Media Uncategorized

The call for Disney to spin off ESPN is about to get louder

Let’s get this out there: I am not the first person — nor will I be the last — to bring up the idea that maybe Disney could spin off ESPN. ESPN has been such a huge money maker for Disney that it made up an inordinate amount of the company’s revenue over the past 15 years. Now, ESPN is the target of every investment wonk and expert out there. The calls for the spin off are going to be loud and clear very soon.

Don’t believe me? Check out this from Liberty Media’s John Malone all the way back in early November. Not enough? How about CNN Money, The Motley Fool, RBC — through Business Insidereven Investopedia got in on the act. Disney is going to need to make a decision, but ESPN’s subscriber numbers and the huge rights fees paid for live sports could make the decision for them.

ESPN is at an 11-year low in terms of subscriber numbers. Its revenues are projected to rise . . . but the problem is they aren’t projected to rise at the same rate as their expenses. That’s thanks to recent deals — the NBA deal will be the one pointed out the most because it’s the biggest jump from year to year — throughout all sports. We’ve done enough impending changes commentary about the sports rights bubble on Fields of Green — for the past two years — to say that this shouldn’t be much of a surprise.

Disney has an obligation to its shareholders and right now ESPN is dragging down its share price. While Marvel, Star Wars, Disney Parks, and almost every other Disney decision turns to gold, ESPN has turned into the easy target. That’s a huge difference from where it was before when it was the crown jewel of the Disney conglomerate.

Look, ESPN can survive without Disney. It has basically operated as its own company under the Disney umbrella. It had different rules than normal Disney groups. ESPN got to keep its headquarters and decision makers away from Burbank and in Bristol Connecticut. It forced ESPN to figure out how to be self sustainable. ESPN did whatever it wanted to do with partnerships and advertising. Disney was smart to stay out of ESPN’s way as it built itself into a sports entertainment behemoth.

Now everything is catching up to ESPN. A lot of people have been waiting for this moment to celebrate ESPN’s failures — hello Bill Simmons, Clay Travis and Barstool Sports — but it’s not dead yet.

Even if Disney was to spin the company off, ESPN has run as a virtual standalone company for its entire tenure. They have smart people with great connections. Maybe the spin off can help ESPN move into digital faster and offer something — anything — a la carte. Maybe a break up would be beneficial for both ESPN and Disney. ESPN would lose a lot of cash backing that comes when having Disney as a parent company, but FS1 and NBC Sports still aren’t catching the worldwide leader in ratings. Someone has to distribute sports content.

Expect the calls for ESPN’s spin off to get louder. Expect the credits to be happy in the current situation. Just don’t expect ESPN to crumble under the weight of its current position. The company and people running it have been around too long for that.

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