Disney established four major priorities during their last earnings call and now we have key news about one of those big priorities. This news comes ahead of The Walt Disney Company's next earnings call tomorrow.
The four priorities that were defined during the last call are: achieving significant and sustained profitability in our streaming business, building ESPN into the preeminent digital sports platform, improving the output and economics of our film studios, and turbocharging growth in our Experiences business.
The priority that we care most about is the final “turbocharging growth in our Experiences business” which is also code for big investment in the Disney theme parks but we also have a close eye on all of the other big priorities because none of these priorities exist in a vacuum. The problems and successes of the various businesses within The Walt Disney Company all impact the other units. Today we have news on one of these big priorities that will shake the future of the company and the media industry.
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Disney's Big News On a Key Priority
The big news today comes around the priority of “building ESPN into the preeminent digital sports platform” as outlined by Disney above. As of today, ESPN, Fox Broadcast (not the Fox that Disney bought), and Warner Brothers Discovery are all teaming up to create a joint venture streaming service that will bundle their sports offerings.
The three companies will launch a new joint venture that will bring content from ESPN, TNT, and Fox Sports into a new standalone app. Sara Fischer at Axios describes the service saying the “standalone subscription streaming service will house an unprecedented amount of live sports content from sports networks across all three companies”. She goes on to write that the service will include games from “the NFL, MLB, NHL, NBA, the major college sports divisions, and more”. It will also include live sports content ESPN+ within the app.
Variety reports linear networks that will be included within the app will include “ESPN, ESPN2, ESPNU, SECN, ACCN, ESPNEWS, ABC, Fox, FS1, FS2, BTN, TNT, TBS, truTV and ESPN+, as well as hundreds of hours from the NFL, NBA, MLB and NHL and many top college divisions”. Content currently streamed on ESPN+ will also be streamed.
The service is set to launch this fall and pricing has not yet been announced. The ownership of this new joint venture will be split evenly between the three companies.
Here's what the leadership from the three companies shared about the news.
“The launch of this new streaming sports service is a significant moment for Disney and ESPN, a major win for sports fans, and an important step forward for the media business, said Disney CEO Bob Iger, in a statement. “This means the full suite of ESPN channels will be available to consumers alongside the sports programming of other industry leaders as part of a differentiated sports-centric service.”
“We believe the service will provide passionate fans outside of the traditional bundle an array of amazing sports content all in one place,” said Lachlan Murdoch, CEO of Fox Corp., in a statement.
“This new sports service exemplifies our ability as an industry to drive innovation and provide consumers with more choice, enjoyment and value and we’re thrilled to deliver it to sports fans, said David Zaslav, Warner Bros. Discovery’s CEO, in a statement.
The Wall Street Journal is reporting that Disney remains interested in looking for a strategic partner for ESPN. Tech platforms and leagues, including the NFL, have all reportedly held talks with Disney.
The new service feels reminiscent of the early days of Hulu when multiple different media companies came together to build a joint venture product with split ownership to compete with YouTube. From the beginning, the joint venture structure created issues. The issue with the ownership structure was that the various owners over the years never fully funded the service because there was always an ulterior motive to prevent the service from growing. You can tie specific mistakes that Hulu made back to the ownership structure and the lack of investment. I am curious to see how this new joint venture will be set up in a way that doesn't cause the same mistakes.
We will get more details on this story during the Disney earnings call and the Fox earnings call, both of which are scheduled for tomorrow. Be sure to join the FREE Mickey Visit newsletter to get the latest on this development.
What Does This Big ESPN News Mean For Disney?
Now, let's turn to commentary and why this matters for those more interested in the future of the Disney theme parks.
When all of the other divisions are performing well and the stock price is high, Disney has more of an ability to invest in their other businesses like the theme parks.
Former Disney Chief Strategy Officer Kevin Mayer called ESPN Bob Iger's top priority saying Iger is “definitely most focused on making sure that ESPN, a company that he really believes in strongly, is well positioned for the future…ESPN is his first priority. And he has ideas to fix that and to strengthen it and to change his business model over time. He's there talking publicly about taking it out of the linear TV bundle where it has been exclusively, the main part of ESPN, the flagship, and moving that to also exist in an over-the-top world”.
At the time Mayer also seemingly alluded to the potential joint venture that was announced today saying “if that transition can be helped by parties that could be partners in a substantial way, that's what he's looking to do”.
Mayer also addressed the idea that uncertainty around the stock and the future of these media businesses was hurting morale and the stock price. He said “When all those uncertainty starts getting knocked down, and they're starting to get knocked down, I think you'll see the stock price react. So I think that when the stock price goes up, he articulates a great strategic vision. That'll take care of most of the problems he has.”
ESPN needs to find further distribution after cable subscribers have fallen dramatically in recent years. At the same time that viewership has declined, the cost of sports rights has gone up as they have remained some of the only television assets that draw a live audience. This new joint venture should be set up to drive further viewership of ESPN and provide a lifeboat for the service to shift from cable to streaming. It may also reduce the amount of sports rights that Disney decides they need to license for ESPN.
That said, Disney is still looking for another joint venture partner according to the Wall Street Journal so they still view this as not the complete transformation of ESPN. It's interesting that during the last earnings call Disney stated that they wanted to turn ESPN into a platform. I wonder if there were any versions of these talks where ESPN was going to be the brand for sports but then the other companies pushed back that it had to be an equal partnership venture rather than them bringing their sports to Disney.
Now that Bob Iger's first priority at Disney has a more defined public strategy, there is an increased opportunity for the leadership to focus on other areas of the business like the theme parks.
Disney recently announced their plans to invest $60 billion into the theme parks over the next decade in an effort to turbocharge growth. In that article, we dive further into what those plans could actually look like. Those plans which ladder into the set of four priorities that we discuss above are still waiting for bigger updates around expansion.
It feels like Disney is on the cusp of announcing major investments into the theme parks. In addition to the $60 billion news, Disney also just shared a commitment to spend at least $1.9 Billion in Anaheim at Disneyland as part of the DisneylandForward initiative. We will likely see bigger news announced for the theme parks at the upcoming D23 conference this August. It is expected that Disney will make a wide-ranging set of announcements.
Some have suggested that the event could even have the heft of the first and second Disney Plus investor days where massive amounts of news for future shows and movies were shared. Those events worked to deliver hype for the nascent streaming service and to drive up the stock with investor excitement.
Recently Disney has teased expansions related to Frozen, Zootopia, and Black Panther for their theme parks. See what we know about a potential Frozen expansion at Disneyland here.
We will just have to wait and see what we get announced for the theme parks as we get closer to August. We will keep our eyes trained on The Walt Disney Company's key priorities and keep you updated with the latest news here.
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The absolute first thing that Disney should do is to get RID of “THE VIEW”. In a recent survey done on the West Coast on the W/E of 2/2/24 through 2/4/24 interviewing 297 people.the results were interesting. Before any questions were asked, those that were approached first were asked if they like “DISNEY?” over the years> THose that were NOT previous fans of DISNEY were thanked and told that was all the Questions. Those who responded in the positive, were then asked, “what would you do to improve the WALT DISNEY COMPANY”?
The top answer, 81% said “Bring back Disney to what it used to be”. The next highest answer, 79% was to LOWER the prices at the PARKS. and the 3rd highest 76.2% was to GET RID of “The VIEW”. People were very vocal about vocal about ouw much they HATE “The VIew”