But the third point still needs some changes – five, to be exact. “They will unlock more value in the near future,” Loeb said.
“Integrating Hulu directly into Disney+… platform will deliver significant cost and revenue synergies, ultimately driving domestic market growth,” Loeb wrote. .”
In the five steps, the third point suggests that “a strong case can be made that the ESPN business should be paid to shareholders with appropriate debt burdens” to reduce DC’s total debt.
Loeb acknowledged that the sports network’s extensive streaming package with Disney+ and Hulu is an attractive aspect. But he thinks there are other reasons to differentiate ESPN from Disney — including the rapid growth of the sports betting industry.
“ESPN, as part of Disney, will have more flexibility to pursue potentially more difficult business activities, such as sports betting,” Loeb wrote. “The customers of ESPN and the sports leagues should be better served by a focused management team that leads a leadership position in sports broadcasting.”
Disney CEO Chapek addressed the question of sports betting on last week’s earnings call, saying he hoped the company would have “something to announce in the future in terms of partnerships.”
Loeb also wants Disney to cut costs and freeze dividends to shareholders to keep more cash for stock buybacks, debt reduction and investments in the business. He also urged Chapek to consider adding new board members.
The third point is that he wants to “work directly and constructively” with Disney, Loeb wrote, adding that the company “may need additional strategic, capital allocation, and management changes to ensure success.” “Some of our recommendations may already be in action,” he admitted.
Disney said in a statement that “we welcome our investors’ feedback” and that the company “will continue to deliver strong financial results.”
The company added that Chapek’s leadership led to “this strong performance while managing the COVID-19 pandemic and its aftermath” and that the “independent and experienced board has significant expertise in leading, consumer-facing and technology businesses.”