Activist Investor Urges Disney to Spin Off ESPN, Fold Hulu into D+

[PGage]

I’m not saying I know better than Daniel Loeb and his hedge fund, Third Point LLC, who announced he has just acquired a big chunk of Disney stock. But I’m not convinced now is the time to sell ESPN, just as live sports is about the only thing keeping television going. In fact a lot of analysts have been saying that the new post Netflix Boom reality is less emphasis on fast streaming subscriber growth,  more on sustainable profit centers. 

Perhaps he is motivated more by the potential bonanza for ESPN if it were able to go all in on sports betting. I suppose with that in mind ESPN is worth a hell of a lot more to a non Disney buyer than to Disney, and Disney stockholders would make out like bandits (that may be redundant). Or, perhaps Loeb is thinking that another entity he also invests heavily in would buy ESPN, and make their own bundle with sports betting.

Folding Hulu into D+ is inevitable, but the call here is to do it sooner, meaning paying Comcast $9Billion now rather than in two years, when Disney will be obligated to anyway. The idea here is to goose D+ subscriber numbers even more than the impressive report Disney just gave, which would put the stock value on overdrive.

All of this just more and more reminders that corporate decisions are less about how to improve the quality of their service or product line, and more about making an even more obscenely large profit for investors and corporate officers. This is what we are seeing at Warner-Discovery, and at Disney. Of course this has always been true, but is becoming more so.

Sorry - I’m out on Strike at Kaiser, likely for weeks or months, and in an ugly mood toward corporate greed and mendacity…

https://www.latimes.com/entertainment-arts/business/story/2022-08-15/should-disney-spin-off-espn-and-fold-hulu-into-disney-one-investor-thinks-so

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[Paul Murray]

> Folding Hulu into D+ is inevitable

Is it? I think Hulu serves a purpose: Hosting things that Disney doesn't want associated with the family-friendly Disney+ brand, just like when they started Touchstone Pictures back in the 1980's to make R-rated movies. (I seem to recall someone saying, when the mouse was busy digesting Fox, that The Simpsons was the edgiest thing that would appear on Disney+.) Disney needs a non-Disney brand streaming service.

And it's not like Disney+ is desperate for growth; they're already #1 in subscribers.

If Hulu is unprofitable, obviously Disney will want to change that. But combining it with Disney+ creates new problems.

[Joe Hass]

PG:

My sympathies on the strike. May you get a fair and equitable contract as quickly as possible. Let me know if there's anything I can do to help from out here in Beautiful Naperville, Illinois.

Joe

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[PGage]

Thanks Joe. In our case, the Strike is not about money (our Union accepted the last financial offer made by the employer) it is about patient care. It’s a long story of course, but all you need to know is when I left work Friday my next available return psychotherapy treatment appointment slot was for October 17.

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[PGage]

I do think it is inevitable, even before Loeb tried to Bigfoot his way into this. D+ already has something like distinct channels for its various brands, and could easily either create a Hulu channel, or a newly branded channel for that content. I’m sure there is a way to lock out certain channels already (when my kids were in preschool I would have loved to have a lot if that Disney content available for them to stream, but would not have wanted them wandering into Infinity Wars).

Even post Peak Stream, the streaming business is built on high subscriber lists, low churn rate. Disney is going to be coughing up 9 billion dollars in a few years for full ownership of Hulu, and Wall Street will value whatever added subscriber list D+ can get from merging more highly than having two independent streamers, even if combined they had more subscribers.

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[Mark Jeffries]

However, I saw an Irish TV commercial for Disney+ featuring "Only Murders in the Building," which is not exactly family fare.  I would guess that Disney+ in foreign markets is running "Dopesick," "Pen15" and "The Dropout," so they're already doing it over there.  If the feeling is that the overseas audience doesn't consider Unca Walt and what he stood for as sainted as we do, well OK.  But everywhere else in the world Disney+ does have grownup content and they have made the adjustments here so that you can watch the two "Deadpool" movies on D+ uncut--and Hulu exists in only one country--us.  I think the merger is inevitable.

Mark Jeffries
Saints Spotlight Editor
spotl...@gmail.com

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[Adam Bowie]

On Tue, Aug 16, 2022 at 4:46 PM Mark Jeffries <spotl...@gmail.com> wrote:

However, I saw an Irish TV commercial for Disney+ featuring "Only Murders in the Building," which is not exactly family fare.  I would guess that Disney+ in foreign markets is running "Dopesick," "Pen15" and "The Dropout," so they're already doing it over there.  If the feeling is that the overseas audience doesn't consider Unca Walt and what he stood for as sainted as we do, well OK.  But everywhere else in the world Disney+ does have grownup content and they have made the adjustments here so that you can watch the two "Deadpool" movies on D+ uncut--and Hulu exists in only one country--us.  I think the merger is inevitable.

Yup - we get "Pam & Tommy" on Disney+ in the UK, as well as Deadpool, Dopesick and the rest. Disney does half-heartedly use "Star" branding at the top of programmes to differentiate them. But essentially the heavy lifting is done when you set up profiles. So if you have kids and want to age-gate what they can see, you can. A quick test in my Disney+ account shows that I can choose 0+, 6+, 9+, 12+, 14+, 16+ or 18+ on any profile. I suspect this functionality is already in US Disney+ since there's a world of difference between Mickey Mouse and Avengers Endgame.

Honestly, I think Disney keeping adult brands separate is a non-issue. They can keep sub-brands so that a show is FX, Hulu, Twentieth Century, Nat Geo or whatever. That gives audiences some expectations as to what you're going to get. Netflix copes perfectly well doing this. But yes, a smart kid is going to be able to get around all of these locks as they always have been able to. Knowing the D+ password is about all they need.

There's no question in my mind that Disney and Hulu have to merge. There's no reason not to. They'll bundle them together in a forced manner and bump up the price. When "Star" launched in the UK, Disney straight-up raised the price and said, "Hey, here's a load of extra stuff..." That also removes the need to have two separate tech stacks and apps being developed. Having a single - global - tech stack and app is much easier for them to manage. For me, it's only a question of when and not if.

Adam

[Mark Jeffries]

Ultimately, as the Ankler's Sean McNulty said in his newsletter this morning, the powers that be are trying to make streaming more like cable by replicating the twin revenue sources of advertising and customers paying for things they don't watch.  Next summer, when the HBO Max/Discovery+ merger takes place, Warners Discovery is going to make HBO Max subscribers pay extra for crappy reality shows and Discovery+ subscribers pay extra for what some may see as immoral HBO programming with dirty words and violence glorifying improper behavior and alternative lifestyles.  Hell, people are now saying that the HBO brand has been sullied by "FBoy Island" and "Big Bang Theory" reruns (conveniently forgetting "First and Ten" and "Real Sex").

At least streaming is closer to that a la carte pricing scheme that supposedly people wanted from cable and the systems didn't want to give them because 57 channels-and-nothing-on made more money for them.  But the people in charge can't seem to get away from it, even as cable subscriber rolls drop and drop.

Mark Jeffries
spotl...@gmail.com

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