A scene from the FX series Shogun.
Source: Disney | FX
disney The math has been made on spinning off the TV network business, but it looks too confusing — at least for now.
The company’s chief financial officer, Hugh Johnston, told CNBC’s “Squawk Box” on Thursday that “the costs may outweigh the benefits” in spinning off the TV network business, given the “complexity of operations.”
The future of the traditional TV network business has always been a focus in the media industry. late October, Comcast Executives said they are exploring the separation of the cable TV network business. Executives say the process is in its early stages and the outcome is unclear.
Although the cable news package remains a cash cow for businesses, it is rapidly losing customers. Analyst firm MoffettNathanson estimates the industry overall lost 4 million traditional pay-TV subscribers in the first six months of this year.
Disney reported Thursday that revenue from its traditional television networks fell 6% to $2.46 billion in the latest quarter, while profits from the division fell 38% to $498 million.
Its apparent commitment to this area appears to have shifted.
Last summer, Chief Executive Bob Iger opened the door to selling its television assets. Iger recently returned as CEO, undergoing a massive restructuring of the company and facing pressure from activist investors.
Johnston said on an earnings call Thursday that he began evaluating divestitures shortly after joining Disney a year ago. He pointed out that after “playing with spreadsheets,” there is no clear path to value creation after spinning off online or other businesses.
“I like the portfolio right now. I wouldn’t change anything,” Johnston said Thursday on CNBC.
Similarly, Fox Corporation Chief Executive Lachlan Murdoch pointed out earlier this month the complexity of spinning off the company’s cable network – even though it is much smaller than its peers.
“From my perspective, I don’t know how we do that. I think it’s going to be very difficult from a cost perspective and from a revenue and promotional synergy perspective to spin off parts of the business,” Murdoch said at Fox said on the earnings call.
Warner Bros. Discovery Chief Executive David Zaslav noted on the company’s earnings call last week that despite the challenges of bundling, it “remains an extremely important part of our business.” He added that it is “a core tool for delivering the WBD story.”
Iger echoed those comments on Thursday, touting content derived from the traditional TV business and its integration with streaming, which remains front and center for Disney.
Iger singled out Disney’s acquisition of Fox Entertainment assets in 2019 as providing content that could help drive the streaming business. Activist investor Nelson Peltz blasted the deal last year, saying it resulted in a loss of shareholder value.
“We specifically mentioned that we did this through a streaming lens, and we saw a world where streaming was going to proliferate and we knew we not only needed more content,” Iger said Thursday. More distribution is needed.
He pointed out 60 Emmy Awards Disney’s content acquisitions this year include FX’s “Shogun,” “Bear” and “Fargo,” which also appear on Hulu.
Revealed: Comcast owns NBCUniversal (parent company of CNBC) and is a co-owner of Hulu.
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