5 Businesses Disney Should Buy or Sell
Since Disney’s Bob Swap–firing Chapek and rehiring Iger–new details and rumors have emerged about what led to the CEO change and the board’s goals for Bob Iger in the next two years as CEO. This post delves into one such topic, which has been mergers & acquisitions, and the business units and companies that Disney might buy or sell in the near future.
Even Disney employees and Cast Members seem to believe that more dealmaking is in the cards for Bob Iger. During the recent Town Hall, Iger was asked multiple questions about what Disney might buy–and sell. Always playing his cards close to the vest, Iger indicated that Disney has a “great set of assets” but offered the caveat that “nothing is forever.”
This only added fuel to the fire among Wall Street analysts, investors, and Disney fans that more mega deals are on the horizon. Understandably so, as the Mouse House that Bob Iger built is largely predicated on huge IP acquisitions. His first major move as CEO was acquiring Pixar for $7.4 billion in 2006. He followed that up with the masterful moves (with the benefit of hindsight) of acquiring Marvel for $4 billion in 2009 and Lucasfilm for $4 billion in 2012.
Then there was perhaps Iger’s most dubious decision–aside from naming Chapek his successor–in acquiring 21st Century Fox for $71.3 billion in 2019. Disney still hasn’t properly “digested” that last deal, and its after-effects have been significant. (One could argue, quite convincingly, that the Fox debt was a catalyst for many of Chapek’s unpopular decisions, which also set in motion his eventual downfall.)
Nevertheless, here are the deals that CEO Bob Iger might make–or that we think he should make–to continue his mostly-impressive run of big bet and mega deals for Disney…
Capcom or Square Enix – This one is out of left field, but it’s the acquisition we think Iger should make–not one that he’s even remotely likely to actually make. Microsoft and Sony have gone on a shopping spree this year, and they aren’t the only ones.
Video game industry consolidation has resulted in hundreds of billions of dollars in mergers and acquisitions as the industry consolidates. While the FTC has filed an antitrust case against Microsoft to challenge the its $69 billion acquisition of Activision Blizzard, plenty of other deals have gotten done this year. Industry insiders have said that more such deals are likely on the horizon.
Video games are a blind spot for many people, and that’s undoubtedly true for readers here. With that said, it’s important to remember that one’s own interests and cultural relevance are not necessarily the same. To that end, I want to provide some context as to video games are such a big deal.
In the last decade, the gaming industry has grown consistently, a trend that accelerated in 2020 when everyone was stuck at home. Just last year, the global games market had $180 billion in revenue, making it bigger than Hollywood and the music industry combined. Major game franchises like Grand Theft Auto, Fortnite, and Call of Duty generate billions in revenue, dwarfing Avatar, Star Wars, and Marvel’s top films.
For all of his dealmaking prowess and success in fostering the growth of Disney’s business units, Bob Iger has unequivocally failed at establishing the Walt Disney Company as a major player in the video games space. After losing nearly $1.5 billion, Iger shut down the company’s in-house gaming division, Disney Interactive, back in 2016.
Iger also conceded during a 2019 earnings call that Disney is “not particularly good” at self-publishing games, and was satisfied with licensing its IP to third parties, like Electronic Arts. Being satisfied partnering with EA is like outsourcing restaurants to McDonald’s. Sure, it gets the job done and is efficient, but is it really what’s best for the Disney brands?!
To be fair, this is not just an Iger or a Disney problem. Hollywood as a whole overlooks the current market and future potential of video games, something captured incredibly well in “Hollywood’s Video Game Blind Spot” by Matthew Ball (one of my favorite writers about Disney, gaming, the multiverse, and more).
Given its current debt load and the market caps of major video game studios, Disney likely can’t go after the type of developer it would like, such as Electronic Arts, Roblox, or Epic Games. However, two companies are much more realistic possibilities: Square Enix and Capcom. (While I’d personally love to add Konami to that list, they’re so mismanaged that I don’t see the point.)
Both Square Enix and Capcom are highly-regarded developers with their own well-established intellectual property, and past connections to Disney. Capcom also has RE Engine, which is excellent–and adaptable to other properties. (Square mostly uses Unreal Engine.)
Finally, I think I speak for everyone when I say that Final Fantasy or Resident Evil would be perfect fits for new rides in Magic Kingdom. No?! Okay, fine…but can you imagine a Kingdom Hearts dark ride in DHS or Dino Crisis interactive shooter in Dinoland?!
ESPN – I love ESPN. It has had its share of missteps, but it’s still the strongest name in sports and a decent amount has been done to position it as a “Disney” brand. That’s how I view it, and I think that’s how more people would view ESPN were it better bundled with the company’s other products and offerings.
With that said, I do not think Disney should (further) involve itself in betting or gambling. I’m also cognizant of the reality that most sports fans feel differently. Platforms like FanDuel and DraftKings have absolutely exploded in popularity in the last several years. Leagues that used to view gambling as the games’ greatest sin now are actively invested in these companies. You can’t turn on sports coverage without hearing about odds, fantasy stats, or seeing ads for Caesars, MGM, and so forth. ESPN would almost certainly be more valuable if it went down this road, and gave the people what they want.
It would thus seem that Disney is at a crossroads with ESPN, or perhaps an impasse. It could be brought into the fold to better take advantage of synergies, but if that comes with sports gambling, it becomes a brand liability. If ESPN doesn’t get into betting, money is being left on the table and it is vulnerable to competitors eclipsing it.
These aren’t the only concerns and considerations that Bob Iger faces when determining what to do with ESPN, just the ones that are most pertinent to me, personally. Disney’s position in ESPN has been a hot topic among investors for years, as its lucrative contracts with sports leagues have been viewed as an albatross in the cord cutting era. Linear television is in secular decline, but still remains profitable for now.
Only a few months ago, activist investors pushed for former CEO Bob Chapek to spin off ESPN. While they later relented and Bob Iger previously dealt with the same thing–and was unwilling to part with ESPN or other television networks–the fact is that the circumstances are different now. With more broadcast rights coming up for negotiation soon, and both Apple and Amazon signaling a willingness to (more or less) write blank checks for them, perhaps now would be a good time to divest Disney of ESPN.
While this has been the top topic of M&A conversation, I’m still not convinced. The saga of streaming and linear television’s downfall are not yet fully written. The latter does seem like an inevitability at this point, but its downstream impacts are not known. Cable subscribers will go somewhere, as will those advertising dollars. In the grand scheme of media, streaming is still nascent, and will certainly evolve more in the next few years.
Disney is only just dipping its toes into ad-supported streaming, which could be a highly lucrative business–especially with sports audiences attached. There’s a reason Apple, Amazon, and (presumably?) Netflix will be willing to pay hefty sums for sports broadcast rights. Spinning off ESPN could be one of those decisions that looks good in the short-term, but winds up being a squandered opportunity in the long-run.
Hulu – Without any alternative action, Disney is currently set to buy out the remainder of Comcast’s one-third ownership stake in Hulu by 2024 at a guaranteed sale price that values the streaming service at $27.5 billion. Whether it’s worth that amount in the current environment as Wall Street reevaluates the streaming business is an open question.
What is known is that Hulu has more subscribers than Disney+ in North America, attracts an older and more affluent audience (read: higher advertising rates), and earns the highest average revenue per user of Disney’s streaming portfolio. Both objectively and subjectively, Hulu is a strong streaming service that’s more well-rounded than Disney+, even if it lacks the high-profile Marvel and Star Wars franchises. The bottom line is that Hulu’s bottom line looks better than that of Disney+, and that’s important when the division is losing $1.5 billion in a single quarter.
With that said, the sale of Hulu would likely command a bidding war. Even with the growing belief on Wall Street regarding streaming valuations, there’s still frothiness and a fear of missing out on the future of media. Hulu would generate a high sale price, raising cash for Disney as it seeks to cut costs–while also unburdening it of some of the 21st Century Fox acquisition.
The streaming industry is likely to see consolidation in the coming years, as several services do not seem viable on their own and have had little success gaining traction and market share. Perhaps more than any other streamer, this is true for NBCUniversal’s Peacock, which makes parent company Comcast the most likely buyer (in addition to the potential seller) of Hulu.
Comcast CEO Brian Roberts has been hot and cold on the idea of a Hulu acquisition. Prior to Iger’s return, he called Hulu a “phenomenal business” and one that “Comcast would be interested” in purchasing. He also indicated that Hulu would see “robust” action if it were put up for auction to sell at fair market value, which would be higher than what Disney has contracted to pay for it in 2024.
However, the circumstances have possibly changed as of December 2022, with Comcast undertaking its own cost-cutting measures. NBCUniversal CEO Jeff Shell said he believes the company will sell its stake to Disney. “We think [Hulu is] worth a lot of money because it’s sold on a full-control basis [and] there’s no indication that anything else is going to happen than Disney writing us a big check for the asset in 2024,” Shell said.
Candle Media – I will level with you: I’m not particularly familiar with Candle Media’s core business and it’s not one that interests me all that much. Candle Media is, as the name suggests, a media company. That part does interest me. In essence, Candle Media is a next-generation content company with a portfolio (thanks to its own aggressive acquisitions) of independent content companies and creator-driven brands. The output ends up all over the place, everywhere from more “traditional” locations like Netflix to more “emerging” ones like TikTok.
My (potentially antiquated) view is that investing millions or billions of dollars on creator-driven studio for the production of social media content is folly. In a quest for relevance or dominance or who knows what, Disney already went down that road several years ago, buying Maker Studios for a ridiculous sum. Part of Candle Media’s approach seems to be replicating that, but on a smaller scale. And in fairness, one of the co-CEOs of Candle Media definitely “gets” TikTok–he briefly served as its U.S. CEO. It’s possible that a leaner business with a hungry, startup mindset can do better in this space than Disney.
But that’s really neither here nor there. The purpose of Disney acquiring Candle Media would be a talent acquisition, plain and simple. Co-CEOs and founders Tom Staggs and Kevin Mayer were previously top candidates to replace Bob Iger as CEO, before both unceremoniously exited (at different times) after being passed over. In addition to them, Candle Media has several seasoned Disney veterans who could be brought back into the fold.
There are a lot of (public) unknowns here, including the relationship between Bob Iger and Candle Media’s founders. Even in re-reading Behind the Scenes at Disney as It Purged a Favorite Son, it’s still unclear whether it was just the board or them and Iger who previously lost faith in Staggs. Even less is known about the circumstances of Mayer’s departure, but it seems like an open-and-shut case of him being passed over in favor of Chapek, and seizing on what seemed like a golden opportunity to helm TikTok. Until it wasn’t.
Whatever the circumstances, there exists this ideal scenario of Staggs and Mayer returning to Disney to be co-CEOs. I wrote about this even before Iger returned, but recognized it was likely bad fanfic given the circumstances. That is, until Chapek was fired and subsequent revelations came to light that Disney’s board actually approached Staggs and Mayer to return to Disney to be co-CEOs. That scenario couldn’t work because it would’ve acquired Chapek to acquire the company that would bring aboard his replacements.
Now? Iger knows he only has 2 years and hitting the ground running with succession planning could be aided tremendously if he brought back two candidates who were previously groomed for the role.
Hasbro or Mattel – Similar story to the Capcom or Square Enix acquisition above. Disney has had licensing deals for its princesses, Cars, Toy Story, Star Wars, and other franchises with both companies in the past–and present. It would seem that as a result of that, there has been near-constant buzz over the last decade about Disney acquiring one of the two companies and bringing toy production in-house.
As with Candle Media, I don’t understand the toy industry nearly as well as video games, so I’m admittedly a bit out of my element. Nevertheless, as a company that likes having an integrated flywheel, it makes sense that Disney would want complete control over this huge area of consumer products.
Toys have been integral to Disney’s business–and that of the companies Iger has acquired–since the very beginning. While it’s impossible to say what Walt Disney would do were he alive today, I think it’s probably more likely that he would’ve wanted full control over merchandising than some of the forays into other assorted and unrelated businesses.
Toys based on the company’s most beloved characters and intellectual property certainly seems, on its face, more integral to Disney’s core business than ESPN or any number of brands Disney currently holds. On the other hand, Disney does have a lot of debt and is much more likely to be a seller than a buyer right now, so unless it unloads Hulu and linear networks, it’s highly unlikely that Iger makes a deal to acquire Hasbro or Mattel.
Need Disney trip planning tips and comprehensive advice? Make sure to read Disney Parks Vacation Planning Guides, where you can find comprehensive guides to Walt Disney World, Disneyland, and beyond! For Disney updates, discount information, a free download of our Money-Saving Tips for Walt Disney World eBook, and much more, sign up for our FREE email newsletter!
YOUR THOUGHTS
What do you think Bob Iger will do when it comes to mergers and acquisitions in the next 2 years? Think he’ll make Disney a buyer, seller, or both? Or, do you think Iger is back at the helm to sell the whole company? (Not covered here, but we’re willing to dissect the Apple “rumors” if there’s interest.) Are you bullish or bearish about the company’s future as the Walt Disney Company enters its 100th year? Think things will get better or worse throughout 2023? Do you agree or disagree with our assessment? Any questions we can help you answer? Hearing your feedback–even when you disagree with us–is both interesting to us and helpful to other readers, so please share your thoughts below in the comments!
I think Disney should consolidate brands. I don’t think ESPN, Pixar, and Hulu branding need to exist going forward. Put the valuable stuff under Disney and ABC branding. Get rid of the not as valuable stuff that costs too much money.
Getting rid of ESPN? Short term gain, long term disaster. Getting rid of a prime sports outlet would be a huge mistake. One of the biggest mistakes in TV history was CBS letting Fox outbid them for the NFC rights for the NFL. It made Fox by establishing a firm foothold on Sundays resulting in the blossoming of their Sunday night lineup, leading to further success throughout the week. CBS discovered that without the football lead-in, their Sunday shows took a huge hit. The next time broadcast came up, CBS went all in on buying the rights to the AFC away from NBC. NBC? After a number of years without the NFL, NBC paid a huge sum to create and broadcast Sunday Night Football. Disney should take these lessons to heart.
Disney pretty much kills any gaming studio it tries to run. They can stick to licensing their characters.
Sell: ABC, ESPN, 20th Century (except for family films/franchises), Hulu, Fox Batman 1966 TV series & movie (to WBD), Shanghai and Hong Kong Disney (just take royalties ala Tokyo), Miramax library
Buy: The Wizard of Oz, Willy Wonka (from WBD), Chitty Chitty Bang Bang (from MGM), etc., Rodgers & Hammerstein Company, Bourne Music (own publishing for Disney classics), Classic Media (Rudolph) from NBC/Universal, Dr. Seuss, Peanuts, Sony’s Spider-Man rights, Indiana Jones films from Paramount, more adjoining property in Anaheim, Henson, Sesame Workshop
Disney has always had such a strange relationship with gaming. many video games are disney based, yet disney failed at being able to handle gaming as well as anything else they owned. I personally dont play video games much with two small children, but I would love for Disney to acquire SE, Capcom, etc.
The influx of new IP for movies, Disney +, rides, would seem like a perfect fit. Plus a way to have some sort of counter to the upcoming Epic Universe.
The Jim Henson Company. It ain’t as “splashy” as the others (or as expensive), and Fraggle Rock and Labyrinth aren’t at the same cultural zenith as Marvel or Star Wars. I have just always wanted—even before Disney bought the Muppets themselves—these two companies to be together, and I wish the Muppet and Henson libraries would be reunited on Disney Plus. Also, Disney probably couldn’t “buy” Sesame Workshop due to its nonprofit status, but if they formed some partnership like they (and Fox before them) have with NatGeo to get access to the brand, library, and characters, bringing the entire Muppet universe into the Disney fold, that would be a plus. Maybe Iger’s not as big a Muppet guy as Eisner or even Chapek, but Disney and Henson and even Sesame “in a way” are a good fit.
Gaming could be huge considering the properties they own ( Star Wars, marvel, etc) . They would have to do it right though Or could stand to lose a bit. Mind you I am biased as a gamer child of the 80’s-90’s (and now)
Hulu definitely is a plus for Disney. It gives them the perfect outlet for shows and movies that are more adult oriented (and I don’t mean it in that sense, get your minds out of the gutter ). ESPN came over with the ABC acquisition. The new college football alignments are a potential goldmine. As for gaming, they definitely need to bring a publisher in house if they want to remain competitive in the video game world. By their own admission they suck when it comes to handling games in house. Just look how they botched things with Disney Infinity. That platform had so much potential to evolve into an even larger game. I like the idea of a Kingdom Hearts dark ride, maybe even make it interactive.
“It gives them the perfect outlet for shows and movies that are more adult oriented (and I don’t mean it in that sense, get your minds out of the gutter )”
Are you suggesting that Pam & Tommy would be a bad fit for Disney Plus?! 😉
The problem with the ‘goldmine’ of college football is that the renegotiated rights are going to be off the charts, especially if multiple tech companies get involved in the bidding war. I could see Apple, Amazon, or Netflix using that as a ‘loss leader’ of sorts (or user acquisition magnet), shelling out way more than Disney is willing to pay.
Disney won’t go into the toy business… that’s manufacturing and owning factory / foundry. Goes against company DNA and business outlook. The other media business are fair game. I think they need to sell off ESPN — ESPN has lost a fair amount of the live sports contracts in the past couple years, those fees keep going up without the corresponding viewership increases, and their static “talent” costs keep increasing. The biggest property ESPN holds are the NFL Monday Night Football contract and the College Football contracts (both leagues like the SEC and the bowl games). With the new college football playoff coming up and more conference realignment, all those contracts are up for renegotiation (i.e. higher rights fees). The synergy just hasn’t been there for House of Mouse to interact with professional sports in terms of profits.
Not sure about getting out of the service business lane to pursue goods businesses, so no to toys and games – unless Stream or some equivalent games-as-a-service business is for sale. Fox is less of a problem if you treat its third of Hulu as it’s own thing and don’t close down Blue Sky until it cranks out a few more Ice Age films. With HBO Max and Netflix having some success with over $10/month streaming, I can see a ESPN service with *everything* from the channels, ESPN3, and ESPN+ pulling in the $15/month the ESPN package of channels gets from cable. As far as I can tell, Staggs left because Iger got his second wind; I don’t think the next CEO hunt started until a few years after he left Disney. Disney+ gets “fixed” by refocusing on sending movies to theaters first; theatrical motion pictures earn money, and cachet that DTV often doesn’t get. (More of a bandage than a fix to see what happens to streaming over the next few years or so.)
I don’t know what to do about Hulu. Does Hulu+Live TV, a mini-multichannel linear streaming service (cable TV without the cable) make sense to own? Does it make money or is it a loss leader? Should we have a separate non-Disney streaming service? Should it be renamed Hotstar or Star? Should it be managed by the people who manage those non-US non-Disney services? Why didn’t anyone try the optional commercial model before? …
Even if I was sure. I expect it won’t be used to used to it’s current maximum potential until Disney or Comcast owns it outright, and I know it’s never returning to its status as the one-stop shop for almost every TV show. There’s the big question that’s worth a post or two if Tom wants to go mostly off topic for a while.
I know this isn’t the point of the article, but I constantly feel like Disney is leaving money on the table with its streaming services. It has a ridiculously extensive back catalog of media – why not make all of those available? For instance, ABC has years of Jeopardy and Wheel of Fortune episodes taped. If brought to Hulu, that would likely bring in a large audience of folks who may not currently be subscribed to streaming? Same with old Disney content. If Disney+ used more of its old content available in its records/archives, we might be able to forgive its lack/slowness of new content. Anyway, I have no idea how complicated all of this gets, but I’m keeping my fingers crossed.
Disney doesn’t produce or own Jeopardy or WoF. Those are produced and owned by Sony. ABC licenses them. This used to be the primary TV model for decades but now linear channels and streamers push to own/produce as much of their content as possible (as they should).
I agree with your point there is money to be made from video games and it *could* synergize well with Disney’s current creative output. But Capcom in particular seems like a non-starter. Resident Evil is too big of a brand for the Campcom to just give up, but it being a “Disney” property would cause as much if not more outrage than ESPN getting into sports betting (a lot of adults and specifically government officials still seem to believe games like that directly correlate with people committing real world violence). Square Enix could probably be Disney-fied sufficiently but I don’t know if they are looking to be acquired; they’ve recently sold off several franchises they previously had the rights to (Tomb Raider being the biggest one) which seems like the opposite of what you’d do if you were interested in being purchased for as much money as possible.
I honestly will be surprised if Iger makes any more acquisitions during his second stint as CEO. I think the Fox deal hasn’t really justified itself and that debt probably is dragging on Disney’s bottom line. The Warner Bros/Discovery merger seems like chaos, and Microsoft has encountered regulatory opposition to its proposed acquisition of Activision all over the world. There’s no way anything big gets finalized in the 2 years Iger has, so unless he extends (possible) or lets his successor take the deal over the finish line (unlikely) it’s not gonna happen.
“(a lot of adults and specifically government officials still seem to believe games like that directly correlate with people committing real world violence)”
While true, a growing number of Americans also fear a zombie apocalypse. If Disney played its cards right, it could frame playing Resident Evil as a public service of sorts, preparing a future army of noble volunteers for when our nation truly needs us.
(This is how I justify my gameplay to Sarah. It has not been very successful thus far, but Disney has better PR people than me.)
“…but can you imagine a Kingdom Hearts dark ride in DHS…”
That was supposed to be followed by “Insert Futurama TAKE MY MONEY” gif here”
Buy more companies? Let’s see them straighten out the ones they have now. There are too many. problems that need taking care of yesterday.
The most obvious video gaming play is to acquire Psyonix, then build a Thunderdome-esque enclosure over the Tomorrowland Speedway and retrofit the vehicles to convert the entire ride into an IRL Rocket League stadium (okay fine, we’ll make riders sign a waiver in case they get demo’d). You’re welcome, Mr. Iger!
What about a transportation company like Uber/Lyft, Mears/Sunshine Flyer or even an airline?
Great article- really highlights the complexity of Disney’s business.
1) I’d be interested in your thoughts on Apple.
2) I’m admittedly ignorant to these industries, and the ships probably sailed, but in my opinion Disney+ would have worked better as an up charge within an existing streaming service.
3) The first and last video games I played to completion were Final Fantasy installments. The OG on NES and X on PS2…never would have thought about that for a theme park integration, but that would be awesome.
many Hulu series are already part of the Disney+ offering in Europe (for example Only Murders in the building). So I guess that’ll be the future globally.
While I would love to see more Kingdom Hearts theming at Disney parks, or perhaps a Resident Evil dark ride, I can’t support any Western acquisitions of Japanese game developers as long as the Western game industry remains in its current creative rut. Major American game developers seem uninterested in making anything that’s not a open-world game with light RPG elements, a genre that’s been stale for about ten years now, and, probably due to pressure to meet quarterly earnings targets, always seem to ship incomplete games that barely work, only fixing them months after release. I concede that these buggy, middle-of-the-road, American-made games sell very well, but that doesn’t mean they’re good games. Disney, a publicly traded American company who is making products that are designed to appeal to basically everyone, would probably repeat these mistakes. The Japanese industry has its problems too–at least Disney would be unlikely to cancel all future Final Fantasy console titles and pivot to writing software for Moogle-themed slot machines–but Japanese corporate culture is currently altogether more conducive to making good video games. And from a Disney’s point of view, would a Square Enix or Capcom acquisition really make sense? Maybe I’m out of touch, but I think the name recognition of Cloud Strife or Leon Kennedy, or even Sora from the Kingdom Hearts franchise, is still not that great among Disney parks attendees. What Disney really should have done is partner with Nintendo: these are two companies with similar prominence in their respective industries and similar brand culture. Mario is just as well known as Mickey Mouse, and Nintendo’s games are a perfect thing to promote at a theme park that makes a point to accommodate small children.
Do you mean to suggest that the latest Grand Theft Auto Online nonsense, Call of Duty XXVIII, whatever CDPR is going to release next in one-third finished form, or the latest EA lootbox fest is not the height of video gaming?!?! 😉
To be clear, I was suggesting this from Disney’s point of view, not that of end consumers. And I think the name recognition thing would improve considerably if these characters (well, probably not Leon Kennedy–I would welcome a more ‘adult’ Halloween event, but I know that’s unrealistic) were part of Disney’s flywheel.
(Japanese publishers aren’t perfect, either. It’s ridiculous that I could play a remake of Metal Gear Solid 3 at a pachinko parlor, but not on the PS5!)
I would say buy/merge Netflix, (merge with D+), you dominate streaming for next decades and you can buy an “adult” theme park focused on Stranger Things, Wednesday, Lemony Snicket etc), if those rights are easy to manage (multiple parties may be involved). Alternatively to buying Square Enix or Capcom-or any of the other- create partnerships with them as Universal did with Nintendo