ESPN has discussed the possibility of becoming a minority shareholder with the NBA, NFL, MLB and NHL. It is unlikely that ESPN will launch a direct-consumer product before the year 2025, according to sources. Bob Iger would prefer to remain in majority ownership of ESPN, but Disney executives are open to the idea of a full spin-off if no agreement can be reached, a person close to the situation noted.
Bob Iger, CEO of Disney, has taken an uncommon approach of compensating former executives Kevin Mayer and Tom Staggs for consulting services to help him resolve a difficult issue: what to do with ESPN. Iger, who is well-acquainted with the two co-CEOs of Candle Media, has tapped them to assist ESPN President Jimmy Pitaro in surveying the strategic selections for ESPN and, to a lesser degree, Disney's other linear cable networks.
Iger is attempting to find a stimulus for ESPN due to the quickened rate of U.S. cable cancellations. Beforehand, ESPN was able to produce income growth by raising programming fees for pay TV distributors like Comcast, Charter and DirecTV; nonetheless, this is no longer the case. Therefore, the decrease of ESPN earnings will add to Disney's earnings.
Recently, Iger indicated to CNBC's David Faber his enhanced trust in the time when ESPN will initiate a direct-to-consumer product. The pinnacle of ESPN's programming is still part of the linear cable TV package. Disney's lower-grade live games are featured on its ESPN+ streaming service which costs $9.99 per month. When ESPN eventually makes the decision to provide an unbundled subscription service, it will probable cause a further spike in pay TV cancellations. That is why ESPN has delayed so long to go direct-to-consumer.
When asked last month, Iger declined to enumerate when he was expecting to launch the direct-to-consumer ESPN, which is unlikely to be until 2023 or 2024, based on rumors. An ESPN spokesperson declined to comment.
Bob Iger is looking to find minority partners to take equity stakes in ESPN. The sports service has already held preliminary talks with the National Football League, Major League Baseball, and the National Basketball Association, which were reported by CNBC last month. Talks also reportedly involved the National Hockey League, although a spokesperson declined to comment.Taking such a stake in ESPN has never been done before and the leagues are trying to move towards a streaming-driven ecosystem. Team ownership of ESPN could help them create a single product and navigate the new economic models beyond the traditional TV bundle.However, this move could affect their current media partners and produce potential conflicts of interest. Leagues would want to see ESPN do well if they owned part of it, which could hurt the leagues in terms of generating revenue from sports rights. This is usually achieved through bidding wars between media and tech giants such as Comcast's NBCUniversal, Fox, Paramount Global, Warner Bros. Discovery, Apple, Alphabet and Amazon.If finding minority partners is not an option, Disney and ESPN have not ruled out spinning off the network in its entirety. Iger has been resistant to this idea in the past, but former Disney executive VP of corporate strategy Michael Mayer has been more open to it. Mayer left Disney last year to become CEO of TikTok, and declined to comment on the current talks.Iger has said that he does not want to spin off ESPN, and this sentiment is shared by Disney COO Tom Staggs and ESPN president Jimmy Pitaro. Disney presently owns 80% of ESPN, and Hearst holds the remaining 20%. The goal for Iger is to find participants who bring either content or distribution strengths to the table. It is yet unknown whether any strategic companies would be interested in taking a minority stake in ESPN; if Disney is the majority owner, it will control the fate of the network.
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