Scene from the FX series Shogun.
Source: Disney | FX
Disney has done the math on separating its TV networks business, and it appears too messy to be done — at least for now.
The company’s chief financial officer, Hugh Johnston, said Thursday on CNBC’s “Squawk Box” that the “cost is probably more than the benefit” when it comes to separating its TV networks business, given the “operational complexity.”
The future of the traditional TV network business has been top of mind in the media industry. In late October, Comcast executives said they were exploring a separation of the cable networks business. Executives said the process was in early stages and the outcome was unclear.
The cable news bundle, despite still being a cash cow for companies, is losing customers at a fast clip. The industry overall lost 4 million traditional pay TV subscribers in the first six months of the year, according to estimates from analyst firm MoffettNathanson.
Disney reported Thursday that revenue for its traditional TV networks was down 6% for its most recent quarter to $2.46 billion, while profit in the division sank 38% to $498 million.
Its apparent commitment to the segment seems to be an about-face.
Last summer CEO Bob Iger opened the door to the sale of its TV assets. Iger had recently returned to his post as chief executive, instituted a vast restructuring of the company and was facing down an activist investor.
Johnston said during Thursday’s earnings call that soon after he joined Disney a year ago he began evaluating divestitures. He noted that after “playing around with spreadsheets” there was no clear path to value creation after divesting the networks or other businesses.
“I like the portfolio the way it is right now. I wouldn’t change anything,” Johnston said Thursday on CNBC.
Similarly, Fox Corp. CEO Lachlan Murdoch earlier this month noted the complexity of separating the company’s cable TV networks — albeit a much smaller group of networks than its peers.
“From my perspective, I don’t see how we could ever do that. I think breaking apart part of the business would be very difficult, from both a cost point of view and from a revenue and a promotional synergy point of view,” Murdoch said on Fox’s earnings call.
Warner Bros. Discovery CEO David Zaslav noted during that company’s earnings call last week that despite challenges of the bundle, it is “still an extraordinarily important part of our business.” He added it is “a core vehicle to deliver WBD storytelling.”
Iger, on Thursday, echoed those comments, touting the content that stems from the traditional TV business and its integration with streaming, which remains front and center for Disney.
Iger particularly highlighted Disney’s acquisition of Fox’s entertainment assets in 2019 as providing the content to help propel the streaming business. Activist investor Nelson Peltz slammed the deal last year, saying it contributed to eroding shareholder value.
“We specifically mentioned that we were doing so through the lens of streaming, we saw a world where streaming was going to proliferate and we knew we needed not only more content but more distribution,” Iger said Thursday.
He noted the 60 Emmy Awards Disney received this year for content including FX’s TV series “Shōgun,” “The Bear” and “Fargo,” which also appear on Hulu.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC, and is a co-owner of Hulu.