Third Point activist investor Daniel S. Loeb has withdrawn his suggestion last month that Disney should split from ESPN in order to devote even more resources to creating content for streaming platforms.
Loeb sent two olive branch-told Twitter messages to Disney and its CEO Bob Chapek early Sunday morning. Loeb said he gained a “better understanding” of Disney’s plans to integrate ESPN more deeply into its direct-to-consumer operations and the nascent Disney channel bundle. The social media letter signals that Loeb will not increase its public pressure on Disney and will seek to establish an alternate list of directors at the company’s annual meeting next spring.
“We have a better understanding of @espn’s potential as a standalone company and another vertical for $DIS to reach a global audience to generate ad and subscriber revenue. We look forward to seeing Mr. Pitaro execute on plans for growth and innovation and generate significant synergies as part of The Walt Disney Company,” Loeb wrote.
Loeb made headlines on Aug. 15 when he issued an open letter to Disney, urging the company to divest ESPN and accelerate its acquisition of Comcast’s outstanding 33% stake in Hulu. Loeb seized on an argument that’s been gaining traction in investor circles for more than a decade that ESPN and Disney would be better off as separate entities.
But in interviews with diversity and other media outlets on Saturday ahead of the big D23 Expo fan gathering in Anaheim, Chapek made it clear that he has no intention of parting ways with ESPN, the sports TV powerhouse — quite the opposite. Chapek hinted that Disney is preparing for the future of its direct-to-consumer business with a new platform integrating ESPN alongside brands from Disney, Marvel, Lucasfilm, Pixar, ABC, National Geographic, 20th Century Studios and more overarching Disney+ streaming platform. ESPN is a rare example of a long-term joint venture for Disney, with Hearst Corp. has held a 20 percent stake in the world’s leading company for decades.
“You can look at this from two different angles, from a guest perspective or from a commercial perspective or from a shareholder perspective. Does it actually make sense? And I think in Dan’s case he was more like asking, is this the right business combination for the company?” Chapek said diversity on Saturday. “Our investors only know what we have told them so far. They don’t really know what our plans are for the future. In terms of sport, we have very ambitious plans.”
Chapek also pointed to long-term planning involving ESPN and Hulu, the two companies Loeb was targeting in his letter. Chapek declined to elaborate, but promised a “fuller expression” of the company’s plans will come, though he wouldn’t give a timeline.
“The advertising demand for ESPN speaks volumes. But what speaks volumes is that when word broke on the street that Disney might be spinning off ESPN, we had no less than 100 requests from people to buy it. what does that tell you That says we have something really good. And when you have a strategic plan, a vision of where it fits into the company in the next 100 years, you don’t exactly want to part with it. And we have this plan,” he said.
Chapek urged that he agrees with Loeb on the strategic importance of Disney buying up the last piece of Hulu it doesn’t already own to make it a part of the foundation of Disney+.
“The top request we have from Disney+ subscribers is for broader entertainment,” Chapek said. “When people watched ‘Dumbo’ with their kids and put them to bed and it’s 7:30 now – those same people might not want to watch ‘Bambi,’ right? They want to see something different, something that’s still Disney’s capital “D.” And the elasticity is much greater than we could have ever imagined, as our experience in Europe has shown, with Disney+, where we have a lot more general entertainment on the (platform). The appetite for general entertainment is enormous. We have a lot of general entertainment content within the Walt Disney Co. We just don’t have the full capability to leverage it because of the complicated ownership structure that we have (in Hulu), at least for the next 16 months.”
https://variety.com/2022/tv/news/disney-daniel-loeb-espn-sale-bob-chapek-1235368737/ Investor Daniel Loeb rejects Disney-ESPN sale proposal