Disney weighs options for TV networks as cord-cutting accelerates

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Walt Disney is preparing for a future without traditional television as chief executive Bob Iger said on Wednesday that he is considering “strategic options” for the company’s portfolio of TV networks.

Iger said three businesses would drive Disney’s future growth: film studios, theme parks and streaming — a list that notably excludes traditional networks such as ABC, where his career began.

“While linear [television] remains highly profitable for Disney today, the trends being fuelled by cord-cutting are unmistakable,” he told investors after the company reported fiscal third-quarter results. “We are thinking expansively and considering a variety of strategic options.”

The company is also considering strategic partnerships for ESPN, the sports cable network, with an eye towards retaining control of the group. “We’ve received notable interest from many different entities, and we look forward to sharing more details at a later date,” he said.

ESPN’s cable television channels remain profitable, but Iger said it is not a question of “if, but when” the network’s premium sports programming shifts entirely to streaming.

“He was very clear that the linear TV assets are for sale,” said Rich Greenfield, an analyst at LightShed Partners. “He doubled down on the fact that ABC is for sale.”

The comments came as Disney reported quarterly results that showed narrowing losses in streaming video but declining revenue and operating income in film and traditional TV units.

Iger said the company was on track to exceed his goal of eliminating $5.5bn in costs amid a push to “restructure the company, improve efficiencies, and restore creativity to the centre of our business”.

Revenue of $22.4bn in Disney’s fiscal third quarter missed Wall Street forecasts by $100mn, but diluted earnings of $1.03 a share were above expectations of 96 cents. Its shares rose more than 4 per cent in after-hours trading after it announced plans to raise prices on many of its streaming offerings and crack down on password sharing.

Iger, who served as Disney chief executive for 15 years before retiring in 2022, returned to the company in November following the ousting of his successor, Bob Chapek. Since then he has confronted myriad challenges, including a declining TV business, box office disappointments and a strike by Hollywood writers and actors. He is also pushing to achieve profitability at Disney’s streaming business by the autumn of 2024.

The company said on Wednesday that the number of subscribers at its Disney+ service fell to 146.1mn, below expectations for 151.1mn. The fall-off is due to the Disney+ Hotstar business in India, where it lost streaming rights to Indian Premier League cricket matches.

However, its “core” Disney+ offering — which excludes the India business — added about 800,000 subscribers.

Disney cut losses at its streaming services by more than $500mn in the quarter to $512mn, more than Wall Street had expected, thanks to higher subscription prices and lower marketing spending. Revenues rose 9 per cent to $5.5bn at the streaming division, which includes Disney+, Hulu and ESPN+.

But sales and profits fell at Disney’s traditional TV networks, which have been suffering from cord-cutting and a poor advertising market. Operating income fell 14 per cent at Disney’s US television channels, while revenue declined 4 per cent.

Iger recently said in an interview with CNBC that linear TV may no longer be “core” to Disney, giving rise to speculation that he may be looking to offload the businesses.

Disney’s recent box office performance also has been the source of concern on Wall Street, including the recent releases of Indiana Jones and the Dial of Destiny, Pixar’s Elemental and Haunted Mansion. Iger said that Disney’s studios had “a tremendous run over the past decade” but acknowledged that “the performance of some of our recent films has definitely been disappointing, and we don’t take that lightly”.

Revenue at Disney’s theme parks rose 13 per cent to $8.3bn, led by growth at Shanghai Disney, which has fully reopened after Covid-19 closures. But operating income fell at its US parks due to declines at Disney World in Florida, which was the first to reopen following pandemic closures.

Iger, who has always considered himself to be a talent-friendly chief executive, angered Hollywood actors and writers recently when he said their strike demands were “unrealistic”.

But he struck a more conciliatory tone on Wednesday, saying “nothing is more important to this company than its relationships with the creative community”.

He also hinted at taking a more active role in seeking a resolution to the strikes. “It is my fervent hope that we quickly find solutions to the issues that have kept us apart these past few months, and I am personally committed to working to achieve this result,” he said.