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Way back in 2006 in his first stint as chief executive of Disney, Bob Iger made a big splash just four months into the job with the acquisition of Pixar. It was the first of several transformational deals that would define both Iger’s career and modern Hollywood at large over the ensuing decades.
Iger, now age 72, is leading the entertainment industry into a fresh wave of dealmaking, with negotiations around the perpetually in-flux US streaming service Hulu set to begin next month.
But instead of bold moonshots on the future, this era has more of a downbeat feel, with Iger and his peers facing the unglamorous task of managing decline.
Having spent the past several years investing in streaming — and in doing so, undermining the old business of television — big media groups are now dealing with the fallout. Their CEOs have to finish the task of ripping up the US pay-TV business, one that had made these companies and the executives themselves very rich, in the least painful way possible.
This is playing out across the industry, but most publicly at Disney, after Iger in effect put up a “for sale” sign in July on Disney’s TV channels, including ABC, where he started his career. These businesses, which brought Disney nearly $5bn in operating income in the first nine months of its fiscal year, “may not be core” to the company, Iger declared on CNBC. “The disruption of [traditional TV] has happened to a greater extent than even I was aware,” he said.
To cope with this disruption, US media groups are slimming down. Warner Bros Discovery, which has slashed costs over the past year, is in talks to sell a stake in its soundtrack catalogue to Sony Music, according to people familiar with the matter. Negotiations have dragged on for several months and it is unclear if a deal will materialise, these people said.
Warner also owns CNN, another TV channel that seems continually rumoured to be up for sale. The recent hiring of respected news veteran Mark Thompson to lead the network suggests that Warner chief David Zaslav is invested in keeping the network, at least for now.
Paramount, which is controlled by Shari Redstone, this year agreed to sell the Simon & Schuster book publisher to KKR. It also tried to sell BET, one of several cable TV networks that Paramount owns, but abandoned the effort.
Unsurprisingly, private equity companies, experts in wringing cash from companies in decline, are rumoured as potential buyers for these networks. “It’s tough to find anyone who will write a big cheque for linear TV today,” said the chief executive of a global media group. “[Private equity] firms could look at it as a tactical buy.”
Aside from the fact that the assets they are trying to offload are in decline, there are other factors that make this a bad time to sell a media company.
The US regulatory environment has shifted under the leadership of top antitrust enforcer Lina Khan. Media executives know that any proposed transaction could be subject to years of waiting for regulatory approvals if the Democrats win the next election. US interest rates are higher than they have been in two decades, raising the cost of borrowing at a time when Disney and Warner are already saddled with substantial debt. Then there is the historic labour strike in Hollywood, which will affect the income statements of these companies well into next year.
There appear to be few elegant solutions for Iger, who staged a high-profile return to Disney last year, pulling himself out of retirement to turn things around. Since he came back in November, Disney’s stock has fallen about 15 per cent, while the S&P 500 index has gained 12 per cent. The company’s shares hover around $80, the lowest point in about a decade.
Disney might have simply waited too long to sell the businesses. The group is already fielding calls from potential buyers of ABC, but these suitors say that Disney does not seem clear about the structure or details of a potential deal.
As ever, there is the pipe dream that Apple or Amazon could swoop in. Iger wrote in 2019 that if Steve Jobs were still alive, he believes Apple and Disney would have merged.
But Apple is not known for big acquisitions, and even if Iger is successful at shrinking Disney by selling off its declining TV networks, the idea still seems far-fetched. This week, Iger committed to doubling investment in an area that is still performing well: its theme parks. Does anyone believe Apple’s Tim Cook wants to run Disney World?
anna.nicolaou@ft.com
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