In 2019, the walt disney company Celebrated several major successes, including the launch of Disney+ with 10 million subscribers on its first day, the massive $71 billion acquisition of Fox’s entertainment assets and the release of the second-highest-grossing film of all time, “Avengers: Endgame” Is. These achievements demonstrated Disney’s ability to leverage its intellectual property (IP) across a variety of platforms, from theaters to theme parks and streaming.
Fast forward nearly four years, doubts have emerged about the wisdom of consolidating all these assets under one roof. CEO Bob Iger has pondered whether Disney has become too big for its own good. Some Wall Street voices are even advocating a breakup.
Disney’s parks business is showing signs of slowing, its linear TV division is on the decline, and Disney+ subscriber growth has slowed. Dincy appears to have lagged behind its competitors at the box office, causing its share price to fall to a nine-year low and underperforming the S&P 500.
MoffetNathanson analyst Michael Nathanson has called into question the company’s structure, proposing the creation of two Disney units: one focused on parks, Disney+ and studio intellectual property, and the other with linear networks, ESPN+, Hulu SVOD, Hulu Live TV And everything else including Disney+ Hotstar is included. ,
“Then why don’t you take a clean break?” Nathanson asked Iger on the August 9 earnings call.
Iger has remained tight-lipped about the future structure of the company, and has insisted on examining strategic options for ESPN and Linear Networks.
Iger has identified three pillars that will drive Disney’s growth in the years to come: movie studios, parks, and streaming. ESPN, in particular, is set to undergo a complete transformation to become a direct-to-consumer platform. Still, analysts and media experts warn that the journey could be challenging, primarily because of the high cost of sports rights and potential resistance from consumers who already subscribe to multiple streaming services.
Splitting the company into two entities could help Disney pare down its debt, remove loss-making segments and provide a clearer outlook for its future in a rapidly evolving media landscape.
Bank of America Securities analyst Jessica Reif Ehrlich argued against the clean break, saying Disney’s properties synergize, the studios run IP parks while linear networks generate cash to invest in growth areas like streaming.
Erlich suggests leveraging a brand’s intrinsic value to create new opportunities. She cites ESPN’s $2 billion sports betting deal with Penn Entertainment Inc. as an example of untapped potential.
But Nathanson believes the current structure doesn’t fully realize the value of Disney’s assets and proposes the creation of a new company combining Disney’s parks, experiences and products segment with Disney+ and studio IP , which is potentially trading at a premium valuation due to its prestigious assets. and strong revenue growth.
The reevaluation of corporate structures isn’t unique to Disney. Other old media giants like Paramount Global and Lionsgate have found similar avenues. For example, Paramount recently abandoned plans to sell a majority stake in BET Media Group, believing that it would not significantly reduce its debt. Lionsgate has also chosen to split its studio and Starz business, marking a broader shift toward a streaming-first era.
Although the idea of splitting the company is on the table, it is not a straightforward decision, as Disney’s various assets are deeply intertwined, and their separation could be challenging and would not necessarily solve the company’s current challenges. yes.
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