Disney wants to sell the TV business – streaming should become more expensive

Scene from the Star Wars series “Ahsoka”

Disney’s streaming business continues to be in the red.

Photo: Suzanne Tenner/©2022 Lucasfilm/Disney+/dpa

(Photo: dpa)

Dusseldorf Disney is facing drastic changes. The US entertainment giant, which celebrates its 100th birthday this year, could divest itself of its traditional TV business.

The US media mogul Byron Allen made a billion-dollar offer to buy the Disney channels on Friday. According to a spokesman, Allen is offering $10 billion for the TV business. The entrepreneur already owns a number of TV channels in America. In addition, Disney is negotiating with local broadcaster operator Nexstar, which now owns most of the TV stations in the USA, several US media reports.

Disney includes the national broadcaster ABC, the cable channels FX and National Geographic as well as various local programs. ABC has affiliation agreements with approximately 240 local TV stations, reaching nearly all U.S. television households.

Disney is examining “a variety of strategic options for our linear business area,” the company said. However, no decision has been made at this point.

The sale would change Disney. The TV division was very lucrative for the group for many years. Recently, however, revenues and profits in this area have shrunk. In the last quarter, sales fell by seven percent to $6.7 billion. The operating result even fell by 23 percent to $1.9 billion.

The linear television business has a problem in the USA: consumers are canceling their cable TV contracts and switching to streaming services. As the viewers turn away, so do the advertisers. Many companies now prefer to advertise online.

Disney CEO Iger had already announced in July that he would restructure the company. He expressly questioned whether the classic TV business could remain part of Disney in the long term. The upheaval in linear television is much greater than he expected, Iger said in the summer.

Disney+: Continued losses in the streaming business

The Netflix competitor is itself active in the streaming business. In addition to Disney+, the US media giant also owns the Hulu service and ESPN+, which primarily shows sports broadcasts. But these offers have been in the red for years.

In the past nine months alone, streaming losses piled up to over $2.2 billion, with revenue of $16.3 billion in the same period. The profitable TV business has so far been able to offset these losses.

Bob Iger

Users cancel due to price increases – but Disney+ still makes the annual subscription significantly more expensive.

(Photo: Reuters)

CEO Iger therefore wants to set up the streaming business in such a way that it makes a profit. Disney is increasing prices again. In Germany, from November onwards, users will have to pay 120 euros per year instead of the previous 90 euros for the previous scope of services. Anyone who uses the offer with advertising pays less. According to Iger, these subscriptions now account for 40 percent of new subscriptions.

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The manager also wants to reduce costs by $5.5 billion. In the future, fewer series will be produced for Disney+ and they will also be more cost-effective. Overall, too much money was spent on producing content, the manager admitted in the summer. Iger has also announced that he wants to cut 7,000 jobs. The measures seem to be having an effect: the streaming losses have recently been less significant than in previous years.

But Disney’s streaming business is also growing less quickly than hoped. The company has apparently cashed in on the goal announced in the summer of 2022 of having between 215 and 245 million subscribers to Disney+ by 2024, reports the Bloomberg agency. Last quarter, Disney+ had 105.7 million subscribers.

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In addition to strong streaming competition, Disney+ is suffering from users canceling due to price increases. In times of rising living costs, 30 percent of Germans want to save on their streaming subscriptions, a recent study by the Simon-Kucher consultancy showed. In addition, Disney has not managed to secure the streaming rights to cricket games in India again.

Iger does not want to make any forecasts about the development of user numbers in the future – and is based on competitor Netflix. Iger is considered the architect of today’s Disney company. The 72-year-old returned from retirement in autumn 2022 and became head of the company again. He initially received a two-year contract, which was extended by another two years in the summer.

More: Disney is struggling with these problems on its 100th birthday

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