Disney boss rejects Dan Loeb’s calls to spin off ESPN

Bob Chapek, Walt Disney chief executive, has rejected calls by activist investor Dan Loeb to sell or spin off the ESPN sports television network, vowing to restore the business to its onetime status as a growth engine of the company.

Loeb, whose Third Point hedge fund revealed in August that it had bought a $1bn stake in the company, called for ESPN to be spun off to reduce Disney’s debtload — just one element of a sweeping plan to shake up the media company.

In an interview with the FT, Chapek said Disney had been “deluged” with interest from companies seeking to buy ESPN earlier this year amid rumours that the company was weighing a sale of the cable network.

“If everyone wants to come in and buy it . . . I think that says something about its potential,” Chapek said. “I think its potential is within the Disney company.”

ESPN broadcasts live sports in the US, including games of the National Football League, National Basketball Association and Major League Baseball.

“We have a plan for it that will restore ESPN to its growth trajectory,” Chapek said. “When the rest of the world knows what our plans are they will be as confident about that proposition as we are.”

Chapek said he has “regular conversations” with Loeb, who also took a stake in Disney in 2020 that he sold early this year. He characterised the conversations as “very collaborative, non-antagonistic and collegial”, including around Loeb’s recommendations to change the composition of the Disney board.

He defended the board, saying that the average tenure is four years and has a broad “range of skillsets”.

But he added: “We’re so consistent with Dan’s thinking that everything he’s talked about are either things we have considered in the past or are considering for the future.”

Loeb has also called on Disney to purchase Comcast’s 33 per cent stake in the Hulu streaming service earlier than January 2024, when Disney has the option to purchase the remaining stake. Some analysts on Wall Street are also calling for Disney to settle the Hulu ownership soon.

Chapek said he would “love” to settle the matter sooner but that Comcast has seemed reluctant.

“We have talked to them numerous times over the past year-plus,” he said. “If that were in the cards we would love to do that, but it takes two to tango.” He noted that market sentiment has changed significantly since the agreement was struck, when investors were more bullish on streaming.

Chapek spoke on the sidelines of the annual D23 conference in Anaheim, California, where the company revealed its streaming and theatrical slate to thousands of Disney fans. Disney showed off trailers of two highly anticipated films coming this autumn, the Black Panther sequel Wakanda Forever and Avatar: The Way of Water.

It also previewed a run of original series on Disney Plus, including the Star Wars prequel Andor and the Marvel series Secret Invasion.

Chapek said the new slate represented the end of a Covid-induced production bottleneck. “This is our new steady state (of production),” he said, saying that both the pace of production and the size of its content budget — currently about $30bn — would remain level.

Disney has continued to add new customers to its streaming services this year, and by some measures its overall streaming operations have surpassed Netflix in subscribers. But Netflix’s revelation that it has lost more than 1mn subscribers this year has cast a pall over the entire streaming business, with investors growing concerned over high content spending and clamouring for a clear path to profitability.

Disney’s theme park business is also recovering strongly despite the closure of parks in China, analysts said. But shares are down 26.5 per cent this year, compared to a decline of 15.2 per cent for the S&P 500.

Chapek said Disney has “commercial momentum that is enviable” both in its content and theme parks businesses, but was suffering from investor “malaise” around streaming due to Netflix’s problems.

“For a long time we benefited from being just like Netflix because we were a streaming company,” he said. “It’s not unexpected that we would get painted with the same brush [but] we’re not the same company.”