Justin Solomon | CNBC
Daniel Loeb’s Third Point acquires a new stake in Disneyprompting the entertainment giant to break up its sports network ESPN, according to a letter obtained by David Faber from CNBC.
Stocks jumped as much as 2% on the news.
In a letter to Disney CEO Bob Chuckle, Loeb said there is a strong case that the ESPN business should decouple, saying that the sector generates significant free cash flow for Disney.
“ESPN will have more flexibility to pursue business initiatives that may be more challenging as part of Disney, such as sports betting,” Loeb said. “We believe most of the arrangements between the two companies can be contractually replicated, the way eBay spun PayPal while still using the product to process payments.”
Disney makes more money from cable subscribers than any other company Just because of ESPN. ESPN and sister network ESPN2 charge roughly $10 a month together, while Disney requires pay-TV providers to include ESPN as part of their most popular cable packages.
ESPN+, a streaming service with limited content, has become a stronger product in the past year with Disney moving more exclusive live games to the service. Disney said last month that it would raise the price of ESPN+ to $9.99 a month from $6.99 a month starting Aug. Biggest price increase to date.
Second, Loeb urged the entertainment company to integrate the Hulu streaming device directly into Disney+’s direct-to-consumer platform.
Comcast has an agreement to sell its 33% stake in Hulu to Disney within two years. Loeb said Disney should “make every attempt” to acquire the remaining minority stake in Comcast before the 2024 deadline.
“We believe it would be wise for Disney to pay a modest premium to speed up the merger,” Loeb said in the letter. “We know this is a priority for you and hope there’s a deal before Comcast is contractually committed to doing so in about 18 months.”
Disney only He came out of a strong quarter With the growth of the number of streaming subscribers exceeding previous estimates. Disney also posted better-than-expected results in both the top end and bottom line, buoyed by increased spending at its local theme parks.
Loeb has a history of being an active investor in the media giant. Most recently, he held a stake for two years from 2020 to early 2022, which prompted Disney to ramp up its streaming services.
Disney shares are down about 20% this year.
Disclosure: CNBC is part of Comcast’s NBCUniversal.
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