DIS selling ABC?

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There has been some reporting that DIS has been talking to Nexstar about a possible sale of ABC. Nothing is firm at all, not even close, only cursory talks have been held so far is my understanding.

Curious about any opinions on this. I’m sure we will get an article on it from Rick (if he hasn’t done one already, I’ll have to check; I just saw this news now myself). My take at the moment (may change as I hear other opinions): I would rather the company keep ABC, I think it is a great, unique asset, one that can be used to both incubate new programming and amortize content from other platforms DIS owns (the media ecosystem, in other words). I’d sell ESPN first over ABC.

However, if the decision is made to sell ABC, then I’ll just accept it and look forward, but I’ll say this: I’m assuming enough money would be made from it (after taxes) to eliminate just about all of the debt. I would hope the money is used for that purpose primarily (and I’ll include the obligation to CMCSA within that amount). Of course, that would imply a net worth of ABC between $60 and $70 billion … I don’t know, worth that much? DIS paid $19 billion back in '94 I think it was. Not sure ABC appreciated that much. I’ll have to check around to see what ABC might be worth today (and if Nexstar would need partners to financially facilitate the deal)…

Editing this: Well, let me say, I may have vastly overstated ABC’s putative value…I just read Byron Allen reportedly would like to offer $10 billion for ABC and some of DIS’s cable channels…thinking about it, when DIS bought ABC, it actually was buying Capital Cities, which also owned ESPN, and this was at a time when broadcasting arguably was more valuable - i.e., not in an age of streaming. So, please disregard my hypothesis…however, I will say, I think $10 billion has to be a bit low…there has to be billions more to be had for this asset in goodwill alone (if I am using that term in its proper accounting perspective)…

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Just some random thoughts here, since I know nothing about what Iger might be thinking/planning.

In the early 80’s Westinghouse and Disney did some short lived projects together, I was involved in negotiating union rates for a new cable channel to challenge CNN. Turner trumped it by launching Headline News (now all but defunct), one of the other things was the launch of the Disney Channel. Westinghouse wanted it to be pay, Disney opted for free with advertising, planning to use it to “spread the word”, and “incubate new programming” and “amortize other content.” They bought ABC a decade later and followed the same playbook. The idea of having a pay streaming channel is great, but only a streaming channel? I don’t think so.

It’s true they’ve been able to acquire their way into content: Marvel, Pixar, 20th Century Fox, etc. although it’s been expensive. On the other hand, running the TV network and associated channels is labor intensive, full of headaches, and looks to be a diminishing business. But I would note that they’ve been able to profit massively from owning “wide spray” media helping spill the Magic into iconic characters for exploitation in theme parks, cruise ships, merchandise, and more.

Cap Cities came with ESPN which was losing money at the time and they thought about cutting it loose but didn’t; it’s turned out to be a jewel but I maintain it’s less “Disney” than any of the other channels, stations, or network. I see it as vulnerable, perhaps more so, to assumption of the franchise by the people who actually create the product, i.e. the leagues and teams themselves. I wonder how long it will be before that happens.

10 billion for ABC and it’s other channels seems vastly low to me, but what do I know? Disney has almost $50B in debt so it would hardly make a dent.

Iger’s done some smart stuff so I’ll reserve judgement, but all things being equal I’d rather see them hold the broad spray networks and sell ESPN, but that’s just me.

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The cell phone companies have been trying, for 20 years, to get the government to shut down over-the-air broadcast TV, so the cell operators can have the spectrum. They haven’t gotten all they wanted, but the TV spectrum has been cut down substantially over recent years, with the resulting free spectrum auctioned off to the cell operators.

I also keep hearing about how the conventional cable TV business is dying.

So, maybe Iger perceives that the days of a “TV network” having any value, are coming to an end, replaced by streaming, where DIS already has a presence.

Steve

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Thanks for these replies. A lot of food for thought.

I didn’t know that about the cell companies, Steve. I am no expert at all, but I always thought that would never happen because they are considered public airwaves. However, in this age of broadcast losing to linear cable which then lost out to streaming, can the telecoms make that case to a politically-amenable public at this point?

I’ve read that, per the cable is dying issue, the peak was 100 million households wired up (I don’t know if that included satellite), with maybe 60 million hooked up now (going on memory here, I could be wrong, although I am more confident about the 100 million). I wonder: do they know what the lowest wired-up household stat will be at this point…50 million, 40…do they expect it to go to zero? I would assume not that low, but it would be nice if somehow the experts can project that; would make it easier to think about this issue.

That’s a great story, GH…and yes, I have to agree: you sort-of need something like ABC to bounce content around with. In fact, I think ABC has shown some D+ stuff recently; granted, may be strike-related, but I think DIS could use ABC to amortize out some of that content. Hulu is now showing some D+ stuff from time to time, and will soon again with the upcoming Goosebumps project, and that’s a model that makes sense to me.

Never knew ESPN was losing money at one time; always remembered that as a big success. I don’t know much about sports at all, but seems to me the sports-rights issue is a huge conundrum…should ESPN have made the WWE deal instead of Peacock to counteract some of that? I don’t know. But some other alternative sports/sports entertainment may be needed (in addition to exposure to betting). I would agree ESPN does not seem core, but as someone else said, too bad DIS didn’t sell out earlier on when it was more appreciated (and to think Chapek was thinking about doing this and he was ousted as a spreadsheet guy; Iger seems to be looking at a few spreadsheets himself these days)

Iger has indeed done some smart things; Pixar Marvel Lucasfilm were truly brilliant moves. However…when I think of the disastrous video-game investments (and that was theirs to lose at the time, they could have avoided all that with simply licensing), when I think of Fox assets, when I think of Maker Studios…and when I think of how Iger at one time seemed to dismiss cord-cutting woes when the market was saying otherwise, and how he signed licensing deals for content and then wanted to buy them back when D+ was hatched (in other words, he seemed to lack foresight at that point)…and how he was all in on streaming with low-volume then switched to high-volume (Fox purchase, in part, driving that) and now, he believes streaming subs are not the answer…well, I think the following: he’s a brilliant guy, no doubt, and I would love to sit and have an illuminating conversation with him about the industry and life…but, it seems like everyone only gets a few really good ideas in one direction; he should have maybe been a seller of stuff while at the same time being an acquirer. You have to be good at both. (Heck, remember when he was interested in Sky? What a disaster that would have been)

Anyway, just some thoughts. I’ll echo the thought and ask what do I know as well. No matter, I am still long DIS, adding to the position, and I will give Iger time (even though I may well-meaningly criticize from time to time)…