As Disney (DIS) pursues a new strategic partner for ESPN and considers selling its majority stake in the network, there are many companies it could consider for a partnership.
In an interview with CNBC on Thursday, Disney CEO Bob Iger said the company plans to transition ESPN from a legacy sports network into a streaming platform similar to ESPN+ or Disney+, and is eyeing strategic partners to assist in the process.1 Disney has many options at its disposal, from traditional telecom companies to tech giants looking to grow their streaming business.
A partnership with a big tech company like Apple (AAPL), Amazon (AMZN), or Google parent, Alphabet (GOOGL), could be lucrative as the tech giants aim to expand their streaming presence.
All three already own sports content and are investing heavily in sports programming. Amazon and Google have partnered with the NFL to stream “Thursday Night Football” and “Sunday Ticket,” respectively, while Apple owns streaming rights to “Friday Night Baseball” and Major League Soccer (MLS) games.1
“Apple and Amazon have money to burn, a desire to dig deeper into sports content, and appropriate platform infrastructure. Both currently offer direct-to-consumer (DTC) premium subscription channels for their subscribers to opt in to for an additional charge, which makes them likely candidates for this sort of DTC distribution partnership,” Wedbush Securities analyst Alicia Reese said in an email.
Disney could also pursue a partnership with a traditional telecom company like Comcast (CMCSA), AT&T (T), or Verizon (VZ), all of which have a heavy presence in media and entertainment, and could integrate ESPN with their existing offerings.
The Decline of Cable TV
Falling cable TV viewership is a major reason Disney is considering selling off ESPN, along with several other faltering networks such as ABC, NatGeo, and FX.
In 2018, Disney launched its ESPN+ streaming service but stopped short of putting prime ESPN content onto the platform as its cable TV business still generated billions of dollars in revenue. However, the rise of streaming platforms like Netflix, Hulu, Prime TV, Disney+, and others has accelerated cable’s decline, with millions of Americans canceling their subscriptions every year.
More than 25 million U.S. households dropped their cable TV subscriptions between 2016 and 2021, Insider Intelligence reported, with subscriptions projected to fall a further 4.8% this year. Meanwhile, the share of U.S. households with a traditional pay TV subscription is forecast to drop below a majority for the first time in decades.2
Operating income from Disney's domestic cable channels fell 33% year-over-year in the latest fiscal quarter to $1.57 billion, from $2.35 billion in the same quarter last year.
“The disruption of the traditional TV business is most notable,” Iger said in the CNBC interview. “If anything, it’s happened to a greater extent than even I was aware.”1
Disney shares are up just under 2% so far this year. They’ve fallen 54% from an all-time high hit in early 2021.
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Originally published on Investopedia.com
