Bleeding Disney
DC 9.53pm / Reno 6.53pm
Raising your prices in the middle of a strike, while talking about how much money you’ve been saving, while saying you’d like to “let the writers go homeless…” is an interesting action for people who are being totally transparent and not evil.
Apple is sneakily putting out the best content of all the streaming services, thanks especially very successful Messi x Apple+
Apple is working on a documentary series about Lionel Messi’s move to the United States.
The tech giant’s streaming service has negotiated a deal with Major League Soccer and team Messi to make a six-part series offering fans a behind-the-scenes look at the final chapter in the career of the greatest soccer player of his generation. It will be produced by Smuggler Entertainment, which is already working with Apple on a documentary series about Lionel Messi that culminates in his win at the 2022 World Cup.
Apple has become a real player in the sports documentary boom, from its series about the World Surf League and Magic Johnson to a film about Stephen Curry.
A Messi project is a no-brainer for them since the company is also the primary home of MLS. The number of people who have signed up for MLS Season Pass on Apple TV+ has doubled since the league announced Messi’s arrival, according to the owner of Inter Miami. (Whether any of the news customers is paying for the service is less clear.)
The Argentinian dynamo has already delivered heroics, scoring game-tying and game-winning goals in the leagues cup. All of this before he has even played his first MLS game. People are paying thousands of dollars for tickets to see Messi play in the US and his first away game sold out in 10 minutes.
The cost of streaming rises as customer growth stalls.
Disney has raised the price of Disney+ by $6 in less than a year. Hulu, which used to be one of the cheaper streaming services, is now more expensive than the most popular plans for Netflix and Max. US$18 for ad-free Hulu is basically the death of Hulu as a stand-alone *premium* service. Disney is now positioning D+Hulu ad-free as its version of Netflix premium, which both cost $20 per month. Up to consumers whether they think Hulu+Disney is equal to Netflix alone. Disney+ will follow Netflix's example and start cracking on password sharing starting next year.
While Disney has been the most aggressive, the price of just about every major streaming video and audio service has increased in the last 18 months. That’s partially due to inflation, but it’s also because these streaming services have stopped growing. This is a chart of subscribers added in the second quarter by Disney+, Hulu, Netflix and Paramount service.
The number of subscriber additions for Netflix, Disney+, Hulu and Paramount has declined by 87% over the last four years.
If you aren’t able to grow through new customers, you need to grow by making more from your existing ones. The bad news for customers is that some of these packages are now more complicated than cable. Just look at this Disney pricing plan.
The good news for companies is that a lot of people seem happy to pay.
So how Disney will survive? For comparison, Paramount sells Simon & Schuster to private investment firm. Simon & Schuster will fare better as a standalone company. "Paramount wasn't all that interested in staying in the publishing industry," he notes. "They hadn't really made any outside acquisitions."
In addition to Simon & Schuster, Paramount Global's portfolio includes CBS, Showtime Networks, Nickelodeon, MTV and a vast film and TV collection. CBS News co-president Neeraj Khemlani cost-cutting was seen by some as a possible path to spin off the network as its parent Paramount Global — which also owns Paramount Pictures, Showtime, MTV and Nickelodeon, among others — focuses on streaming. But Khemlani get fired hours ago.
As the media industry grapples with changing consumer habits, a fickle ad market and the Hollywood writers and actors strikes, the sale to KKR will help Paramount Global pay down debt.
Bob Bakish, President and CEO of Paramount Global, writes, "The proceeds will give Paramount additional financial flexibility and greater ability to create long-term value for shareholders, while also delivering our balance sheet."
There is a growing consensus among Wall Street analysts and former Disney employees that the 72-year-old CEO Bob Iger should take all the company’s linear TV networks, such as ABC, Freeform and FX, and spin them off into a separate company.
This would solve a lot of his problems. He can offload debt and get rid of legacy businesses that suppress his share price. He can then create a new company with theme parks, the studios and Disney+ that is better positioned for future growth. Former Disney executive Kevin Mayer — now an adviser to Iger -- has been proposing a version of this strategy for months.
Iger hasn’t made any final decisions, but he has been floating the idea of selling assets, all but asking someone to make him an offer. Last month, he said the linear TV networks are not core to the business. This past week, he identified studios, streaming and theme parks – the three areas of this potential new Disney – as the future pillars of the company. With Disney’s share price in the toilet, Iger knows he needs to do something.
A spin would be complicated, and it’s not clear whether it would include ESPN and Hulu. After years of speculation that Disney would sell or spin ESPN, Iger has said he doesn’t want to part with it. He’s a big sports fan, and ESPN fits into Disney’s family-friendly image.
But ESPN is a logical fit alongside the other linear networks. Disney uses the power of ESPN to charge pay-TV providers higher fees for all of its other channels, including Freeform and FX. Separating them would make the remaining networks less enticing to pay-TV providers (and potential investors).
ESPN, meanwhile, relies on ABC to score big sports deals. Leagues want their matches to reach as many people as possible, and broadcast networks offer a larger audience than cable. Disney has a leg up on Warner Bros. Discovery in the current NBA renewal talks because it can put games on both ESPN and ABC. If Iger separates those two network, would he lose the expanded college football playoffs to Fox?
For now, Iger is shopping a minority, non-controlling stake in ESPN separate from any conversations about the other networks. While sports leagues are unlikely to invest in one rights holder (ESPN) when they sell to everyone, there is interest in a company with an unparalleled set of sports rights. We should know more about this process in the next couple months.
Should Iger attempt to sell or spin his TV networks, private equity firms are the most logical buyer, as Claire Atkinson argued this week. Those firms love assets on the decline that spit out cash. They go in, cut costs and make them more profitable. They can take out enough money to get a good return while slowly killing the business.
These linear TV networks do generate a lot of cash. And that’s the biggest argument against selling them. Iger needs cash to pay down debt, buy the rest of Hulu and fund his unprofitable streaming services.
He just closed a deal to license the ESPN name to casino operator Penn Entertainment – after years of pooh-poohing gambling – because it will pay Disney $150 million in cash a year for a decade. That is less than Disney thought it would get three years ago, but still better than nothing. (Peter Kafka wrote a good breakdown of this deal.)
Seeing Iger float deals in public has been unsettling for employees and long-time Disney watchers. He has always seemed so confident and assured. Plans for his biggest deals, like Pixar and Marvel, were kept very quiet until they were done.
What people often forget about Iger’s first tenure is he didn’t do it alone. He had a core team of lieutenants advise him on major deals and strategy decisions. A lot of that inner circle is now gone; Iger’s bench is depleted.
That is a big reason Mayer and Tom Staggs, Iger’s former heir apparent, are back as advisers: They have the benefit of knowing a lot about the company while not being as emotional about its assets. (Their return is a bit of a slap in the face to people like ESPN boss Jimmy Pitaro and entertainment co-chiefs Dana Walden and Alan Bergman, but that’s a story for another day.)
Iger 2.0 looks and sounds less sure of himself, and there is growing concern among current and former Disney employees that he doesn’t have a clear plan. His recent interview with CNBC did little to reassure them. Yet there remains a core group of people loyal to Iger who argue he is doing his best with a bad situation.
Both can be true. Iger has returned to a situation that is far more challenging than when he left Disney. The number of people watching his linear TV networks has continued to collapse. His streaming services are losing even more money. And his creative engine is sputtering for the first time in years.
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