD.

In fact, that time is seemingly coming soon, as the so-called ESPN Flagship service will launch this fall.

Don’t think it’s coincidental that Disney simplified this service’s name to ESPN.

 

The company wants you to consider the streaming service, not the cable channel, as the true form of ESPN.

So, while I doubt any sort of proclamation about a spinoff is happening before then, I pretty much expect it a year from now.

At that point, Disney will finally ditch cable, no matter what Bob Iger said on CNBC on Tuesday.

Thanks for visiting MickeyBlog.com! Want to go to Disney? For a FREE quote on your next Disney vacation, please fill out the form below, and one of the agents from MickeyTravels, a Diamond Level Authorized Disney Vacation Planner, will be in touch soon!

Feature Photo: simplemost.com