CEO of Disney, Bob Iger, has expressed openness to selling the company’s linear TV assets amidst the challenges faced by the media industry’s shift towards streaming and digital platforms. Iger made this statement during an interview on CNBC following the announcement that his contract had been extended for another two years until 2026. He had previously resumed his role as CEO in November when Disney’s board removed Bob Chapek from the position. Iger’s current contract extends until 2024, and the company intends to identify a successor.
Bob Iger, the executive chairman of Disney, has expressed the importance of assessing the traditional TV business. Disney currently owns various TV networks, including ABC and ESPN. Iger mentioned that Disney would take an expansive approach in considering the future of these networks, leaving the possibility open for a potential sale. He acknowledged the creative contributions that these networks have made to Disney.
ABC News President Kim Godwin supported Iger’s contract extension and encouraged ABC employees to focus on their work and audience. ABC News declined to comment on the matter. In the case of ESPN, a cable TV channel, Disney is exploring options for a strategic partnership. This could involve forming a joint venture or selling a portion of ownership to a suitable partner.
Reorganization Efforts and Strategic Partnerships for ESPN
According to Disney CEO Bob Iger, ESPN, the cable TV channel, is in a different situation. He expressed openness to finding a strategic partner for ESPN, which could involve a joint venture or selling a portion of the company. When Iger left Disney, he had a pessimistic outlook on the future of traditional TV, and upon his return, he found that his concerns were justified. The situation was even worse than he had anticipated.
In a previous interview with Faber in February, shortly after announcing a significant company restructuring, Iger mentioned feeling obligated to Disney and expressed his preference to fulfill his two-year contract. He stated that they had made substantial progress quickly, including significant cost reductions and a significant realignment of the company to address their most critical challenges. The February interview occurred shortly after Disney’s extensive restructuring efforts, which involved thousands of layoffs and billions of dollars in spending cuts.
This reorganization successfully averted a potential proxy fight with activist investor Nelson Peltz. Disney’s new structure consists of three segments: Disney Entertainment, encompassing most of its streaming and media operations; an ESPN division; and a parks, experiences, and product unit.
After his return, Iger took several significant actions. Disney announced plans to reduce costs by $5.5 billion, with $3 billion coming from content (excluding sports) and the rest from noncontent expenses. They also revealed their intention to lay off 7,000 employees.
The Strategy of Disney to Achieve Profitability in the Streaming Industry
Besides searching for his successor, Iger’s primary focus has been making Disney’s streaming business profitable. In the past year, media executives from various companies have been exploring ways to achieve profitability in the streaming industry, especially after Netflix, a significant player, experienced declining subscribers. Netflix responded by introducing an ad-supported tier and cracking down on password sharing to generate more revenue.
Although Disney’s revenue and profit for the last quarter aligned with Wall Street estimates, they faced a loss of 4 million subscribers on their flagship streaming platform, Disney+. However, Iger stated in May that price increases did not cause subscriber losses. Instead, he saw it as an opportunity to raise streaming further service prices and encourage customers to opt for the ad-supported tier, aiming to reach profitability.
To bolster Disney+ and attract more subscribers to its cheaper ad-supported tier, Disney announced their plan to incorporate Hulu content into Disney+ last quarter. Disney owns 66% of Hulu, while Comcast owns the remaining stake. It is anticipated that Comcast will sell its Hulu stake to Disney in early 2024, as previously reported by CNBC.
Iger mentioned that since his return to Disney, he concluded that it is more beneficial for the company to retain Hulu. He assured that the combined offering of Hulu and Disney+ would be available by the end of the year and that ongoing negotiations with Comcast regarding valuation would not hinder this.
Iger stated, “The combination of those apps is designed to, obviously, help the streaming business become profitable.”
