Earlier this year, Disney CEO Bob Iger spoke during an interview with CNBC, saying that since his return, he has been looking to make changes to the company and has been reevaluating what their core focus should be on.  He specifically called out the traditional linear business as a side of the company that isn’t growing and that they are being expansive about opportunities with that business, such as potentially selling the channels off, since they are not as important to the future of Disney as they used to be.

They may not be core to Disney. Yeah, there’s clearly creativity and content that they create that is core to Disney, but the distribution model, the business model that forms the underpinning of that business, and that is delivered great profits over the years is definitely broken. And we have to call it like it is and that’s part of the transformative work we’re doing.

This comment from Bob Iger left many to speculate about the future of Disney’s linear television business and who might potentially be a possible buyer, since linear television continues to lose viewers to streaming services.

Only this week, Disney made a deal with Charter Communications to provide fewer linear channels, in exchange for their customers’ ad-supported version of Disney+.

During a recent investor conference in New York hosted by BofA Securities, Tom Carter, a former Nexstar executive, who is now a senior advisor to the CEO and board of directors, has said that Nexstar could easily acquire Disney’s local ABC TV stations.

“We think there could be some opportunities depending on how things fall out.  Disney had talked about it this way: ‘Let’s morph into a GrowthCo and a SustainableCo.  The only issue is, the SustainCo is funding the GrowthCo, and if you sell one, you’ve lost access to that cash flow. Granted, you’re going to have proceeds, but is that really what you want to do?”

When asked if Nexstar could be a strong candidate to buy those ABC Local channels, which have been valued at around a potential $3 billion, Charter said:

“Yes. I think you’ll see us take a look at it.  You’re seeing ESPN simulcast a large portion of their sports telecasts on ABC. If you were to buy the ABC complex, how would that work going forward? There are a lot of questions that need to be answered.”

Last year, Nexstar acquired the CW Network and already owns many other channels that are currently affiliated with other networks, so there might be some legal issues for Nexstar to purchase those ABC channels, since there is currently a FCC 39% cap on stations being owned by one company. However, according to Tom Carter, even though Nexstar is already at that limit:

“But it would not preclude us from buying stations.  ABC’s portfolio of stations is modest. It’s only eight, largely in the top 10 markets. We’re in eight of the top 10 markets already with a CW station. We could buy a second station in that market and not increase our household footprint. There may be a few stations that would require divestiture of either a Nexstar station or an ABC station, but we could onboard those with relatively little friction.”

With the future of linear television constantly evolving, the big question for companies like Nexstar is how they can make them profitable while knowing that the business is not growing.  However, there is still lots of money to be made on advertising while people watch traditional television.   There is also the question of whether ESPN would continue simulcasting sporting events on ABC going forward if they sold the channels. This is a major issue for a company like Nexstar, with Carter adding:

“I don’t know if there’s a deal to be done there.  I think they’ve got to be a bit clearer in their own thinking about how that goes. We can take direction but we’re not necessarily out there leaning into this stuff without a clear path.”

But the recent new deal between Disney and Charter Communications to offer the ad-supported version of Disney+ in a bundle could make linear television more appealing, as Carter explained:

“We’re putting the band back together.  We’re recreating the bundle by bringing Disney+ back into the pay-television ecosystem and not strictly as a DTC product. So, one of the potential benefits of the Charter-Disney deal is that it could potentially lessen subscriber attrition going forward, because there’s less reason for customers to leave the bundle.”

The shift within the cable business this week to blend the lines between linear and streaming is no doubt going to go through more changes.  With Disney looking to drive up profitability and with an upcoming bill of billions of dollars to buy out the remaining stake of Hulu from Comcast, selling some linear channels might help offset some of that cost.

Do you think Nexstar should buy some of the local ABC channels?  Let us know on social media!

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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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