Here’s an example of just how chaotic things are in Hollywood these days: Disney CEO Bob Iger‘s recent remarks that the company’s linear TV assets “may not be core” to its business were buried under the lede of his comments that SAG-AFTRA and the WGA are not being “realistic” in their contract negotiations last week.
But now that a small bit of the initial dual strike dust has settled, sources inside and outside of Disney are asking what reaction Iger was looking to provoke by announcing Disney’s intention to“open-minded and objective about the future of those businesses,” which include broadcast network ABC as well as cablers FX, Disney Channel, Nat Geo and Freeform, among others. (Not ESPN, which is run by Jimmy Pitaro under a separate segment of Disney’s business from its other TV and streaming assets.)
“Does he mean all of the linear business or just some of the cable networks? Does he mean ABC and the ABC stations? That part wasn’t clear,” Bank of America Securities media and entertainment analyst Jessica Reif Ehrlich told PvNew. “I’m not sure exactly what he means, if it’s a complete disposal or some kind of different structure — but he was saying the obvious, meaning the business is incredibly challenged on a secular basis. But he’s maybe even more negative than I would have expected because radio has been around for 100-plus years, but it’s still around. And if you’ve listened to Bob’s remarks, it sounds like linear won’t be around. I think broadcast and cable will be around, in some form, for a long time. But it’s a challenging business and they’re fighting off sub losses daily.”
It should be noted that Iger’s comments come amid a summer primetime ratings win for ABC. Currently, the Disney-owned broadcaster is the top-rated network in both adults 18-49 (0.6) and average total viewers (3.2 million) based on Nielsen data from May 25-July 9. In comparison, NBC has a 0.4 rating and is averaging 2.94 million viewers, Fox is at a 0.3 and 1.6 million viewers, and CBS holds a 0.2 and 2.86 million viewers.
In an offsite meeting for Disney’s TV execs led by Disney Entertainment co-chairman Dana Walden on July 18 — one that had been planned since mid-June and was not scheduled in reaction to Iger’s headline-making interview with CNBC on July 12, the Disney CEO did address his remarks.
“He said that linear and news is very important for the company. He was very honest about that piece, and he said we just have to be mindful about the future business and that we’re going to endure,” a Disney insider said. “But it was one of the things that he talked about.”
“Off site aside, it was something that was immediately addressed by all of our leadership the day he said it,” the source added. “We were all like, we can’t keep our head in the sand about linear ratings. … He never said he was going to sell them — he said they may not be core to the business. But what he did say and has said over and over again, is the content is 100% core to our business. So we will continue making that content, and the way that the distribution might change, that’s something that we have to navigate every day.”
This source says Disney TV employees last reckoned with where their “best content” would be living when Disney+ launched in November 2019, and “we endured that.” “Now, we have to figure out what is the next iteration of that? And everybody is having honest conversations about what that looks like.”
But that still leaves many questions about how Disney is evaulating its existing assets. ABC’s eight owned-and-operated TV stations are beachfront real estate that include strong local news leaders in the nation’s top three TV markets: New York, Los Angeles and Chicago. TV stations still make a lot of money — albeit not as much as they once did — which makes them attractive to financial buyers. But it doesn’t make a lot of sense to sell the O&Os but keep the ABC network.
“Who is going to be in a position to buy ABC and the TV stations without piling more debt on their already debt-laden balance sheets?” a source at a TV station group said. “So it was maybe an unforced error by Iger. I’m not sure what his calculation was, maybe he knew what he was doing all along, if he’s trying to condition the marketplace and his own employees for an eventual change in the real world.”
Another source noted that, while Iger has been supportive of ABC throughout both his first and second tenures as CEO, from the moment that Apple struck its first programming deal in 2005 with Disney for “Desperate Housewives,” “Lost” and other shows as pioneers in the download-to-own model for the iPod, the tech giant has been rumored as a potential buyer of the Mouse House. Now that Iger is back (following the ousting of his brief successor CEO Bob Chapek) and trying to cut costs and increase profit wherever he can, a deal that unloads ABC and other linear assets gets several things off Iger’s streaming-and-parks-focused plate at once.
“Does [Iger] mean what he’s saying or is he just talking to Wall Street? What does Disney even look like without its linear business?” one agency partner said. “It could be he’s just trying to make them look like a good acquisition target. He promises to push off these certain assets and then that sets them up to get acquired by someone like Apple.”
With Disney’s next quarterly earnings set to be announced Aug. 9, Iger is likely to be pressed by Wall Street analysts to expand on his comments. He’ll surely be pushed for more detail on how he’s thinking about the linear assets as well as the overall state of Disney amid the ongoing SAG-AFTRA/WGA dual strike.
“It seems like maybe Bob has bit off a little more than he can chew and perhaps has too many quote-unquote children under his banner,” an exec at an ABC rival broadcaster said.
