Disney & Bob making noise about selling ABC, linear is all but dead in the US
Should Iger sell ABC and FX, as he dangled in Sun Valley? The reality is that audiences have been trained to expect linear and Pay TV to get worse as prices go up. Virtual TV providers, like YouTube TV and Hulu with Live TV, keep getting more expensive while the content offered on those platforms moves to streaming. Trying to pivot interest back to linear at this point doesnât work, and therefore arguing it still has value becomes much, much more difficult. Just look at what happened to newspapers and digital media over the past 20 years, as revenue went down and private equity came in.
Perhaps the most obvious cautionary tale is ABC News. As my colleague Dylan Byers recently pointed out, Robin Roberts , GeorgeStephanopoulos and Michael Strahan are being paid a combined $75 million a year to work within a model of news that is in decline. As I noted in a recent piece, news is becoming more passive, more intimate, and more micro-community based. There are news organizations that appeal to specific audiences, and journalists that speak to specific industries. (Puck is a case in point.)
This doesnât mean macro news organizations are going away, but theyâre morphing into larger lifestyle brands (The New York Times ) or developing new products to increase participation amongst audiences (Twitch). The type of news that exists in Pay TV will inevitably disappear with the audience watching it (Baby Boomers and older Gen X). The need for global and local news doesnât go away, but the approach and distribution changes.
Disney executives should sell networks like ABC, even at a potentially humbling loss, before it gets much worse. In the most recent quarter, Disney saw its linear networks revenue decrease by 7 percent while its operating income dropped a whopping 35 percent. The silver lining, as Iger presumably knows, is that writing down losses demonstrates action and vision to Wall Street. (This is one reason why David Zaslav took a hammer to CNN+ mere weeks into its life.)
FX, however, is a more complicated story. It offers slightly more differentiated content than general ABC or Freeform. But is owning FX more valuable to Disneyâs future D.T.C. business than selling it and re-investing the cash into individual projects for D+? Itâs a question without a clear answer. FX content has exclusively streamed on Hulu for more than a year now, but Hulu isnât seeing the level of growth each quarter to make it stand out as a differentiated partner, even with hits like The Bear .
Divesting the content from the distribution channel, if possible under the terms of any potential sale, would be crucial for Disney to keep its prestige brand. Rolling it into Hulu exclusively would hurt in the short term but keep the brand active and forward thinking in the long term. Think Showtime, but with more attention on its series. Recall that HBO, the crème de la crème of these networks, hit a subscriber ceiling. Thatâs why being bundled with cable was crucial to HBO. It was always a channel on top of everything elseâthe cherry on topâand thatâs how it exists now within Max.
FX plays a similar role within Hulu and, especially as the company is determining what content to license and what to keep exclusive on its platform. FXâs content is an example of whatâs worth keeping, even if the channel isnât.
