Over the past few years, Disney has slowly been retreating from its linear businesses around the world, closing many of its channels across Asia and Europe, as the company pushes forward with its plans to go all in on streaming, as audiences around the world slowly move away from traditional linear television.

Last month, Disney CEO Bob Iger revealed during an interview with CNBC that its linear television channels, including ABC, FreeForm, FX, National Geographic, and the Disney Channel, aren’t considered core to their business and could potentially be sold.   This only refers to the actual linear television channels and not the actual studios which make the shows, since it will want to keep them and the shows they make for Disney+.

During the most recent Investor Call, Disney CEO spoke about the future of its linear business, saying:

Looking to our broader linear business. While linear remains highly profitable for Disney today, the trends being fueled by cord-cutting are unmistakable. And as I’ve stated before, we are thinking expansively and considering a variety of strategic options. However, we’re fortunate to have an array of extremely productive television studios that we will rely on to continue providing exceptional content for audiences well into the future.

The major reason why Disney is moving away from linear television is that the speed at which the channels are losing viewers and adverting revenue is increasing, as more people shift to streaming services.   With Bob Iger explaining:

At Linear Networks, operating income declined versus the prior year by $580 million driven by declines at both domestic and international channels.

In the US, Disney is able to sell its channels like ESPN and the Disney Channel to television networks at a high price, forcing US subscribers to pay for these channels, even if they didn’t watch them, but as more people cut the cord, this number continues to drop.  Internationally things were different, so this is one reason why the linear channels have been closing so much quicker.

And things won’t be improving for a while, until more people are watching ad-supported content on Disney+, which is why Disney has been so aggressive in its pricing structures to encourage people to move to the cheaper alternatives, so Disney can sell more advertising.

Linear advertising continues to see impacts from market softness. While sports is healthy, entertainment continues to face headwinds. Note that we expect D2C advertising year-over-year growth to partially offset linear declines in the fourth quarter.

During the conference call, Bob Iger was asked about what the practical considerations are for separating assets like ABC, National Geographic

Clearly, if we are to do anything significant in terms of, call it, strategic direction to the linear nets, we have to keep in mind the need for content to ultimately fuel our DTC businesses, notably and as you mentioned Hulu. So anything that is to be done would be done with an eye toward maintaining a rich flow of content to fuel our growth business, and that will be streaming. There’s obviously complexity as it relates to decoupling the linear nets from ESPN, but nothing that we feel we can’t contend with if we were to ultimately create strategic realignment.

It’ll be interesting to see if Disney does find a buyer for its linear networks in the US, since some companies are looking to scoop up channels and run them with cheaper content, but at the moment, Disney hasn’t revealed if it will be closing or selling any channels in the US soon.

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Roger Palmer

Roger has been a Disney fan since he was a kid and this interest has grown over the years. He has visited Disney Parks around the globe and has a vast collection of Disney movies and collectibles. He is the owner of What's On Disney Plus & DisKingdom. Email: Roger@WhatsOnDisneyPlus.com Twitter: Twitter.com/RogPalmerUK Facebook: Facebook.com/rogpalmeruk

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