Disney Bets On Baseball Streaming -- WSJ
August 10 2016 - 3:03AM
Dow Jones News
It will pay $1 billion to acquire 33% stake in BAMTech, created
by Major League Baseball
By Ben Fritz and Shalini Ramachandran
One year after its shares began a 12% slide driven by concerns
over ESPN's growth trajectory, Walt Disney Co. has come up with an
answer for Wall Street: The media giant said Tuesday it will spend
$1 billion to acquire a 33% stake in BAMTech, the streaming media
unit created by Major League Baseball.
As part of the deal, ESPN will later this year launch a new
digital service, separate from the traditional cable bundle, that
will include games the sports network doesn't air on its linear
channels, Disney Chief Executive Robert Iger said on a conference
call with analysts to discuss the company's financial results. The
new service will show professional baseball and hockey as well as
college football and basketball.
It will include a mix of rights already controlled by ESPN and
BAMTech, meaning they will likely be games not popular enough to
air on TV. Costs for consumers have not yet been set, but Mr. Iger
said they could vary depending on how much people want to
watch.
"We view this as a complementary service to what ESPN is
providing in the multichannel package," Mr. Iger said, referring to
traditional cable and satellite television programming bundles.
ESPN has lost 3.7 million cable subscribers in the past year,
according to Nielsen data, and now reaches about 88.8 million
households. That figure excludes streaming services like Dish
Network Corp.'s Sling TV and Sony Corp.'s PlayStation Vue.
Concern about cord-cutting and young people who never subscribe
to cable in the first place has driven investor anxiety about cable
television in general, but particularly ESPN, which has long been a
cash cow for Disney. It is the most expensive U.S. cable channel,
according to SNL Kagan, charging cable and satellite companies an
average of $7.21 per monthly subscriber.
The BAMTech deal could also enable digital offerings from other
Disney networks such as ABC, the company said.
Nonetheless, Mr. Iger said that maintaining the value of the
multichannel bundle remains a "top priority" for Disney, implying
that the programming currently airing on TV likely won't be
available without a subscription to multiple networks anytime
soon.
As part of the deal, Major League Baseball said it would spin
off BAMTech from its broader digital business known as MLB Advanced
Media. BAMTech powers direct-to-consumer streaming services and
apps for a number of companies including HBO and serves nearly 7.5
million total paid subscribers to all its clients' streaming
products.
The deal announced Tuesday gives Disney the right to eventually
acquire a majority stake in BAMTech. Mr. Iger said he wanted to
"walk before we run" when it came to integrating the technology
firm.
The purchase of the minority stake will result in a "very slight
dilution" in earnings for Disney, the CEO said.
Disney also said it's struck a deal for seven of its networks,
including ESPN, ABC, Freeform and Disney Channel, to be carried on
all the plans offered by AT&T Inc.'s forthcoming DirecTV Now
streaming service. Getting his company's channels into new "skinny
bundles" offered over the internet has been a priority for Mr.
Iger, who noted Tuesday that he is "neutral" on how consumers
access Disney networks, as the media giant receives similar
subscriber fees regardless. Total revenue for Disney grew 9% in the
quarter ended July 2 to $14.3 billion, while net income rose 5% to
$2.6 billion.
Revenue at Disney's film studio grew 40% to $2.85 billion and
operating income surged 62% to $766 million on the strength of
"Star Wars: The Force Awakens" and "Zootopia" DVD and digital
sales, as well as the box-office performance of blockbusters "The
Jungle Book," "Captain America: Civil War" and "Finding Dory."
Disney shares rose 1% to $96.67 before financial results were
released and were down 1% in after-hours trading, as earnings came
in slightly below analysts' expectations.
Write to Ben Fritz at ben.fritz@wsj.com and Shalini Ramachandran
at shalini.ramachandran@wsj.com
(END) Dow Jones Newswires
August 10, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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