Aug 15, 2023

Will Disney split its business in two?

The situation at The Walt Disney Company has been volatile over the past few years, and analysts have been trading ideas about what they think the company's future will look like.

A leading prediction is that Disney may take its liner TV businesses, such as ABC, Freeform, and FX, and split them into separate companies. Further speculation is that a Disney unencumbered by these entities would be more attractive to potential buyers such as Apple and Google's parent company, Alphabet.

Where did this rumor come from: In a CNBC interview in July, he said the company's television business "may not be at the core of Disney." Kevin Mayer, a former Disney executive whom Iger recently brought back to the company as a consultant, has been hinting at some kind of split for months. And when asked during an investor conference call last week whether the company was considering a split, Iger's response was, "As I've said before, we are thinking broadly and considering a variety of strategic options."

Why would Disney do that - Disney would be giving up a huge amount of debt and losing legacy businesses that are hurting the company's bottom line. It would also create a new company that would include Disney's theme parks, studios, and the Disney+ platform. During a conference call last week, Iger cited these three divisions as the businesses most likely to drive the company's growth over the next five years.

Is streaming profitable - not right now. In fact, Disney's streaming business lost $512 million last quarter, bringing its total losses for 2019 and beyond to more than $11 billion. The good news, at least for Iger, is that many analysts were predicting even bigger losses. To improve the company's streaming outlook, the CEO explained that Disney will raise subscription fees for Disney+ and Hulu and begin cracking down on password sharing, like Netflix before it.

How Disney will split its TV business - analysts suggest several possibilities:

Has this been done before - very recently, in 2018, before Time Warner sold its core company to AT&T for $85.4 billion, It sold part of its media business. Shortly thereafter, Warner Brothers was sold to AT&T to protect the telecom company's earnings. If Iger is following such a model, perhaps the long-rumored acquisition of Disney by Apple and Alphabet has some merit.

Will Disney be put up for sale - when asked about it in a telephone conference call last week, Iger again replied matter-of-factly, "I will not say anything more. I won't say any more than that. Just ...... It's not something we're concerned about."