Disney Has No Plans To Sell Or Spinoff Linear Television Channels
A couple of years ago, Disney CEO Bob Iger caused a panic when appearing on CNBC, talking about how linear is no longer core to their business model and that he had been considering selling some of its traditional channels.
In the past few months, both Comcast and Warner Brothers Discovery have split their companies into two, spinning off their traditional linear channels into a new business, while keeping their theatrical business, core brands and streaming services as part of their original companies.
Recently, during another interview with CNBC to discuss the recent finalisation of the purchase of Hulu from Comcast, Iger was asked if they are also planning on spinning out or selling their linear channels, to which he replied:
“Soon after I returned to Disney, I put everything on the table and asked the team to evaluate whether we should buy Hulu or whether we should sell Hulu, whether we should sell our linear television networks or whether we should hold on to them, and after a pretty lengthy process internally, and really taking a long look at what these properties could mean to us, long term, we decided that the best course for us to take was to not only buy [Hulu] in its entirety, but also to hold on to the linear television networks and to integrate them seamlessly with our streaming business. What that has enabled us to do is aggregate revenue, both on the sub fee side and on the advertising side. There is still enough linear television subscribers to generate a significant amount of revenue in advertising and in subscription fees. We program them seamlessly, we manage them in one organization. And so there’s been great economies of scale in doing that.
It’s one of the things that’s enabled us to turn the streaming business around from a huge loss to profitability, and over the next several years, it will enable us to grow margins significantly on the streaming side, because of the ability to amortize program costs and the ability to essentially aggregate audiences in revenue. It’s also interesting to us that as many others exit that business, I think it gives us a stronger hand to stay in that business. We’re very focused. We will have, interestingly enough, a linear television business that’s paired with a streaming business. So when you think about it, these spin off companies won’t have the assets from a streaming perspective that we will have.”
When pressed on if ABC is still an important asset for Disney, Iger replied:
“I think there’s a lot more value in a broadcast network, again, if it’s paired very, very seamlessly with a streaming business. I mean, you think about our core networks, obviously, ESPN is a big one. That will be connected, obviously, fully with ESPN’s digital offering. Disney Channel is connected seamlessly with Disney Plus. FX and ABC have fed Hulu programming very effectively. And now when you think about all four, and we also have Nat Geo, which does the same with Disney Plus, when you think about those five networks and how they’re programmed across linear and streaming, you’ve got a business that actually provides us an opportunity to not only grow, but to grow margins in the process as well. So, again, we like the direction we’re going. We like the fact that we’re one of the few that is doing this, because I think it sets us up to be even more competitive in a marketplace that’s becoming even more fragmented.”
Disney has spent the last couple of years going through some major restructuring following its purchase of 20th Century Fox and the return of Iger as CEO. We’ve seen the company undergo significant changes, resulting in thousands of people being laid off and numerous changes within its businesses.
Unlike other broadcasters like Comcast and Warner Brothers, Disney seems to be taking a very different approach to dealing with the decline of linear, instead using it as an asset to complement its streaming services. Although I still think they’ve more changes to make, including making streaming either the default or at least on par with linear, dropping the concept of “next day” releases on streaming, and adopting a unified approach.
I wouldn’t be surprised if some of the lesser watched channels like Disney XD, Freeform, Nat Geo Wild or FXX eventually get closed down or sold off, as cable companies look to reduce the amount of channels in their bundles, but it does seem like Disney knows it has advantages of holding onto its core channels for the foreseeable future, as the streaming and linear television can complement one another.
One of the many changes we’ve seen Disney make in the last few years is utilising its content across both methods of distribution. Shows like “Grey’s Anatomy”, “9-1-1”, or “High Potential” are popular on both streaming and linear platforms, reducing the need to spend hundreds of millions of dollars on original streaming programming like Marvel and Star Wars. Since that same money can be spent creating multiple shows for both linear and streaming at the same time.
In a few years’ time, Disney may decide it wants to spin off or sell some linear assets, as the growth of streaming continues to grow, but it’s very noticeable that Disney doesn’t seem to be following the trend from other studios.
What do you think of Disney’s linear strategy? Let me know on social media!
