Since Nov. 21, when Disney revealed the shocking return of Bob Iger as CEO and the ouster of his chosen successor Bob Chapek from the role, the informed speculation rumor mill about the future of the Burbank-based entertainment giant has been in overdrive.
Iger, in a town hall with employees on Nov. 28, dismissed the idea that another megadeal is what’s driving this new era for the executive at Disney. “We have a great set of assets here,” Iger told staffers. “Nothing is forever, but I am very, very comfortable with each of the assets that we have,” he added, and specifically called the idea that Disney could sell out to Apple “pure speculation.”
That hasn’t stopped Wall Street analysts, investors and longtime Disney observers to note that Iger has built Disney into what it is today with a series of big swing bets — Pixar for $7.4 billion in 2006, Marvel for $4 billion in 2009, Lucasfilm for $4 billion in 2012 and 21st Century Fox assets for $71.3 billion in 2019 — that have shored up its intellectual property edge among rivals.
As Hollywood is ushered into an era where seemingly unthinkable deals are now discussed as possibilities, here’s a survey on the reasoning for and against those bets.
Disney Sells to Apple
Why it makes sense: Disney+ is growing fast, but that’s been costly. Apple offers a quick fix with troves of cash to fuel Disney’s streaming ambitions. Disney would also gain access to more than a billion Apple devices where its content would be integrated and boosted. In return, the tech giant would acquire Hollywood’s biggest brand to complement Apple TV+, which has struggled to feature enough original content to compete. Plus, Iger has close ties to Apple, sitting on the company’s board from 2011 to 2019. He noted in his autobiography, “I believe that if Steve [Jobs] were still alive, we would have combined our companies, or at least discussed the possibility very seriously.”
Why it doesn’t: Maybe it could make sense. But despite Department of Justice saber-rattling, it’s up in the air whether a sale to Apple would violate antitrust law, as Apple TV+ accounts for a minor share of the streaming market. If there was interest in a deal, the two sides could choose to bide time until a possibly better regulatory environment arrives post-Biden. Apple would also likely have to burn its cash reserves to make a deal happen, which may not be wise considering the recent downturn in the tech sector. Factor in the tech giant’s disinterest in stepping into the theme park business, there may not be enthusiasm for a deal on either side. — Winston Cho
Disney Sells Hulu to Comcast
Why it makes sense: Hulu would likely command a bidding war and high sale price from interested parties and help Disney raise some much-needed cash as the company seeks to cut costs. Comcast CEO Brian Roberts has already champed at the bit in public for a Hulu acquisition, making statements describing Hulu as a “phenomenal business” that would trigger a “robust auction” from parties including Comcast if it went for sale. And with the pressure to improve NBCUniversal’s streaming business, where the Peacock streamer has failed to drive subscriptions, parent company Comcast could be willing to pay top dollar.
Why it doesn’t: Disney is already on track to buy out the remainder of Comcast’s 33 percent stake in Hulu by 2024 at a guaranteed sale price that values the streamer at $27.5 billion. Hulu, which has more subscribers than Disney+ in the U.S./Canada, attracts a more adult audience and drives the highest average-revenue-per-user of Disney’s streaming portfolio. As Disney’s streaming losses have grown to $1.5 billion, the company needs all the paying subscribers it can get. — J. Clara Chan
Disney Spins Off ESPN
Why it makes sense: Disney is in the content ownership business. Marvel? Star Wars? Frozen? Disney owns them. But sports? For Disney, sports at ESPN could be considered a rental. And while ESPN generates a ton of cash (Disney’s “linear networks,” including ESPN, had $8.5 billion in profits last year), linear TV is declining. Disney needs to invest in the future, and the future is not an expensive linear TV channel where all the big rights could be poached by a tech giant in a few years.
Why it doesn’t: The world is moving to ad-supported streaming, and sports rules advertising. The audiences are larger, people watch longer, and there are natural ad breaks. If Disney is all in on streaming, sports need to be part of it. And that cash flow? Why not take the profits and funnel them into streaming? And then there’s the allure of sports betting, which is growing fast. Disney may not own the sports, but it does own the ESPN brand, and that brand could be worth a fortune to the right betting partner. — Alex Weprin
Disney Buys Roblox or Epic Games
Why it makes sense: Despite its rich IP, Disney hasn’t found success with any of its in-house gaming efforts (remember Disney Interactive, the gaming division that was responsible for $1.41 billion in losses between 2008 and 2013 and essentially shuttered in 2016?); returning CEO Bob Iger even admitted in 2019 that the company isn’t “particularly good” at self-publishing games. Buying an existing, popular platform could supercharge Disney’s gaming ambitions and drive additional revenue — especially as it seeks expansions into virtual and augmented reality.
Why it doesn’t: Disney doesn’t need to make another expensive buy when it can continue to license its IP out to established gaming companies and developers like Electronic Arts, which is the strategy Iger stuck with at the end of his previous tenure. With Iger back as CEO, making another potentially embarrassing attempt at gaming would be unlikely for an executive focused on burnishing his legacy and finding a suitable successor. And if Disney does want to return to an in-house strategy, the company doesn’t necessarily need a platform like Roblox or Epic Games’ Fortnite. Instead, it could follow the Netflix model and buy smaller game developers to create quality games featuring Disney IP. — J. Clara Chan, Georg Szalai
Disney Merges With Netflix
Why it makes sense: Acquiring Netflix would make Disney the undisputed leader in streaming, giving it access to a wider breadth of content and expanding its worldwide footprint (Disney has been growing its international expansion, while Netflix is already in more than 190 countries). Netflix stock has dropped more than 55 percent in the past year, which may give it a more attractive price point. Plus Netflix co-CEO Reed Hastings recently signaled his fondness for Iger, tweeting, “I had been hoping Iger would run for President. He is amazing.”
Why it doesn’t: In 2019, Disney closed a $71 billion deal for Fox assets that brought a vast IP library, but, even then, some thought that then CEO Bob Iger overpaid. With those assets, as well as the Marvel franchise and existing Disney IP, Disney has more than kept up with Netflix in streaming (235 million subscriptions across multiple Disney services; 223 million subscribers for Netflix). Iger may decide Disney does not need more pricey third-party IP to be competitive, especially with Wall Street concerned about Disney’s level of spending on streaming. Iger has already said that he will keep cost-cutting measures in mind, starting with a plan to keep Chapek’s planned hiring freeze in place, which may make an expensive acquisition even less likely. — Caitlin Huston
This story first appeared in the Nov. 30 issue of The Hollywood Reporter magazine. Click here to subscribe.