Justin Solomon | CNBC
Daniel Loeb’s Third Level has taken a brand new stake in Disney, pushing the leisure large to spin off its sports activities community ESPN, based on a letter obtained by CNBC’s David Faber.
The shares jumped as a lot as 2% on the information.
In a letter to Disney CEO Bob Chapek, Loeb stated there’s a sturdy case that the ESPN enterprise ought to be spun off, saying the phase generates important free money stream for Disney.
“ESPN would have higher flexibility to pursue enterprise initiatives which may be tougher as a part of Disney, comparable to sports activities betting,” Loeb stated. “We consider that the majority preparations between the 2 corporations might be replicated contractually, in the best way eBay spun PayPal whereas persevering with to make the most of the product to course of funds.”
Disney is making extra money from cable subscribers than some other firm solely due to ESPN. ESPN and sister community ESPN2 cost practically $10 monthly 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 change into a stronger product up to now 12 months as Disney strikes extra unique stay video games to the service. Disney stated final month it’s going to increase the value of ESPN+ to $9.99 monthly from $6.99 monthly beginning Aug. 23, the most important value improve to this point.
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 stated Disney ought to “make each try” to accumulate Comcast’s remaining minority stake earlier than the 2024 deadline.
“We consider that it might even be prudent for Disney to pay a modest premium to speed up the mixing,” Loeb stated within the letter. “We all know it is a precedence for you and hope there’s a deal available earlier than Comcast is contractually obligated to take action in about 18 months.”
Disney simply got here off a powerful quarter with its streaming subscriber progress blowing previous estimates. Disney 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 within the media large. Most just lately, he had held a stake for 2 years from 2020 to early 2022, pushing Disney to ramp up its streaming companies.
Shares of Disney are off about 20% this 12 months.
Disclosure: CNBC is a part of Comcast’s NBCUniversal.