Walt Disney (DIS.N) and Apple (AAPL.O) have a history together. A future partnership could be on the cards too. Disney Chief Executive Bob Iger is seeking a team-mate for sports network ESPN. Apple head Tim Cook is expanding into soccer and baseball coverage for its streaming service. In 2024, Iger could look to Cook for a deal.
Disney is casting around for a minority partner to invest in sports cable network ESPN. It’s part of a wider effort undertaken by Iger, who is under pressure from activists including Nelson Peltz, to re-evaluate the $170 billion entertainment company’s broadcast portfolio, which includes other networks like ABC and FX.
Apple is a logical place to start. One of Iger’s hallmark deals was to buy Apple co-founder Steve Jobs’ animation studio Pixar for $7.4 billion in 2006. The all-stock transaction made Jobs the largest shareholder in the Magic Kingdom, earning him a seat on Disney’s board. Cook in turn recruited Iger to Apple’s board in 2011, where he served until 2019.
Disney owns 80% of ESPN while Hearst, the publisher of Elle magazine and the Houston Chronicle newspaper, has the other 20%. The network has roughly 71 million subscribers through basic cable packages, as of September. But drumming up viewers is getting harder as eyeballs are fixed on streaming.
Both Disney and the $3 trillion technology giant have invested heavily in their respective streaming businesses, but they are in different stages. Disney needs money and Apple needs content, so a deal could work. Cook has bought rights to Major League Soccer and Major League Baseball. Having ESPN as its main outlet would be a punch up. Plus, Apple could seed the sports network on iPhones and through Apple TV to juice customer acquisitions.
Meantime Iger could get a cash infusion. ESPN generated approximately $3 billion in EBITDA for the year ending September. On a multiple of 10 times, ESPN has an enterprise value of $30 billion. With $162 billion in cash on Apple’s balance sheet, Cook could easily swing the investment and provide a lifeline to a familiar friend.
- This is a Breakingviews prediction for 2024. To see more of our predictions, click here.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
CONTEXT NEWS
Walt Disney reported on Nov. 8 that its sports network ESPN made $3.8 billion in revenue for the quarter ending Sept. 30, an increase of 1% year-over-year. Operating income rose 15% to $953 million.
Disney Chief Executive Bob Iger said in July he was open to selling an equity stake in ESPN. Disney owns 80% of the sports network, while Hearst owns the rest.
