One thing Bob Iger can do with Hulu? Trade ESPN for it

We now know in great detail what Bob Iger is planning with Disney. We don’t know what in the world will happen to Disney Hulu.

Fact: In January 2024, Comcast could sell a third of its stake in Hulu to Disney for north of $9 billion. Another option: Comcast CEO Brian L. Roberts buys Hulu from Disney. And one more thing: Disney and Comcast are looking for Hulu buyers in an open auction. Last week, after his company reported its financial results for the first quarter of 2023, Iger signaled again that he was ready to sell Hulu. “Everything is on the table right now,” he said.

Then there’s a fourth option: What if Disney traded its ESPN stake for Comcast’s Hulu stake? (Disney owns 80 percent of ESPN, Hearst owns the rest.) Hey, business and sports go hand in hand.

The idea was first floated at last summer’s Allen & Company Sun Valley Conference, an annual Idaho summer camp for top media executives and their investment banking friends, and then revived last week. Puck legal writer Bill Cohan in a published interview with colleague Matt Belloni noting that “valuations can be adjusted for cash and the transaction would be tax-free for all parties”.

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ESPN’s 80 percent is worth billions more than Hulu’s 33 percent, but Comcast has the cash. While ESPN never quite fit the Disney vibe, NBCU already has a major sports presence with “Sunday Night Football” and has brought more live competition, including Premier League soccer and the WWE Network, to the young Peacock. At a time when sports rights are incredibly expensive, Disney would be making a ton of money and download ESPN.

IndieWire reached out to representatives of Comcast and Disney for comment for this story, but did not hear back.

What might mess with that idea are spoilsport’s antitrust regulators, who see no ambiguity in combining Comcast, already a major player in sports, with ESPN, which still (sometimes) bills itself as the “world leader in sports.” It would be a question of the rights owned by ESPN and the free market effect if these rights were brought under one roof.

“It would certainly merit increased scrutiny from regulators,” said Corey Martin, managing partner and chairman of entertainment finance at law firm Granderson Des Rochers. “I don’t think there’s necessarily been a precedent for a company like ESPN, which has multiple rights for multiple sports, to merge with another company that has rights for multiple sports.”

You may recall a similar problem when Disney acquired Fox in 2017, when Disney had to divest itself of Fox’s large network of regional sports networks. (RSNs), according to Martin, it was obvious that a company controlling both the national and regional broadcasting of a particular sport could cause problems.

In the event of a possible ESPN-Comcast deal, the NFL would be the primary consideration. The NFL is unique in that it has rights applications from all four major broadcasters (ABC sometimes simulcasts ESPN’s “Monday Night Football” games), not to mention Amazon. What happens to the market if the two broadcasters merge? How would a combination of ESPN and NBCU affect the pricing of sports rights or give you a sudden advantage?

“I think there would probably be a lot of nerves in all the sports leagues,” Martin said. “This would likely reduce the influence of these sports in playing rights holders off against each other.”

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ESPN+, part of a bundle with Disney+ and Hulu, had nearly 25 million subscribers at the end of December. On Disney’s Feb. 8 earnings call, Iger said he is not currently considering a sale or spinoff of ESPN. But as Belloni wrote in his back-and-forth with Cohan, “nobody seems to believe it,” especially after Iger’s Disney reorg included separating ESPN from the rest of Disney Entertainment.

This reorganization raised questions in the investment community about ESPN’s future; Iger said he knew they would come.

“ESPN is a differentiator for this company. It’s the best sports brand on television. It is one of the best sports brands in sports. It continues to create real value for us,” he replied. “It’s going through some obviously challenging times because of what’s happened in linear programming.”

“The ESPN brand is very healthy and ESPN’s programming is very healthy. We just have to figure out how to monetize it in a disruptive world. That’s all, Iger continued. “But we are not currently in any discussions or considering a spin-off of ESPN. By the way, this was done in my absence, and I was told that after a thorough investigation, the company concluded that this was not what the company intended to do.

Right, Chape’s Disney looked into it and eventually passed. But For the verb Disney was busy undoing almost everything Chapek did.

There’s a bonus for cash-rich Comcast. A theoretical asset swap would create NBCU ‘perfectly’ for a possible merger with Warner Bros. Discovery,” Cohan wrote. “These deals are going to happen,” he confidently wrote of both ESPN-for-Hulu and NBCUniversal/WBD, “it’s just a matter of when.”

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