The sports media unit remains profitable and part of Disney. But expect the company to keep a close eye on its financial performance.
Walt Disney Co. Chief Executive Bob Iger this week announced a “major transformation” for the entertainment media giant, raising a familiar question from Wall Street: What will happen to ESPN?
Iger was clear that, despite clamoring from some investors, he has no plans to get rid of ESPN, the best-known sports media brand in the business, either by selling it or through a spinoff.
But leading ESPN into the future won’t be easy, as the company still must navigate the pressures of continued cord-cutting and escalating fees for the rights to air live sports.
It also will face greater accountability. For the first time, it will start reporting financial results as a free-standing unit under its chairman Jimmy Pitaro. ESPN’s results have previously been disclosed as part of Disney’s larger television networks segment, eluding deep, detailed scrutiny.
The new status for ESPN follows Iger’s announcement that he is targeting $5.5 billion in cost savings, largely from its content and marketing divisions. Disney said it plans to achieve $3 billion in content savings, excluding sports, over the next few years.
Iger told CNBC on Thursday that ESPN will remain a part of the company “as long as it continues to be profitable and it too needs to find a path that basically enables it to continue to deliver the kind of results that we’d like it to deliver.” On Wednesday’s call with analysts, he swatted away speculation of an ESPN sale, though he said such options had been reviewed in his absence.
ESPN’s exposure to consumers shifting away from traditional TV to streaming, as well as escalating sports rights fees, led several investors and analysts to suggest Disney should spin off the unit with some debt attached. Activist billionaire investor Dan Loeb, of Third Point Capital, was among the voices calling for an ESPN spinoff to help reduce Disney’s debt load, but he eventually backed off.
Such a concept seemed stunning considering ESPN’s stature in the media industry.
Back in 1995 when Disney merged with Capital Cities/ABC, ESPN was considered the crown jewel in the acquisition, as it was the first stop in sports news and highlights and the locomotive for a still-expanding cable business.
