When Bob Iger orchestrated the coup that returned him to the top of Disney the media industry and Wall Street were jubilant. The general narrative was the most successful CEO of his generation was returning to right a floundering ship and save the company from a failed leader who clearly had lost the confidence of just about everyone.
Iger fans tended to overlook the fact that the man he ousted was his hand-picked successor. A case can be made that Iger never really could pull away and give Chapek the stage to himself, but that’s beside the point. Iger wanted the job back and it’s hard to argue with the board’s decision to give it to him.
Shortly after he took the job, I wrote a piece urging Iger to sell ESPN. Others suggested the same thing. The basic argument is given the rapidly declining economics of the traditional television ecosystem it’s difficult to see a version of the world where ESPN makes more money today than it did yesterday. In other words, the one-time envy of the television industry, the undisputed market leader, was facing a future of irreversible decline.
That’s not to say that there’s nothing ESPN can do to improve its fortunes. While its future may never be as bright as its past, just like athletes can find new life in new situations, ESPN still has much to offer. But I didn’t, and still don’t, see Disney as the right place for ESPN to reinvent itself.
Based on his statements and actions since his return, Iger still believes the ESPN brand and sports are integral parts of the Disney portfolio, and that he and his handpicked leadership team can find the answers. Iger doesn’t seem interested in selling ESPN. But would he trade it?
Recently Bill Cohan at Puck put forward an interesting idea. Another pivotal decision facing Iger is what to do about Hulu. Without recounting the entire saga, as part of a previous agreement Disney is facing a deadline to purchase the one-third share of Hulu it doesn’t own from Comcast. Cohan’s idea is to put together a trade where Disney gets all of Hulu and Comcast gets ESPN. To make this work Comcast would have to throw in a bunch of cash or something else given ESPN’s market value is substantially higher than Comcast’s one-third share of Hulu.
I love the optics of this concept. The idea of the worldwide leader in sports starting a new era through a trade seems very apropos. From a business standpoint, it also makes a lot of sense. Disney would benefit by shedding itself of a decaying business with massive, rising fixed programming costs. And one that never truly fit into its larger strategy of building the world’s most formidable collection of family friendly entertainment experiences.
To be clear, acquiring ESPN and harvesting its massive cash generation during the peak of the cable days was a stroke of genius by Disney. Iger used that money wisely, it’s what made his reputation and made the Disney content portfolio the envy of the industry. But sports were never more than an adjunct to the larger Disney mission. Now that ESPN is not throwing off the cash it used to, why not leverage it one last time to acquire Hulu, a brand that aligns better with Disney’s long-term strategy.
Do Brian Roberts and the team at Comcast know something about the future of the sports business that Iger doesn’t? Maybe not. But they would bring much needed vigor and energy to the business. Sports is a better fit with what Comcast is trying to build with Peacock. They won’t back down from making the hard choices required to find ESPN’s place in this new direct to consumer streaming world. There are more natural bundling opportunities given Comcast’s broadband and wireless business (re-aggregation is coming people, the bundle will be back) that Disney doesn’t possess.
Also, I don’t sense Comcast possesses any of Disney’s understandable squeamishness about getting into the gambling business. The last thing the Disney brand needs is to be associated with the inevitable scandals that will come with sports gambling, not to suggest that ESPN would ever be responsible for such sordidness. Given the massive growth in sports gambling, ESPN can’t afford to sit on the sidelines much longer.
In a couple of weeks, the titans of media will gather in Sun Valley for the Allen & Company conference. It’s been the birthplace of many big deals. Wouldn’t it be great if Adam Schefter or Adrian Wojanowski, the ESPN journalists who scoop all the big NFL and NBA trade deals, turned their formidable skills to media for the conference? Maybe they would spot Roberts and Iger meeting for a latte or early morning walk to hammer out the deal. Give them a little time and they will find inside sources to leak enough juicy speculation that generates tons of headlines. CNBC should explore borrowing them for the conference. The buzz would be tremendous.
Will such a deal take place? It seems highly unlikely. But like the GM who waited too long to trade a beloved but aging player, Iger may regret it if he leaves the conference with ESPN still on his roster.