Illustration by Læmeur
Just weeks before Bob Iger sat down for a CNBC interview in which he said Disney’s linear television networks, like ABC and FX, “may not be core” to the company’s business, a veteran Hollywood exec put it. Hollywood Reporter On the possibility of a deal that would shake up the industry: Apple’s purchase of Disney. It’s an idea that’s still being discussed, though many senior executives have scoffed at it and many still do. Apple doesn’t want to buy a studio, they say, and there’s no way the feds would allow such a huge deal to happen.
But this observer was not so quick to dismiss it. “I don “t think so [Apple] He will buy the company as it currently exists. “But if you see Bob start to strip things … it looks like he’s getting ready to sell. And there’s clearly no buyer like Apple.”
Shortly thereafter, Iger appeared on television and hung a potentially for-sale sign on Disney’s television business. That way, it was a little more possible to see the outline of a diluted Disney company that could be a tempting takeover target.
Obviously, there is no buyer like Apple, which has $62 billion in cash and cash equivalents and has a market capitalization of $2.8 trillion. And while it may very well be true that Apple doesn’t want to buy a Studio, you may want to buy this The studio – which, despite the challenges of the moment, has a vault full of invaluable IP and remains the most valuable brand in entertainment.
And there was a long-running “special relationship” between Disney and Apple: Steve Jobs served on Disney’s board of directors from 2006 until his death in 2011. Iger joined Apple’s board shortly after Jobs’ death. He resigned from this position on September 10, 2019, the same day that Apple officially announced that it was entering the content field with the Apple TV + service.
Some Hollywood executives were predicting a future in which the studio herd would continue to be weakened — exponentially. “There will end up being three or four platforms and everyone else will be hollowed out and taken over,” says one industry veteran. There will be Apple, Amazon, Netflix and one more. If you can put NBCUniversal, Warners, and Paramount together, you’ll probably have enough to survive.” (The Feds might have something to say about any version of this potential group.) If Iger sees the world the same way, it might be a find. A house for Disney as a temptation.
Multiple sources say Iger, after returning to the CEO role in November, has not faced further pressure. Not only is he facing an industry in transition, but much of the team he was with in the good years is no longer at the company: general counsel Alan Braverman and movie studio chief Alan Horn have retired. Chief Financial Officer Christine McCarthy, having gotten a little close to Bob Chapek during his tenure as CEO, is gone after 23 years with the company.
This may explain Iger’s affinity for former top Disney executives Kevin Mayer and Tom Staggs, both of whom were passed over as CEO but were recently appointed as advisors to the company. (The two are partners in their own business, Candle Media.) They know the company well, and not only can they help figure out how to lower Disney+ costs, but they can also help with a potential sale of its linear TV assets, including broadcast network ABC and its eight local TV stations, Plus cable channels like Freeform and National Geographic.
Other holdings, such as Disney Channel and Disney Junior, might seem of little value without the larger company’s content and backing — and FX without a programming hand. John Landgraf and his team seem to have been depreciated, too. One knowledgeable observer predicts that Disney will “load those assets with debt and sell them to private equity.” It is believed that the real estate, which is expected to generate $7 billion a year in profits, will sell for $50 billion. (Disney’s linear networks earned $8.5 billion in fiscal 2022, though that’s expected to drop as cord-cutting continues.) Disney could put $25 billion of Disney’s debt into the deal, lowering its debt burden to $20 billion.
The company is already considering selling the Indian companies it acquired from Fox. It wouldn’t be surprising to see the sale of its majority stake in Nat Geo (perhaps in conjunction with the sale of the cable channel). Disney’s 50 percent stake in A+E Networks is also likely to be available to the right buyer (Hearst owns the other half).
The idea that Disney might sell is top of mind for some Wall Street analysts. Needham & Co. analyst Laura Martin has argued for some time that Disney could sell to Apple. It predicts that Disney will “be bought out within the next three years,” noting that acquisition premiums for media companies are typically in the range of 30 to 40 percent. “If they don’t sell, Disney will compete against them [tech] Companies in an industry as the economy goes down (because they never need to make money off of content), we think,” Martin wrote on July 14.
In a June research note, Martin said Disney could give Apple the catalyst it needs to drive adoption of the highly anticipated Vision Pro augmented reality headset. “The fact that Disney CEO Bob Iger was on stage promoting Apple’s Vision Pro protective eyewear demonstrates the compelling strategic fit between Disney content and Apple’s wearable technology,” she wrote.
Not everyone is so optimistic about the deal. Anthony Sabino, a lawyer and professor at St. John’s University (and who describes himself as a “crazy Disney fan”), says Iger’s contract extension and potential sale of Disney’s linear TV assets “demonstrate that they [Disney’s board] I want him to direct the company, and not think of selling him to the company.”
Any deal Disney does would certainly invite close scrutiny from the Biden administration, which has been aggressive in filing lawsuits to block important deals from closing, albeit with mixed results.
“It’s a given, and it’s absolutely certain that if there was some talk of Disney merging with someone else, that would be scrutinized to the ninth degree by the Federal Trade Commission, by the Justice Department,” Sabino says. “So this would basically be walking into a bear trap that I’m not sure any company would be willing to indulge in.” A Republican administration may be more lenient when it comes to a big deal (although it was the Trump administration that tried and failed to stop AT&T’s acquisition of Time Warner).
The actual areas of overlap between Apple and Disney aren’t that significant — nowhere near the overlap of, say, Disney’s acquisition of Fox, which gutted an old studio. The issue will be the sheer size and power of the merging companies.
But a pair of recent lawsuits, one from the FTC and one from the Department of Justice, could be related to any Disney deal. Recently, the FTC faltered in its efforts to block Microsoft’s acquisition of video game publisher Activision Blizzard. It’s a similar situation, with a tech giant and platform owner going after what is first and foremost a content company. Microsoft pre-emptively promised to continue making key games available to competitors like Nintendo and Sony, a decision that was convincing for the judge in the case, providing a potential roadmap for Disney’s deal with the tech giant.
On the other hand, the DOJ scored a big win when a judge blocked Paramount’s sale of Simon & Schuster to Penguin Random House in 2022. The DOJ made a “monopoly purchase” argument, meaning that a merger would be detrimental to authors looking to sell. their work. Since all of Disney’s logical buyers already own their own studios, the government could make a similar case, though one source speculated that Disney could offer to pre-emptively divest some studio assets (such as 20th Century Studios and Searchlight Pictures) to keep the level of competition stable. market and frustrate the issue of monopoly purchase.
Loyal Disney fans, many of whom are shareholders, will be wary of the tech company’s commitment to Disney’s core theme park business. It is a group that includes Sabino. “The uproar from Disney shareholders will be insane,” he says. But with more than 1.8 billion shares outstanding, and with more than 60 percent of those shares held by institutional investors, fans of Disney’s retail shareholders may not have what it takes to block a deal.
There is one person who has been considering a deal between Apple and Disney for years. In his 2019 memoirs, Trip of a lifetimeIger has written extensively about his friendship with Jobs, who founded Pixar and sold it to Disney in 2006. Before there was a pandemic, before he came back from retirement to run a hugely challenged Disney, Iger wrote: “I think if Steve we’d be Alive, we’d get our companies together, or at least discuss the possibility very seriously.”
Source: Market value as of August 7.
This story first appeared in the August 9 issue of The Hollywood Reporter. Click here to subscribe.
. “Professional creator. Lifelong thinker. Reader. Beer buff. Troublemaker. Evil problem solver.”