SBD/December 6, 2016/Finance

Talk Continues Around Possibility That Disney Could Look To Unload Or Spin Off ESPN

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With concerns about ESPN subscriber numbers weighing on Disney's stock this year, RBC in a note has stated Disney “should consider divesting the sports network because such a move would create value,” according to CNBC’s Carl Quintanilla, who noted RBC also suggested “spinning off ESPN into a separately traded public company, selling the network in a taxed transaction.” Quintanilla said the report is about how ESPN “used to be considered the crown jewel, now it's considered a liability.” CNBC’s Jim Cramer said Wall Street believes “ESPN is now pulling down Disney stock.” CNBC’s David Faber said somehow ESPN has become an "overhang" for Disney "as opposed to a huge benefit" ("Squawk on the Street," CNBC, 12/5). BARRONS' Alex Eule noted the issue is that "cord cutting seems to be weighing on ESPN's business." ESPN charges cable companies "far more than any other channel" (BARRONS.com, 12/5). Quintanilla said for Disney, live sports have become a "liability when you compare it to movies and parks and products.” Elevation Partners co-Founder Roger McNamee said, “The world has, in fact, changed and now the leagues are in charge of their own broadcasts and that makes ESPN's role a lot less valuable than it was before Major League Baseball figured out how to present all of its games directly to fans. ... ESPN's outlook is really significantly less interesting than it was. The one thing I can tell you absolutely for certain is that if this deal happens, it will be great for the investment bankers. It’ll certainly be fun to watch" ("Squawk Alley," CNBC, 12/5).

BUY, SELL OR HOLD? CNBC’s Julia Boorstin said there are "plenty of reasons that it’s worth it for Disney to hold onto ESPN. Not just ESPN’s cash flow, but the fact that having ESPN gives Disney more negotiating leverage for its whole bundle of channels." Boorstin noted Disney Chair & CEO Bob Iger "certainly dismissed this idea of spinning off ESPN on Disney’s last earnings call." Boorstin was unsure of the value of ESPN if Disney were to sell it, but "it's probably worth less than if it's part of the bundle for Disney." CNBC contributor Karen Finerman said she was "skeptical" that Disney would divest itself of ESPN and would instead "put in the time in an attempt to fix it" ("Fast Money," CNBC, 12/5).
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