disney Chief Executive Bob Iger has opened the door to selling the company’s linear TV assets as business struggles amid the media industry’s transition to streaming and digital offerings.
Iger appeared on CNBC Thursday morning, the morning after the company announced it was extending his contract by two years through 2026. Disney’s board ousted Bob Chapek, who was under contract through 2024 and plans to return to the helm in November. Find your next successor.
“Coming back, I realized there were a lot of challenges facing the company, some of which I had brought on,” Iger told David Faber at Allen’s company’s annual meeting in Sun Valley, Idaho. He noted, He’s accomplished a lot after seven months, but there’s still more to do.
Iger said the first task is to evaluate the traditional TV business. Disney owns an array of television networks, from ABC radio stations to cable channels like ESPN.
Disney will think “broadly” about the traditional TV business, opening the door to a possible sale of the TV network. “They’re probably not core to Disney,” Iger said, adding that creativity from those networks has been key for Disney.
ABC News President Kim Godwin on Thursday expressed support for Iger’s contract extension to staff, according to a person familiar with the matter. Godwin encouraged ABC crews to focus on their work and their audience, the person added.
An ABC spokesman declined to comment.
Cable channel ESPN, however, is in a different situation. In this regard, Iger said that Disney is willing to find a strategic partner, which can be in the form of a joint venture or an ownership sale.
Iger said that when he left the company he predicted the future of traditional TV and was “very pessimistic,” and has since returned to find he was right, adding that things were worse than he expected.
Iger last spoke to Faber in February, shortly after the company announced a major restructuring, saying he felt a “sense of obligation” to return to Disney and that he would prefer to stay on to fulfill his two-year contract.
“We’ve done a lot of work very quickly, significantly reduced costs, and made a major realignment of the company,” Iger said. “But some of our biggest challenges were head-on.”
In February, Disney announced a sweeping reorganization that included layoffs of thousands of jobs and billions of dollars in spending cuts.
The restructuring avoided a potential proxy fight with activist investor Nelson Peltz.
Disney reorganized into three divisions: Disney Entertainment, which includes most of its streaming and media businesses; ESPN; and Parks, Experiences and Products.
These are some of the most significant actions in the months since Iger’s return. Disney revealed that it will cut costs by $5.5 billion, with $3 billion coming from content (excluding sports) and the rest from non-content costs. The company earmarked 7,000 job cuts.
In addition to finding his next successor, Iger’s mission is to make Disney’s streaming business profitable.Last year, media execs of all companies focused on making streaming profitable, especially after behemoths Netflix The company lost subscribers early last year and has since set up an ad-supported layer and cracked down on password sharing to boost revenue.
While the company reported revenue and profit in line with Wall Street expectations last quarter, subscribers to its flagship streaming service, Disney+, fell by 4 million.
Those user losses were offset by price increases, which Iger said in May were not the result of lower user numbers. On the streaming side, instead, he said, it showed room to grow further and push customers into the ad-supported tier to monetize.
In an effort to scale Disney+ and attract more subscribers to the cheaper ad-supported tier it launched last year, the company announced last quarter that it would add Hulu content to Disney+.
Disney has been considering whether it should buy all of Hulu, given its 66% stake, Comcast own the rest. Comcast may sell its Hulu stake to Disney in early 2024, CNBC previously reported.
Iger said Thursday that since his return to Disney, he’s finally come to the conclusion that the company “would be better off with Hulu.”
He added that the combined Hulu and Disney+ service will launch by the end of the year, and upcoming talks with Comcast on a valuation won’t stop that either.
“The combination of these apps is clearly trying to help the (streaming) business become profitable,” Iger said.
Disney is scheduled to report its fiscal third-quarter earnings on Aug. 9 after the market closes.
Disclosure: Comcast is the parent company of NBCUniversal (including CNBC).
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