On Second Thought

Even as streaming has gained steam in the world of television, there's been one problem with trying to cut the cord: Pro sports leagues have remained loyal to cable and broadcast TV. Sure enough, sports fans have been some of the last TV viewers still clamoring for a cable TV subscription, even as overall streaming surpassed cable in terms of hours watched. 

Now even cable's hold on sports seems to be giving way. Later this week, Amazon will begin streaming an exclusive set of Thursday night National Football League games on its Prime Video platform, for which it is paying about $1 billion a year. Pro football generally fills the list of most-watched cable broadcasts in any given TV season, so primetime games on a streaming channel, where no cable is required, is a big deal. It's likely that the package of out-of-market football games that previously belonged to DirecTV (technically satellite not cable) will also soon be awarded  to a streaming platform in the coming weeks or months. Maybe to Apple? 

All of this has put Walt Disney and its ESPN business, which is the pioneer in cable sports, in a difficult position. Last month, activist investor Daniel Loeb called on Disney to spin off ESPN. At the time, Loeb said a standalone ESPN would have a more focused management team that "would have greater flexibility to pursue business initiatives that may be more difficult as part of Disney, such as sports betting."

Loeb characterized the ESPN move as a "suggestion," but the activist often takes an aggressive approach toward putting his suggestions into action, including fighting for seats on the company's board. 

At an investor conference last week, Disney's CFO Christine McCarthy pushed back on Loeb's plan: 

ESPN is a great business, and it is fully integrated into how we think about delivering entertainment with compelling content to consumers....And so we look at ESPN as being part of our overall portfolio."

Then on Saturday, CEO Bob Chapek made an even more forceful defense of ESPN in an interview with Deadline Hollywood at the company's D23 Expo: 

News and sports are the only two things that you have to watch at that moment. So, if you happen to have a vision for the future that the rest of the world’s not necessarily in tune with yet, then you keep ESPN. You keep ESPN, and you have a full complement of general entertainment, family news, sports that no other entertainment company can touch.

And now the activist is backing away. Loeb tweeted Sunday that "We have a better understanding of @espn's potential as a standalone business and another vertical for $DIS to reach a global audience to generate ad and subscriber revenues."

Disney shares rose 1% today. Now the pressure is on Chapek and company to deliver on ESPN's next chapter. Barron's Carleton English has more on Loeb's change of heart here.