Disney received a boost last week when Goldman Sachs analyst Brett Feldman initiated coverage with a “buy” rating. The main reason for his optimism: Disney+, the new streaming service that he predicted would reach 150 million subscribers by 2025 and would be profitable next year.
The analyst also was bullish on ESPN — not ESPN’s legacy cable channel business. Rather, he thinks the streaming service ESPN+ is primed for growth.
The new streaming service builds on the entertainment giant’s push into the direct-to-consumer market. getty images
While ESPN — and all other TV channels — will be hurt by cord cutting, Disney’s purchase of BAMTech will help ESPN’s push into streaming. Plus, its ability to sell ads on Hulu suggests that ESPN+ will continue to grow, Feldman said.
It reminds me of this passage from Bob Iger’s autobiography, “The Ride of a Lifetime,” about the decision to create ESPN+ in 2018. Disney paid $1 billion for a 33% stake in BAMTech in August 2016.
Iger: “The initial plan was to address the threats to ESPN’s business by creating a subscription service that would exist alongside the programming on ESPN’s networks, but as tech companies invested more deeply in their entertainment subscription services, the urgency for us to create direct-to-consumer bundles not just for sports but for television and movies intensified.”
Two years later, Disney bought full control of BAMTech.
“That announcement marked the beginning of the reinvention of the Walt Disney Company. We would continue supporting our television channels in the traditional space, for as long as they continued to generate decent returns … but we were now fully committed to also becoming a distributor of our own content, straight to consumers, without intermediaries. In essence, we were now hastening the disruption of our own business.”
