Disney and Hearst are reportedly exploring a sale of A+E Global Media, a joint venture between the two companies that operates cable networks A&E, History, and Lifetime, according to a July report from Deadline. But whoever might be interested in buying up the joint venture is likely to find a struggling cable business.
Disney recently reported that income from equity investees (which denotes income made from what a company invested in) in Disney Entertainment’s linear networks segment decreased by $90 million in the nine-month period ending June 28, from $440 million to $350 million. That was due, according to the filing, “to lower income from A+E attributable to decreases in affiliate and advertising revenue.”
The disclosure, from a quarterly filing last month, comes as other media giants like Warner Bros. Discovery and NBCUniversal look to shed their cable businesses. Disney, on the other hand, has made fewer such moves, which executives have defended as a strength.
“As many others exit that business, it gives us a stronger hand to stay in that business,” Disney CEO Bob Iger said in a June interview on CNBC. “We will have, interestingly enough, a linear television business that’s paired with a streaming business. When you think about it, these spinoff companies won’t have the assets from a streaming perspective that we will have.”
Earlier this month, ESPN chairman Jimmy Pitaro echoed similar sentiments at the Bank of America Media, Communications & Entertainment conference.
“We’ve been very clear about our continued focus on the traditional ecosystem,” he said at the event. “We are running parallel paths. We are all in on direct-to-consumer, but we continue to see the value in that traditional pay TV environment, not just for our business, but also for the sports fan.”
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It’s all about perspective: While some media giants like NBCU and WBD may be spinning off their cable arms, that might not be the right choice for others like Disney, Dan Rayburn, conference chairman at the NAB Show Streaming Summit, told Marketing Brew. Sports continues to be a huge driver of eyeballs for linear TV, and companies have varying levels of live sports content to offer viewers in an increasingly fragmented sports viewing landscape.
“Broadcast is still where it’s at for sports,” Rayburn said. Companies like Disney, Paramount Skydance, and WBD are “all in the business of sports. That’s what’s driving decisions.”
Another factor to consider is each company’s unique financial makeup, he added. “Each one of these companies has to be looked at individually based on the channels they have, the reach they have, their free cash flow, their advertising revenue, and where the debt is structured,” Rayburn said.
“It’s not fair to just say ‘One did this, the other one should do it.’ You really have to look at the financials.”
Disney’s not the only media company choosing to keep its linear and streaming businesses under one roof. Jeff Shell, president of Paramount, echoed Iger’s comments during a press event last month.
“We’re thinking about the cable networks not as declining linear assets that we need to spin off or deal with somehow,” Shell said. “We’re thinking of them as brands that we have to redefine.”
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