A year after returning to Disney for his second tour as CEO, Bob Iger has begun to lay out his plan for the media giant: He’s hung a for-sale sign on its linear TV assets, which include ABC and cable networks like FX and National Geographic; and said he’s seeking content or distribution partners to help ESPN go direct to consumer.
These moves rekindled the years-old idea that Disney will sell all or part of itself to Apple. Some think Iger’s endgame is to strip down Disney to the parts — like the film studio and the streaming business — that would be most attractive to a buyer.
And Apple has long been seen by some analysts as the most obvious acquirer of all or part of Disney. Both companies have a prestige sheen. Iger had a longstanding relationship with Steve Jobs leading up to Disney acquiring Pixar from Jobs, and the Disney CEO held a seat on Apple’s board until 2019. The relationship has continued under Apple CEO Tim Cook; in June, the two companies announced a partnership where Disney would create content for Apple’s Vision Pro mixed-reality headset.
Apple can certainly afford any amount of Disney it wants, with $62 billion in cash and cash equivalents and a $2.8 trillion market cap, versus Disney’s $151 billion.
Naysayers have long pointed out that Apple, which is highly protective of its culture, doesn’t have a history of doing big deals, and has done just fine. And a Disney-Apple combo would face regulatory scrutiny by a Biden administration that’s been unfriendly to big corporate mergers.
“Not doing a big deal hasn’t impacted them, and if it ain’t broke, don’t fix it,” said the chief executive officer of Investment Partners Asset Management, Gregg Abella.
Then there’s the issue of what — aside from the linear TV assets, for which talks and offers have been reported — Disney would sell. Iger said he considers the studio, streaming, and parks businesses (where the company recently set plans to invest $60 billion over the next decade) to have the most value. So taking its businesses one by one, it’s hard to see Disney selling any of those. Those three businesses also are inextricably linked through the company’s iconic intellectual property. It would be hard to imagine operating the parks or streaming businesses without owning the popular franchises that fuel them.
The parks and the studios, which encompass Star Wars and Marvel as well as Disney’s vast legacy IP, “are really core to the company’s history,” David Rogers, a Columbia University business professor and author of “The Digital Transformational Roadmap,” told Insider. “And the parks are profitable.”
As for Apple, buying theme parks and cruise lines would be a massive strategic shift — not to mention a mind-bending culture shock. The company has never shown interest in buying a studio, as much as people think it needs more content, particularly the kind of valuable IP held by Disney, to build up its streamer, AppleTV+. And needless to say, you won’t find Apple on anyone’s list of potential acquirers for Disney’s dying linear TV businesses.
But that leaves one asset that seems likely to be of interest to Apple — and that Disney has already signaled openness to options for: ESPN.
Disney plans to launch a streaming version of ESPN, but to do so, it needs help with distribution and marketing so it can drive enough revenue from viewers and advertisers to keep paying for the costly sports rights that fuel the platform.
It’s already been talking to potential partners with big distribution potential, which reportedly include Verizon and Amazon.
Then there’s Apple. While AppleTV+ remains a tiny streaming player, lately it’s been beefing up its offering with live sports. Its MLS-Messi partnership just drove a spike in signups, according to data from Antenna.
ESPN could help drive viewership and subscriptions to AppleTV+, one of the units fueling Apple’s growing services business, which in turn keeps sales of its core devices humming.
Wedbush Securities analyst Dan Ives, a longtime Apple bull who recently wrote a note arguing for Apple to buy ESPN, sees sports as a way for Cook to drive the tech giant’s streaming future. It could keep acquiring its own sports rights, but many are tied up for years, and partnering with ESPN could be a one-stop shop. Ives envisions a deal where Apple pays for exclusive access to ESPN content and game broadcasts, with an acquisition following down the road. Acquiring ESPN would cost Apple close to $50 billion, Ives estimates.
Given the benefit ESPN could bring to Apple, he doesn’t believe Apple will let it fall into the hands of one of the tech rivals that are also expected to be interested.
“Google, Meta will look at live sports content as well,” Ives told Insider. “Amazon, because of its Prime membership, would have more FTC scrutiny. But ultimately, I think the only serious bidder would be Apple. It checks every box. And they want live sports content — that would be a massive growth engine. I believe it’s a matter of not if, but when Apple buys ESPN.”
Read the full article here