(Photo by Beata Zawrzel/NurPhoto via Getty Images)
NurPhoto via Getty Images
Tucked amid the outcry over Jimmy Kimmel’s suspension, FCC threats against broadcast licensees, and all the rest, a modest analyst proposal surfaced that would short circuit the possibility of a future repeat of the mess.
What if Disney stopped broadcasting, asked Needham Securities analysts Laura Martin and Dan Medina in a Sept. 23 research note? Don’t dismantle the network, just put all the news, sports, entertainment and more on Disney streaming service Hulu, where all of its FX shows run, and on the ABC app.
That way, the next time FCC Chairman Brendan Carr threatens licenses over his upset about a comedian’s bad joke, or station groups decide to pre-empt programming, Disney could continue reaching its audiences and advertisers. The key: don’t sell the broadcast licenses when you stop broadcasting, because that puts the FCC back in position to commit political mischief, because it must approve license transfers.
“We calculate that shutting down (not selling) ABC would force (Disney) to write off about $1.7 (billion) to $2.7 (billion) of free spectrum value, plus about $1.4 (billion) of lost (free cash flow) per year, which is worth about $8.3 (billion) of value based on current TV trading comps,” Martin wrote.
That sounds like a fair amount of money, but Martin and Medina suggest, “Value destruction would be (as) low as a percent of (Disney’s $204 billion) market (capitalization), and (one-time) only, which Wall Street would add back.”
And ABC, despite its top-rated evening news and hits such as Abbott Elementary, isn’t driving a lot of viewership overall. Nielsen estimates the network is averaging only 2.4 million viewers in prime time across broadcast and cable. Martin and Medina estimated the network and its owned & operated local stations generate only about $4 billion in revenues, down 11% from 2024.
Dumping the fading broadcast platform for streaming and online delivery would allow Disney investors to better value the company’s faster-growing sectors, expanding valuation multiples by 40 to 60 basis points per year for the next decade, Martin and Medina wrote. That would add 10% more value for Disney shareholders.
The real issue driving Needham’s proposal: studios can’t afford to screw around with political headaches and grandstanding at a moment when the entire business is being radically transformed by generative artificial intelligence.
“GenAI collapses time frames, thereby making the delays, distractions and headaches of regulation more expensive, so jettisoning regulatory risks is increasingly valuable,” the Needham analysts wrote.
As with just about any way-out-of-the-(TV)-box idea, there are some big caveats.
Though broadcast ratings continue to decline, they remain the best way to reach a large, broadly based audience. That’s particularly important to the major sports leagues who provide some of TV’s most valuable programming. They depend on broadcast to reach casual fans, relying on subscription services to extract more income from hard-core followers.
The NBA’s rich new contracts signed last summer were decided in part by the fact that Disney had ABC and ESPN and its streaming operations. Comcast’s NBCUniversal bid was also considered superior because of its broadcast component, compared to long-time league partner Warner Bros. Discovery, which only has a cable network and streaming. Amazon, the third winning bid, is, well, Amazon.
Similarly, CNBC reported last week that the NFL wants to advance its “look-in” provisions by a year for $111 billion in TV contracts. After more recent big rights renewals for the NBA, college football, and other leagues, the creators of television’s most-watched programming are concerned they may have left money on the table when they signed those original NFL deals.
Will having a broadcast operation still be required of any traditional media partner going forward as the league tries to anticipate what will matter in the media ecosystem of the early 2030s?
Another potential complication for such a bold move: Carr and influential FCC staffers have rumbled about expanding the commission’s regulatory power far beyond broadcast, where government regulation is said to be necessary because it relies on divvying up scarce publicly owned broadcast spectrum.
But getting into areas such as regulating online cable-like operators such as YouTube TV, or more broadly tweaking the Communication Act’s Section 230 safe-harbor provisions protecting online services are a different thing altogether.
Those kinds of regulatory extensions would require a deeply divided Congress to get on board. That could be difficult, especially given that even some conservatives said they were deeply dismayed by Carr’s comments around the Kimmel controversy.
Beyond all these issues, there is one of history and sentiment. ABC and Disney have been connected since the 1950s, when Leonard Goldenson needed programming for his new American Broadcasting Corporation. But the movie studios largely wouldn’t countenance letting even their old movies run on television, with one exception.
Walt Disney’s family-owned studio had lots of animated features and shorts and nature documentaries sitting largely unused in its library. And Walt needed money to finance his ambitious plans for a Disney theme park in Anaheim.
Out of that shared set of interests came The Wonderful World of Disney (among many other names), which would anchor Sunday prime-time schedules for ABC and then other networks for decades.
Fast forward to the 1990s. Walt is gone, Michael Eisner is CEO, charged with transforming the studio into a bigger media company. Among his deals: the $19 billion acquisition in 1996 of Capital Cities/ABC, whose senior TV executives included an ambitious former weatherman named Robert Iger.
Iger spent 22 years with ABC before the Disney deal, and now has run Disney as CEO for close to that long across two stints. Iger’s been a fierce guardian of the Disney brand, but he’s not known as a sentimentalist. Given his ABC roots, though, would Iger ever countenance a dramatic move like Martin and Medina suggest?
Probably not. But there is another consideration. The Disney board is expected to name Iger’s successor over the next few months, and the clubhouse favorite has long been co-head of entertainment Dana Walden.
Walden, a frequent walking partner with Iger, is also a long-time friend of former Vice President Kamala Harris, whose mere name seems to enrage Trump. Would a move out of Brandon Carr-regulated broadcasting take away one of the ways the administration might monkey with a preferred successor, or any major moves she might undertake at CEO?
Again, probably not. But the bigger question, as Martin and Medina lay it out, is how well Hollywood’s battered media companies can navigate a fast-changing ecosystem where YouTube attracts more streaming eyeballs than anyone, AI is dramatically reducing the cost of production and marketing, politically motivated regulators are seeking even more power, and dirt-cheap micro dramas out of China are grabbing more and more attention. Bold moves may be just what’s needed.
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