Usually when a person or company sells something, the primary motivation is getting back as much money as possible.
Disney’s motivation to potentially sell ABC and its owned affiliates, linear cable networks, and a minority stake in ESPN isn’t based solely on the financial value of these assets. It’s about signaling to investors that Disney is no longer just an old media company.
Disney has a market capitalization of about $156 billion and $45 billion in debt. By selling assets, the company can reduce its leverage ratio and mitigate losses from its streaming businesses.
However, the main reason for considering the sale is to send a message to the investment community that the era of traditional TV is over for Disney. The company is ready for its next chapter, focusing on streaming as its future.
Analysts believe that moving away from the declining linear business and finding a more suitable operator for it would benefit Disney’s stock and overall business.
Nexstar and media mogul Byron Allen have expressed interest in acquiring ABC and its affiliates, but Disney has not made any official decisions regarding the divestiture of ABC or any other property.
The value of broadcast and cable networks has significantly declined in recent years due to the increasing number of Americans canceling cable subscriptions.
ABC and Disney’s owned affiliate networks are currently valued at around $4.5 billion, a steep drop from the $19 billion Disney paid for them in 1995. ESPN, on the other hand, has a valuation of about $30 billion, but its value is seen as declining.
While Disney wants to retain a majority stake in ESPN, selling ABC may have implications for existing deals with pay TV operators or leagues, as well as ESPN’s ability to secure future sports rights deals.
Disney’s decision regarding the ABC network is particularly interesting. Selling off its owned and operated affiliate stations would not drastically impact the media industry, but divesting the ABC network would signal Disney’s lack of faith in the broadcast cable world.
However, selling ABC could potentially hinder ESPN’s ability to secure future sports rights deals and may require rewriting existing agreements with pay TV operators or leagues. It’s a complex decision for Disney, weighing the negative impact of losing ABC against the positive gains of shedding declining assets.
Disney aims to show investors that it is serious about embracing new opportunities and adapting to the changing media landscape.
The Way Forward
Disney’s potential sale of media assets is seen as a bullish sign, suggesting the company is taking decisive steps to evolve and become a catalyst for industry change.
Analysts believe that Disney’s recent moves, including partnerships and divestitures, position the company as a leader in pushing the industry forward.
– HaberTusba’s Lillian Rizzo contributed to this article.
WATCH: Nexstar could ‘no doubt’ take ABC and monetize it really well, says Wells Fargo analyst