Justin Solomon | CNBC
Daniel Loeb’s Third Point has taken a new stake in Disney, pushing the leisure big to spin off its sports activities community ESPN, in response to a letter obtained by CNBC’s David Faber.
The shares jumped as a lot as 2% on the information. Loeb’s stake is price roughly $1 billion, Reuters reported Monday.
In a letter to Disney CEO Bob Chapek, Loeb mentioned there’s a sturdy case that the ESPN enterprise must be spun off, saying the section generates important free money circulate for Disney.
“ESPN would have greater flexibility to pursue business initiatives that may be more difficult as part of Disney, such as sports betting,” Loeb mentioned. “We believe that most arrangements between the two companies can be replicated contractually, in the way eBay spun PayPal while continuing to utilize the product to process payments.”
Disney is making extra money from cable subscribers than every other firm solely due to ESPN. ESPN and sister community ESPN2 cost practically $10 per 30 days mixed, whereas Disney requires pay TV suppliers to incorporate ESPN as a part of their hottest cable packages.
ESPN+, a streaming service with restricted content material, has turn into a stronger product in the previous yr as Disney strikes extra unique reside video games to the service. Disney mentioned final month it’ll elevate the worth of ESPN+ to $9.99 per 30 days from $6.99 per 30 days beginning Aug. 23, the most important worth improve up to now.
Secondly, Loeb urged the leisure firm to combine streamer Hulu immediately into the Disney+ direct-to-consumer platform.
Comcast has an settlement to promote its 33% stake in Hulu to Disney in two years. Loeb mentioned Disney ought to “make every attempt” to amass Comcast’s remaining minority stake earlier than the 2024 deadline.
“We believe that it would even be prudent for Disney to pay a modest premium to accelerate the integration,” Loeb mentioned in the letter. “We know this is a priority for you and hope there is a deal to be had before Comcast is contractually obligated to do so in about 18 months.”
Disney responded to Loeb in a assertion, saying the corporate has seen steady progress throughout companies.
“We welcome the views of all our investors,” Disney mentioned. “As our third quarter results demonstrate, The Walt Disney Company continues to deliver strong financial results powered by world-class storytelling and our unique and highly valuable content creation and distribution ecosystem.”
Disney simply got here off a sturdy quarter with its streaming subscriber progress blowing previous estimates. The firm additionally posted better-than-expected outcomes on each the highest and backside line, bolstered by elevated spending at its home theme parks.
Loeb has a historical past of being an activist investor in the media big. Most not too long ago, he had held a stake for two years from 2020 to early 2022, pushing Disney to ramp up its streaming companies.
Shares of Disney are off about 20% this yr.
Disclosure: CNBC is a part of Comcast’s NBCUniversal.