Comcast president Mike Cavanagh pushed back against recent speculation that the media conglomerate would consider a strategic partnership with Disney for ESPN.
“I’ve been asked about and read some speculation that in some way we might be interested in swapping businesses [with Disney] as part of what’s going on in the sports space, and I would just say that that’s very improbable,” he said during the company’s second quarter earnings call on Thursday. “As you could imagine, there’s tremendous issues around tax, minority shareholders, structuring generally, so I would put aside the idea that there’s anything inorganic that is likely to happen around ESPN in particular.”
Cavanagh went on to tout NBCUniversal’s own sports business and Peacock’s live sports lineup
“I think we’ve got one of the best portfolios in sports. Sunday Night Football, Big 10, Nascar, EPL, WWE, Olympics next year, PGA rights. And we’ve got a very acclaimed group of people in terms of producing excellent content around those sports,” Cavanagh said. “So obviously, it makes us a really strong partner to leagues and around the world. We’re known for that…so that brings us to the table with more than money when it comes time for discussions around how rights owners want to create value for their participants.”
The comments come after Disney CEO Bob Iger recently told CNBC that the company was looking for a strategic partner for ESPN.
“We’ve had a great business and we want to stay in that business,” Iger said at the time. “That said, we’re going to be open-minded there too, not necessarily about spinning ESPN off, but about looking for strategic partners that can either help us with distribution or content.”
He added that Disney has already had “some conversations” with potential strategic partners for ESPN, with possible options on the table including a joint venture or an ownership stake.
“If they come to the table with value that enables ESPN to make a transition to direct to consumer offering, then we’re going to be very open-minded about that,” Iger said.
CNBC reported that Disney has had talks with the NFL, NBA and MLB about becoming minority investors in ESPN. But Bank of America analyst Jessica Reif Ehrlich told The Marchand and Ourand Sports Media Podcast that Iger’s idea for a strategic partnership “screams one company” — Comcast.
“Comcast has so many sports assets and sports aspirations. They obviously have distribution, they have an amazing balance sheet, they have a company that’s become midsize, it’s not big, its not small in NBCUniversal and there’s been tons and tons of speculation in media that they are very interested in NBA,” she said. “And what Bob said as part of this strategic negotiation was it’s likely before they finalize the NBA negotiations.”
When asked about how he feels about the company’s current sports rights, Cavanagh said that Comcast and NBCUniversal are “always looking to see if there’s ways to add more value to our business and likewise work with partners.”
“Obviously, NBA is coming up, that’s a fantastic property,” he continued. “We don’t necessarily need it, given the portfolio we have but given its strength and our historical involvement in the sport it’s something I’d like to see us take a look at.”
While Disney hasn’t given a timeline for taking ESPN fully direct-to-consumer, Iger said that the eventual move is an “inevitability.”
“We haven’t said when, but we do know that it will happen,” he explained. “I think I’m much more certain about when but not prepared to say when that is, I won’t say whether it’s sooner or not, but I’m enthusiastic about it. I think sports stands tall in a sea of tremendous choice and is in many respects an advertiser’s dream and a consumer’s dream. Sports is very, very attractive media and we have a unique position and we feel that we should stay in it.”
The company is currently in negotiations with Comcast to purchase its minority stake in Hulu. Under a 2019 put/call agreement, Disney can buy out the stake as early as January 2024, and Comcast can require that Disney do so. Disney has guaranteed a minimum total equity value of $27.5 billion for Hulu, suggesting that Comcast’s share would be worth at least $9 billion. As of Oct. 1, 2022, Disney valued Comcast’s stake at $8.7 billion.
“There is a mechanism to ultimately determine its fair market value, and we’ll go through the process with it,” Iger said. “The goal is to do it as quickly as possible.”
Though the Hulu negotiations weren’t addressed during Comcast’s earnings call, CEO Brian Roberts previously said at an investor conference in May that he was “pretty certain if and when we sell our Hulu stake, it’ll be for more than what we have.”
Iger plans to combine Disney+ and Hulu into one combined app offering by the end of the year.
“Comcast does not get in the way of us doing that and the combination of those apps is designed to obviously help the business become profitable,” he said. “Hulu is a diversified business in terms of its content offering, it’s done extremely well on the advertising front, it will help in terms of viewer engagement and advertising, meaning… it’s the right thing for us to do as we prioritize turning that business, not just into a profitable business, but a growth business, which I’m confident we can do.”
In addition, Iger said that Disney’s linear networks “may not be core” to the company — suggesting that he would be open to the possibility of a sale — and that several strategic options were being explored.
