https://www.cnbc.com/2023/02/08/disney-r...ation.html

Big reduction in labor force and subdivision of Streaming, Theme Parks, and ESPN.

BTW: This follows in the same vein of a FOX explanation about why they cut the RSNs, did not invest more in streaming (difficulty in surfing options), and still sees a future in cable subscriptions. You should be able to find that article somewhere on Google from either today or yesterday.

This is a dumb move.

ESPN is far more valuable as a stand-alone company than as part of the Mouse House. There are no longer any substantial synergies between ABC and ESPN.

If a large business unit has no synergies with the rest of your company, then you have become a conglomerate. Conglomerates destroy the value of the individual business units by adding an extra layer of costly managers who can't possibly be experts in every industry the firm is involved in. Even worse, it slows down decision making.

This issue was settled like 30 years ago. You'll have trouble finding a single financial or economic expert in academia or Wall Street who thinks that conglomerates increase shareholder value.

(02-09-2023 08:27 AM)Captain Bearcat Wrote:  This is a dumb move.

ESPN is far more valuable as a stand-alone company than as part of the Mouse House. There are no longer any substantial synergies between ABC and ESPN.

If a large business unit has no synergies with the rest of your company, then you have become a conglomerate. Conglomerates destroy the value of the individual business units by adding an extra layer of costly managers who can't possibly be experts in every industry the firm is involved in. Even worse, it slows down decision making.

This issue was settled like 30 years ago. You'll have trouble finding a single financial or economic expert in academia or Wall Street who thinks that conglomerates increase shareholder value.

1. There is absolutely overlap between ESPN and abc. A good number of Marquee ESPN events are broadcast on abc. But that's a fairly minor issue if you did split I think you would assign ABC and the ABC owns television stations to the ESPN side of the split and not the Disney side.

2. ESPN plus and Disney Plus have a whole lot of overlap because of the bundle. At this point, that's the real connection between ESPN and the rest of the Disney Empire. Without being bundled by Disney with Disney plus, I don't think ESPN plus has 25 million subscribers, I think Disney Plus has five or 10 million fewer us subscribers.

The conglomerate is held together because essentially Disney is trying to rebuild the Cable Bundle out of only Disney components.

(02-09-2023 08:27 AM)Captain Bearcat Wrote:  This is a dumb move.

ESPN is far more valuable as a stand-alone company than as part of the Mouse House. There are no longer any substantial synergies between ABC and ESPN.

If a large business unit has no synergies with the rest of your company, then you have become a conglomerate. Conglomerates destroy the value of the individual business units by adding an extra layer of costly managers who can't possibly be experts in every industry the firm is involved in. Even worse, it slows down decision making.

This issue was settled like 30 years ago. You'll have trouble finding a single financial or economic expert in academia or Wall Street who thinks that conglomerates increase shareholder value.

I agree with what "JB" says above, and additionally, I think the point of the reorganization is to allow ESPN to be more entrepreneurial, give it a bit more autonomy, while still leveraging the synergies with the rest of Disney. It also will make it organizationally easier for Disney to spin ESPN off in the future it it decides it should do that. But IMO, if Disney were to divest itself of ESPN, it would immediately become a much less powerful entertainment company, and thus be less able to achieve its goals in its other areas.

To me, sports is a form of entertainment, a major form, and Disney is in the entertainment business. So sports broadcasts complement what it does with movies, TV shows, theme parks, etc.

We'll see how things play out, though.

Interesting read. My first thought, showing my age a bit, was back to the movie "All the President's Men" and the concept of a non-denial-denial. I am guessing for sure, but his quotes about ESPN sound like "coach-speak".

1. "We are not engaged in any conversations or considering a spinoff of ESPN." Direct and to the point, but also clearly talking about the current situation. I sounds like a GM saying they are not interested in trading Kevin Durant when they mean, make me an offer I can't refuse.

2. He also said a spinoff was considered "in my absence", when it was decided it wasn't the right move for Disney. "In my absense" means under Chapek, who just got fired. Seems like a really plausible way to say the decision to keep him was made by the dummy I'm replacing, so we'll see.

We will, indeed, have to see. I have no idea what will happen, but this interview creates more smoke in my mind than it eliminates. Particularly when he says he will put more "decision-making back into the hands of our creative teams and rationalize costs".

Interesting...

(02-09-2023 08:27 AM)Captain Bearcat Wrote:  This is a dumb move.

ESPN is far more valuable as a stand-alone company than as part of the Mouse House. There are no longer any substantial synergies between ABC and ESPN.

If a large business unit has no synergies with the rest of your company, then you have become a conglomerate. Conglomerates destroy the value of the individual business units by adding an extra layer of costly managers who can't possibly be experts in every industry the firm is involved in. Even worse, it slows down decision making.

This issue was settled like 30 years ago. You'll have trouble finding a single financial or economic expert in academia or Wall Street who thinks that conglomerates increase shareholder value.

I’d disagree that ESPN doesn’t have synergy with the rest of Disney. I think that they make a ton of sense for Disney or any other media and entertainment company because if a core business is to get consumers to watch your product on a TV screen - whether it’s streaming or linear TV - then sports constitute a huge market segment of that business. Disney is also in the ad selling business and essentially the only thing that anyone buys ads at any premium value for anymore is for sports.

The irony of the Big Ten no longer being on ESPN is that the ESPN Rose Bowl contract is a *perfect* encapsulation of Disney synergy at its best: Disneyland theme park tickets are combined with Rose Bowl tickets in travel packages to Southern California, the Rose Parade is on ABC that “just happens” to have actors and in the parade that are starring in Disney movies and TV shows, the Parade broadcast promotes the Rose Bowl Game broadcast on ESPN later in the day, and then both the Parade and Game broadcasts integrate promotions for Disney movies, parks, TV, streaming and other parts of their portfolio.

Disney *invented* synergy. If you Google “Walt Disney Synergy Map”, you’ll pull up Walt’s own hand-drawing of how he wanted to interconnect all of the parts of his business (e.g. movie studio, theme parks, TV shows, merchandising, music studio, etc.) from over 60 years ago. It’s another indication that the guy was a business genius (beyond being an artistic genius) because you can see that today’s companies are still trying to figure out what Walt knew was the model for an integrated company many decades before the Internet was in our homes.

Now, having said all of this, separating ESPN from the rest of the entertainment assets and putting it into its own division actually allows Disney to spin it off easily if it eventually decides that’s the right path moving forward. That could very well happen because there are a lot of indications that sports could simply not be profitable in a streaming model in the way that it was in the basic cable model. However, I don’t think that they would spin off ESPN because it’s a matter of a lack of synergy. Ultimately, sports are a massive part of the entertainment business and entirely drive the TV ad business, both of which are core components for Disney. Sports have a pretty direct synergy to the rest of the Disney business.

(02-09-2023 08:48 AM)NotoriousOne Wrote:  Interesting read. My first thought, showing my age a bit, was back to the movie "All the President's Men" and the concept of a non-denial-denial. I am guessing for sure, but his quotes about ESPN sound like "coach-speak".

1. "We are not engaged in any conversations or considering a spinoff of ESPN." Direct and to the point, but also clearly talking about the current situation. I sounds like a GM saying they are not interested in trading Kevin Durant when they mean, make me an offer I can't refuse.

2. He also said a spinoff was considered "in my absence", when it was decided it wasn't the right move for Disney. "In my absense" means under Chapek, who just got fired. Seems like a really plausible way to say the decision to keep him was made by the dummy I'm replacing, so we'll see.

We will, indeed, have to see. I have no idea what will happen, but this interview creates more smoke in my mind than it eliminates. Particularly when he says he will put more "decision-making back into the hands of our creative teams and rationalize costs".

Interesting...

All interviews are a Rorschach test of sorts. People hear what they wish to hear.

CNBC covered this well this morning. In the breakdown ESPN was still a clear money maker in spite of some board resistance here at CSNbbs to ESPN, and piggybacking on the earlier statement by FOX, CNBC indicated this morning that the big loser for Disney was the streaming service of Disney+ which apparently will be separated from ESPN+. Movies also were a loser, which I'm sure COVID still impacts. Theme parks and ESPN were the money makers.

(02-09-2023 08:48 AM)NotoriousOne Wrote:  Interesting read. My first thought, showing my age a bit, was back to the movie "All the President's Men" and the concept of a non-denial-denial. I am guessing for sure, but his quotes about ESPN sound like "coach-speak".

1. "We are not engaged in any conversations or considering a spinoff of ESPN." Direct and to the point, but also clearly talking about the current situation. I sounds like a GM saying they are not interested in trading Kevin Durant when they mean, make me an offer I can't refuse.

I mean, is there any wording that would have convinced you otherwise? A CEO can't say they'll never do something, because business conditions will be different in 5, 10, 20 years. But would any wording have convinced you that Disney isn't divesting or spinning off ESPN in the next 5 years? Next 10 years?

And don't say "specify a timeframe", because people woiuld take that as a pretty firm indicator that they're getting rid of ESPN at the end of that timeframe.

Quote:2. He also said a spinoff was considered "in my absence", when it was decided it wasn't the right move for Disney. "In my absense" means under Chapek, who just got fired. Seems like a really plausible way to say the decision to keep him was made by the dummy I'm replacing, so we'll see.

Or that, even thinking about getting rid of ESPN was an idiot move by my idiot predecessor / successor / protege. Either way, definitely was the other guy not me.

Quote:We will, indeed, have to see. I have no idea what will happen, but this interview creates more smoke in my mind than it eliminates. Particularly when he says he will put more "decision-making back into the hand of our creative teams and rationalize costs".

Interesting...

I don't think theres anything he could have said that woudn't have created more smoke in your mind than it eliminated.

the thing about decision making and creative teams was about a Chapek reorganization that took power away from the MArvel, Pixar and other units and had their budgets controlled by a Streaming department. that's the part that's gone.


Big Announcement from 2020
The creation of content will be managed in three distinct groups—Studios, General Entertainment, and Sports—headed by current leaders Alan F. Horn and Alan Bergman, Peter Rice, and James Pitaro.

So putting ESPN in a separate box from the rest of Disney isn't even a new initiative, it's what Disney's been doing for at least 3 years -- Entertainment, Parks and Sports.

Here's the aforementioned Walt Disney Synergy Map:

https://hbr.org/resources/images/article...ney-2.jpeg

Walt drew this synergy map in 1957. It took most other entertainment businesses until the 1990s or even this century to even begin to understand what Disney has been doing since the 1950s. It's why Disney fans exist en masse while there aren't Comcast/Universal, Paramount or Warner Bros. fans.

(02-09-2023 08:59 AM)JRsec Wrote:  

(02-09-2023 08:48 AM)NotoriousOne Wrote:  Interesting read. My first thought, showing my age a bit, was back to the movie "All the President's Men" and the concept of a non-denial-denial. I am guessing for sure, but his quotes about ESPN sound like "coach-speak".

1. "We are not engaged in any conversations or considering a spinoff of ESPN." Direct and to the point, but also clearly talking about the current situation. I sounds like a GM saying they are not interested in trading Kevin Durant when they mean, make me an offer I can't refuse.

2. He also said a spinoff was considered "in my absence", when it was decided it wasn't the right move for Disney. "In my absense" means under Chapek, who just got fired. Seems like a really plausible way to say the decision to keep him was made by the dummy I'm replacing, so we'll see.

We will, indeed, have to see. I have no idea what will happen, but this interview creates more smoke in my mind than it eliminates. Particularly when he says he will put more "decision-making back into the hands of our creative teams and rationalize costs".

Interesting...

All interviews are a Rorschach test of sorts. People hear what they wish to hear.

CNBC covered this well this morning. In the breakdown ESPN was still a clear money maker in spite of some board resistance here at CSNbbs to ESPN, and piggybacking on the earlier statement by FOX, CNBC indicated this morning that the big loser for Disney was the streaming service of Disney+ which apparently will be separated from ESPN+. Movies also were a loser, which I'm sure COVID still impacts. Theme parks and ESPN were the money makers.

For sure - ESPN is still a cash cow at the moment. Putting aside any synergy questions for the moment, it would be strange to see a company that is hemorrhaging cash in one unit (streaming) to sell off an asset that is still a cash cow (ESPN) if only so the cash cow can continue to paper over the money-losing unit. (The gazillion dollar question is still how much longer will ESPN *be* a cash cow. Note that DVD-by-mail generated a ton of cash for Netflix for many years after the streaming service was started. Netflix used that DVD-by-mail cash flow to stem streaming losses until the DVD-by-mail business died.)

One key note from the CNBC article:

“Iger did note that he and Pitaro would be more selective on what it spends on sports rights, noting the upcoming negotiations for NBA rights.”

This goes to what I’ve been saying for quite awhile about constraints on ESPN spending going forward. ESPN feels that it *needs* the NBA rights and it’s going to conserve whatever it can to retain them. They know the NBA rights are going to skyrocket in value (as Amazon has all but said that it’s a property where they’re willing to get into an NFL-level bidding war), so ESPN isn’t doing anything other than super cheap deals (or not spending at all) until they re-up with the NBA.

(02-09-2023 09:26 AM)Frank the Tank Wrote:  

(02-09-2023 08:59 AM)JRsec Wrote:  

(02-09-2023 08:48 AM)NotoriousOne Wrote:  Interesting read. My first thought, showing my age a bit, was back to the movie "All the President's Men" and the concept of a non-denial-denial. I am guessing for sure, but his quotes about ESPN sound like "coach-speak".

1. "We are not engaged in any conversations or considering a spinoff of ESPN." Direct and to the point, but also clearly talking about the current situation. I sounds like a GM saying they are not interested in trading Kevin Durant when they mean, make me an offer I can't refuse.

2. He also said a spinoff was considered "in my absence", when it was decided it wasn't the right move for Disney. "In my absense" means under Chapek, who just got fired. Seems like a really plausible way to say the decision to keep him was made by the dummy I'm replacing, so we'll see.

We will, indeed, have to see. I have no idea what will happen, but this interview creates more smoke in my mind than it eliminates. Particularly when he says he will put more "decision-making back into the hands of our creative teams and rationalize costs".

Interesting...

All interviews are a Rorschach test of sorts. People hear what they wish to hear.

CNBC covered this well this morning. In the breakdown ESPN was still a clear money maker in spite of some board resistance here at CSNbbs to ESPN, and piggybacking on the earlier statement by FOX, CNBC indicated this morning that the big loser for Disney was the streaming service of Disney+ which apparently will be separated from ESPN+. Movies also were a loser, which I'm sure COVID still impacts. Theme parks and ESPN were the money makers.

For sure - ESPN is still a cash cow at the moment. Putting aside any synergy questions for the moment, it would be strange to see a company that is hemorrhaging cash in one unit (streaming) to sell off an asset that is still a cash cow (ESPN) if only so the cash cow can continue to paper over the money-losing unit. (The gazillion dollar question is still how much longer will ESPN *be* a cash cow. Note that DVD-by-mail generated a ton of cash for Netflix for many years after the streaming service was started. Netflix used that DVD-by-mail cash flow to stem streaming losses until the DVD-by-mail business died.)

One key note from the CNBC article:

“Iger did note that he and Pitaro would be more selective on what it spends on sports rights, noting the upcoming negotiations for NBA rights.”

This goes to what I’ve been saying for quite awhile about constraints on ESPN spending going forward. ESPN feels that it *needs* the NBA rights and it’s going to conserve whatever it can to retain them. They know the NBA rights are going to skyrocket in value (as Amazon has all but said that it’s a property where they’re willing to get into an NFL-level bidding war), so ESPN isn’t doing anything other than super cheap deals (or not spending at all) until they re-up with the NBA.

Or they're just in coupon-clipping penny-pinching mode globally, and maybe ESPN in five years has to make do with a lot less NBA. It's hard to imagine ESPN and the NBA not reaching an agreement for SOME NBA-on-ESPN, but ESPN gave up a lot of baseball in the last round or two of MLB contracts.

They kept their finger in the pie, kept the relationship open and highlight rights and some playoffs, but ESPN didn't bid to keep Fox and Turner out, didn't throw money at MLB to put games on ESPN+ instead of Peacock and Apple.

Given the financial disparity between Amazon and Disney, I see the same sort of future for the NBA on ESPN.

A lot more specific comments from Bob Iger on ESPN on this Athletic article:

https://theathletic.com/4170101/2023/02/...ed_article

More details explaining why this isn’t setting ESPN for a spin-off, how they’re going to be “more selective” on spending on sports rights, and how they want to retain the NBA.

(02-09-2023 09:26 AM)Frank the Tank Wrote:  

(02-09-2023 08:59 AM)JRsec Wrote:  

(02-09-2023 08:48 AM)NotoriousOne Wrote:  Interesting read. My first thought, showing my age a bit, was back to the movie "All the President's Men" and the concept of a non-denial-denial. I am guessing for sure, but his quotes about ESPN sound like "coach-speak".

1. "We are not engaged in any conversations or considering a spinoff of ESPN." Direct and to the point, but also clearly talking about the current situation. I sounds like a GM saying they are not interested in trading Kevin Durant when they mean, make me an offer I can't refuse.

2. He also said a spinoff was considered "in my absence", when it was decided it wasn't the right move for Disney. "In my absense" means under Chapek, who just got fired. Seems like a really plausible way to say the decision to keep him was made by the dummy I'm replacing, so we'll see.

We will, indeed, have to see. I have no idea what will happen, but this interview creates more smoke in my mind than it eliminates. Particularly when he says he will put more "decision-making back into the hands of our creative teams and rationalize costs".

Interesting...

All interviews are a Rorschach test of sorts. People hear what they wish to hear.

CNBC covered this well this morning. In the breakdown ESPN was still a clear money maker in spite of some board resistance here at CSNbbs to ESPN, and piggybacking on the earlier statement by FOX, CNBC indicated this morning that the big loser for Disney was the streaming service of Disney+ which apparently will be separated from ESPN+. Movies also were a loser, which I'm sure COVID still impacts. Theme parks and ESPN were the money makers.

For sure - ESPN is still a cash cow at the moment. Putting aside any synergy questions for the moment, it would be strange to see a company that is hemorrhaging cash in one unit (streaming) to sell off an asset that is still a cash cow (ESPN) if only so the cash cow can continue to paper over the money-losing unit. (The gazillion dollar question is still how much longer will ESPN *be* a cash cow. Note that DVD-by-mail generated a ton of cash for Netflix for many years after the streaming service was started. Netflix used that DVD-by-mail cash flow to stem streaming losses until the DVD-by-mail business died.)

One key note from the CNBC article:

“Iger did note that he and Pitaro would be more selective on what it spends on sports rights, noting the upcoming negotiations for NBA rights.”

This goes to what I’ve been saying for quite awhile about constraints on ESPN spending going forward. ESPN feels that it *needs* the NBA rights and it’s going to conserve whatever it can to retain them. They know the NBA rights are going to skyrocket in value (as Amazon has all but said that it’s a property where they’re willing to get into an NFL-level bidding war), so ESPN isn’t doing anything other than super cheap deals (or not spending at all) until they re-up with the NBA.

The article was scant on details but the morning business show on CNBC was not. It was interesting that they addressed the viewership issue of the NFL on Amazon, noting that the platform was obviously not conducive to the general market when the NFL games showed such paltry viewer numbers, paltry for the NFL, not paltry by Amazon standards.

So, one has to ask the question as to how interested the NFL, or NBA for that matter, will be interested in accepting another streaming platform for their product.

And as I've said before there are cost effective ways to deal with the ACC and still assuage the likes of Florida State, Clemson, and North Carolina.

I do not see an equation between product as being as big of an issue for ESPN as you do. ESPN spent more but cleared 2 billion in profits. Interestingly FOX seems to think that cable subscriptions have another 5 years of run at least left in them over streaming systems. We'll see.

That said, habituation is a really big friend to ESPN and cable, and still a tremendous obstacle for streaming services. We have both and cover the streaming spectrum. We use the search, but it is still aggravating when surfing has been part of your life since the remote came into being.

(02-09-2023 09:34 AM)johnbragg Wrote:  

(02-09-2023 09:26 AM)Frank the Tank Wrote:  

(02-09-2023 08:59 AM)JRsec Wrote:  

(02-09-2023 08:48 AM)NotoriousOne Wrote:  Interesting read. My first thought, showing my age a bit, was back to the movie "All the President's Men" and the concept of a non-denial-denial. I am guessing for sure, but his quotes about ESPN sound like "coach-speak".

1. "We are not engaged in any conversations or considering a spinoff of ESPN." Direct and to the point, but also clearly talking about the current situation. I sounds like a GM saying they are not interested in trading Kevin Durant when they mean, make me an offer I can't refuse.

2. He also said a spinoff was considered "in my absence", when it was decided it wasn't the right move for Disney. "In my absense" means under Chapek, who just got fired. Seems like a really plausible way to say the decision to keep him was made by the dummy I'm replacing, so we'll see.

We will, indeed, have to see. I have no idea what will happen, but this interview creates more smoke in my mind than it eliminates. Particularly when he says he will put more "decision-making back into the hands of our creative teams and rationalize costs".

Interesting...

All interviews are a Rorschach test of sorts. People hear what they wish to hear.

CNBC covered this well this morning. In the breakdown ESPN was still a clear money maker in spite of some board resistance here at CSNbbs to ESPN, and piggybacking on the earlier statement by FOX, CNBC indicated this morning that the big loser for Disney was the streaming service of Disney+ which apparently will be separated from ESPN+. Movies also were a loser, which I'm sure COVID still impacts. Theme parks and ESPN were the money makers.

For sure - ESPN is still a cash cow at the moment. Putting aside any synergy questions for the moment, it would be strange to see a company that is hemorrhaging cash in one unit (streaming) to sell off an asset that is still a cash cow (ESPN) if only so the cash cow can continue to paper over the money-losing unit. (The gazillion dollar question is still how much longer will ESPN *be* a cash cow. Note that DVD-by-mail generated a ton of cash for Netflix for many years after the streaming service was started. Netflix used that DVD-by-mail cash flow to stem streaming losses until the DVD-by-mail business died.)

One key note from the CNBC article:

“Iger did note that he and Pitaro would be more selective on what it spends on sports rights, noting the upcoming negotiations for NBA rights.”

This goes to what I’ve been saying for quite awhile about constraints on ESPN spending going forward. ESPN feels that it *needs* the NBA rights and it’s going to conserve whatever it can to retain them. They know the NBA rights are going to skyrocket in value (as Amazon has all but said that it’s a property where they’re willing to get into an NFL-level bidding war), so ESPN isn’t doing anything other than super cheap deals (or not spending at all) until they re-up with the NBA.

Or they're just in coupon-clipping penny-pinching mode globally, and maybe ESPN in five years has to make do with a lot less NBA. It's hard to imagine ESPN and the NBA not reaching an agreement for SOME NBA-on-ESPN, but ESPN gave up a lot of baseball in the last round or two of MLB contracts.

They kept their finger in the pie, kept the relationship open and highlight rights and some playoffs, but ESPN didn't bid to keep Fox and Turner out, didn't throw money at MLB to put games on ESPN+ instead of Peacock and Apple.

Given the financial disparity between Amazon and Disney, I see the same sort of future for the NBA on ESPN.

I think the difference is that ESPN actually *wanted* to have a smaller MLB schedule.

That doesn’t seem to be the case with the NBA. ESPN sees it as its most important property besides the NFL and justifiably so since the NBA’s audience is much younger than other major spectator sports. That is, the NBA is the primary exception to the aging demographic issues that JRsec has pointed out in other sports. You can see the prioritization in the ancillary ESPN programming where it’s NFL talk first, NBA talk second, and then everything else.

So, it may be inevitable that ESPN gets a smaller NBA package than now because a lucrative streaming package going to Amazon and/or Apple is almost a given at this point. However, it won’t be because of a unilateral lack of trying on ESPN’s part to retain everything in its current NBA package (unlike MLB where ESPN truly didn’t want the same level of midweek games anymore).

The greater point here is that ESPN isn’t going to just throw around an extra $100 million here or there for other sports packages until they know what they’re going to need to spend for the NBA. For ESPN, the NBA is the biggest must have property for them besides the NFL (and the NBA knows it, so they’re going to be sitting pretty in these rights fees negotiations).

(02-09-2023 09:46 AM)Frank the Tank Wrote:  

(02-09-2023 09:34 AM)johnbragg Wrote:  

(02-09-2023 09:26 AM)Frank the Tank Wrote:  

(02-09-2023 08:59 AM)JRsec Wrote:  

(02-09-2023 08:48 AM)NotoriousOne Wrote:  Interesting read. My first thought, showing my age a bit, was back to the movie "All the President's Men" and the concept of a non-denial-denial. I am guessing for sure, but his quotes about ESPN sound like "coach-speak".

1. "We are not engaged in any conversations or considering a spinoff of ESPN." Direct and to the point, but also clearly talking about the current situation. I sounds like a GM saying they are not interested in trading Kevin Durant when they mean, make me an offer I can't refuse.

2. He also said a spinoff was considered "in my absence", when it was decided it wasn't the right move for Disney. "In my absense" means under Chapek, who just got fired. Seems like a really plausible way to say the decision to keep him was made by the dummy I'm replacing, so we'll see.

We will, indeed, have to see. I have no idea what will happen, but this interview creates more smoke in my mind than it eliminates. Particularly when he says he will put more "decision-making back into the hands of our creative teams and rationalize costs".

Interesting...

All interviews are a Rorschach test of sorts. People hear what they wish to hear.

CNBC covered this well this morning. In the breakdown ESPN was still a clear money maker in spite of some board resistance here at CSNbbs to ESPN, and piggybacking on the earlier statement by FOX, CNBC indicated this morning that the big loser for Disney was the streaming service of Disney+ which apparently will be separated from ESPN+. Movies also were a loser, which I'm sure COVID still impacts. Theme parks and ESPN were the money makers.

For sure - ESPN is still a cash cow at the moment. Putting aside any synergy questions for the moment, it would be strange to see a company that is hemorrhaging cash in one unit (streaming) to sell off an asset that is still a cash cow (ESPN) if only so the cash cow can continue to paper over the money-losing unit. (The gazillion dollar question is still how much longer will ESPN *be* a cash cow. Note that DVD-by-mail generated a ton of cash for Netflix for many years after the streaming service was started. Netflix used that DVD-by-mail cash flow to stem streaming losses until the DVD-by-mail business died.)

One key note from the CNBC article:

“Iger did note that he and Pitaro would be more selective on what it spends on sports rights, noting the upcoming negotiations for NBA rights.”

This goes to what I’ve been saying for quite awhile about constraints on ESPN spending going forward. ESPN feels that it *needs* the NBA rights and it’s going to conserve whatever it can to retain them. They know the NBA rights are going to skyrocket in value (as Amazon has all but said that it’s a property where they’re willing to get into an NFL-level bidding war), so ESPN isn’t doing anything other than super cheap deals (or not spending at all) until they re-up with the NBA.

Or they're just in coupon-clipping penny-pinching mode globally, and maybe ESPN in five years has to make do with a lot less NBA. It's hard to imagine ESPN and the NBA not reaching an agreement for SOME NBA-on-ESPN, but ESPN gave up a lot of baseball in the last round or two of MLB contracts.

They kept their finger in the pie, kept the relationship open and highlight rights and some playoffs, but ESPN didn't bid to keep Fox and Turner out, didn't throw money at MLB to put games on ESPN+ instead of Peacock and Apple.

Given the financial disparity between Amazon and Disney, I see the same sort of future for the NBA on ESPN.

I think the difference is that ESPN actually *wanted* to have a smaller MLB schedule.

That doesn’t seem to be the case with the NBA. ESPN sees it as its most important property besides the NFL and justifiably so since the NBA’s audience is much younger than other major spectator sports. That is, the NBA is the primary exception to the aging demographic issues that JRsec has pointed out in other sports. You can see the prioritization in the ancillary ESPN programming where it’s NFL talk first, NBA talk second, and then everything else.

So, it may be inevitable that ESPN gets a smaller NBA package than now because a lucrative streaming package going to Amazon and/or Apple is almost a given at this point. However, it won’t be because of a unilateral lack of trying on ESPN’s part to retain everything in its current NBA package (unlike MLB where ESPN truly didn’t want the same level of midweek games anymore).

Hmm. I think that if the price was right, ESPN would have been happy to keep showing MLB baseball on weeknights. But other players were throwing a lot more money on the table, so ESPN prioritized.

Quote:The greater point here is that ESPN isn’t going to just throw around an extra $100 million here or there for other sports packages until they know what they’re going to need to spend for the NBA. For ESPN, the NBA is the biggest must have property for them besides the NFL (and the NBA knows it, so they’re going to be sitting pretty in these rights fees negotiations).

This is true, but that doesn't mean the money is there on the Disney Visa card to match Amazon's offer. I believe that NBA and ESPN will want to keep a relationship, so there will be an "NBA on ESPN" package, but I don't think it's 4 games a week for the regular season.

Then again, I didn't think ESPN and the Big Ten would completely cut ties.

I like that Disney is keeping ESPN. I think the Disney Steaming Bundle is uniquely positioned in the Streaming Wars and rooting for their success.

Disney+, Hulu, and ESPN+ is a great bundle and provides a wide variety of content.

(02-09-2023 08:37 AM)johnbragg Wrote:  

(02-09-2023 08:27 AM)Captain Bearcat Wrote:  This is a dumb move.

ESPN is far more valuable as a stand-alone company than as part of the Mouse House. There are no longer any substantial synergies between ABC and ESPN.

If a large business unit has no synergies with the rest of your company, then you have become a conglomerate. Conglomerates destroy the value of the individual business units by adding an extra layer of costly managers who can't possibly be experts in every industry the firm is involved in. Even worse, it slows down decision making.

This issue was settled like 30 years ago. You'll have trouble finding a single financial or economic expert in academia or Wall Street who thinks that conglomerates increase shareholder value.

1. There is absolutely overlap between ESPN and abc. A good number of Marquee ESPN events are broadcast on abc. But that's a fairly minor issue if you did split I think you would assign ABC and the ABC owns television stations to the ESPN side of the split and not the Disney side.

2. ESPN plus and Disney Plus have a whole lot of overlap because of the bundle. At this point, that's the real connection between ESPN and the rest of the Disney Empire. Without being bundled by Disney with Disney plus, I don't think ESPN plus has 25 million subscribers, I think Disney Plus has five or 10 million fewer us subscribers.

The conglomerate is held together because essentially Disney is trying to rebuild the Cable Bundle out of only Disney components.

#1 was true 20 years ago. Even 5 years ago. But the value in that business model is dying fast.

#2 is something I hadn't considered before. Essentially you're saying that Disney could make consumers pay a lot for their first Disney-owned streaming service and only a little for each additional service. So the goal is to have enough market power that almost every consumer wants at least one of Disney's streaming services, and once a consumer is on board with one part then they will probably sign up for the rest of the Disney ecosystem.

There are three problems with this: first, Disney only has 3 streaming services, so is that really enough for the strategy to work?

Second, does this mass-market strategy generate more revenue than charging everyone full-price for each individual service? For example, I would be willing to pay full price for both ESPN+ and Disney+, but Disney's strategy allows me to pay less than I would if ESPN were its own company.

Third, why does Disney need to own ESPN to cooperate on streaming packages?Disney could easily sign a contract with ESPN to offer a long-term bundling package. Or, Disney and ESPN could form a joint venture that offers streaming bundles, similar to how Expedia bundles air, hotel, and car discounts. That would achieve the same positives, without any of the negatives of being a conglomerate.

(02-09-2023 08:59 AM)Frank the Tank Wrote:  

(02-09-2023 08:27 AM)Captain Bearcat Wrote:  This is a dumb move.

ESPN is far more valuable as a stand-alone company than as part of the Mouse House. There are no longer any substantial synergies between ABC and ESPN.

If a large business unit has no synergies with the rest of your company, then you have become a conglomerate. Conglomerates destroy the value of the individual business units by adding an extra layer of costly managers who can't possibly be experts in every industry the firm is involved in. Even worse, it slows down decision making.

This issue was settled like 30 years ago. You'll have trouble finding a single financial or economic expert in academia or Wall Street who thinks that conglomerates increase shareholder value.

I’d disagree that ESPN doesn’t have synergy with the rest of Disney. I think that they make a ton of sense for Disney or any other media and entertainment company because if a core business is to get consumers to watch your product on a TV screen - whether it’s streaming or linear TV - then sports constitute a huge market segment of that business. Disney is also in the ad selling business and essentially the only thing that anyone buys ads at any premium value for anymore is for sports.

The irony of the Big Ten no longer being on ESPN is that the ESPN Rose Bowl contract is a *perfect* encapsulation of Disney synergy at its best: Disneyland theme park tickets are combined with Rose Bowl tickets in travel packages to Southern California, the Rose Parade is on ABC that “just happens” to have actors and in the parade that are starring in Disney movies and TV shows, the Parade broadcast promotes the Rose Bowl Game broadcast on ESPN later in the day, and then both the Parade and Game broadcasts integrate promotions for Disney movies, parks, TV, streaming and other parts of their portfolio.

Disney *invented* synergy. If you Google “Walt Disney Synergy Map”, you’ll pull up Walt’s own hand-drawing of how he wanted to interconnect all of the parts of his business (e.g. movie studio, theme parks, TV shows, merchandising, music studio, etc.) from over 60 years ago. It’s another indication that the guy was a business genius (beyond being an artistic genius) because you can see that today’s companies are still trying to figure out what Walt knew was the model for an integrated company many decades before the Internet was in our homes.

Now, having said all of this, separating ESPN from the rest of the entertainment assets and putting it into its own division actually allows Disney to spin it off easily if it eventually decides that’s the right path moving forward. That could very well happen because there are a lot of indications that sports could simply not be profitable in a streaming model in the way that it was in the basic cable model. However, I don’t think that they would spin off ESPN because it’s a matter of a lack of synergy. Ultimately, sports are a massive part of the entertainment business and entirely drive the TV ad business, both of which are core components for Disney. Sports have a pretty direct synergy to the rest of the Disney business.

I agree that Disney is a great example of synergy.

My point was that the synergy of ESPN with any of Disney's other brands used to come almost entirely from the cross-promotions on ABC. And that is a business model that is rapidly disappearing.

The Rose Bowl & Parade of Roses is a great example of synergy, but those two events appears to be splitting up with the new CFP.

And if ESPN wants to go into gambling (which they probably should) that's toxic to the rest of the Disney brands. That's negative synergy (similar to negative branding synergies between BP-branded gas station franchises and BP deep oil drilling in the Gulf of Mexico).

(02-09-2023 12:08 PM)Captain Bearcat Wrote:  

(02-09-2023 08:37 AM)johnbragg Wrote:  

(02-09-2023 08:27 AM)Captain Bearcat Wrote:  This is a dumb move.

ESPN is far more valuable as a stand-alone company than as part of the Mouse House. There are no longer any substantial synergies between ABC and ESPN.

If a large business unit has no synergies with the rest of your company, then you have become a conglomerate. Conglomerates destroy the value of the individual business units by adding an extra layer of costly managers who can't possibly be experts in every industry the firm is involved in. Even worse, it slows down decision making.

This issue was settled like 30 years ago. You'll have trouble finding a single financial or economic expert in academia or Wall Street who thinks that conglomerates increase shareholder value.

1. There is absolutely overlap between ESPN and abc. A good number of Marquee ESPN events are broadcast on abc. But that's a fairly minor issue if you did split I think you would assign ABC and the ABC owns television stations to the ESPN side of the split and not the Disney side.

2. ESPN plus and Disney Plus have a whole lot of overlap because of the bundle. At this point, that's the real connection between ESPN and the rest of the Disney Empire. Without being bundled by Disney with Disney plus, I don't think ESPN plus has 25 million subscribers, I think Disney Plus has five or 10 million fewer us subscribers.

The conglomerate is held together because essentially Disney is trying to rebuild the Cable Bundle out of only Disney components.

#1 was true 20 years ago. Even 5 years ago. But the value in that business model is dying fast.

#2 is something I hadn't considered before. Essentially you're saying that Disney could make consumers pay a lot for their first Disney-owned streaming service and only a little for each additional service. So the goal is to have enough market power that almost every consumer wants at least one of Disney's streaming services, and once a consumer is on board with one part then they will probably sign up for the rest of the Disney ecosystem.

There are three problems with this: first, Disney only has 3 streaming services, so is that really enough for the strategy to work?

Second, does this mass-market strategy generate more revenue than charging everyone full-price for each individual service? For example, I would be willing to pay full price for both ESPN+ and Disney+, but Disney's strategy allows me to pay less than I would if ESPN were its own company.

Third, why does Disney need to own ESPN to cooperate on streaming packages?Disney could easily sign a contract with ESPN to offer a long-term bundling package. Or, Disney and ESPN could form a joint venture that offers streaming bundles, similar to how Expedia bundles air, hotel, and car discounts. That would achieve the same positives, without any of the negatives of being a conglomerate.

Hulu by itself is 7.99/month
Disney Bundle Trio (Hulu, Disney+, ESPN+) is $12.99/month

For $5s more you get 3 streaming service instead of 1.

You can't buy Hulu without the Bundle comparison being advertised. Honestly, I don't know anyone who didn't opt for the bundle instead of the solo.

(02-09-2023 10:00 AM)johnbragg Wrote:  

(02-09-2023 09:46 AM)Frank the Tank Wrote:  The greater point here is that ESPN isn’t going to just throw around an extra $100 million here or there for other sports packages until they know what they’re going to need to spend for the NBA. For ESPN, the NBA is the biggest must have property for them besides the NFL (and the NBA knows it, so they’re going to be sitting pretty in these rights fees negotiations).

This is true, but that doesn't mean the money is there on the Disney Visa card to match Amazon's offer. I believe that NBA and ESPN will want to keep a relationship, so there will be an "NBA on ESPN" package, but I don't think it's 4 games a week for the regular season.

Then again, I didn't think ESPN and the Big Ten would completely cut ties.

Let me attach some numbers to what I'm saying. The current deal has Turner and ESPN splitting the NBA roughly 50-50, for $2.5B a year. The NBA is reported to be looking to triple that number.

So to keep the package they have, ESPN would have to come up with an extra $2.5B a year. Disney's entire profit from their television division (ESPN, ABC and the other cable channels) was $1.3B.

Amazon can cut that check without blinking. If they want the NBA (likely including local streaming rights) as one of the cornerstones of Amazon Video Sports, they can lay out $7.5B a year to build the Next Thing. "Gotta Spend Money To Make Money." And they have the money.

The question for ESPN and the NBA becomes--how much ESPN on NBA can the NBA and ESPN afford?