Disney CFO Sidesteps Netflix Acquisition Rumor

9 Jan, 2017 By: Erik Gruenwedel

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Christine McCarthy reiterates media giant’s plan to roll out standalone ESPN OTT video service

Walt Disney Co. CFO Christine McCarthy downplayed — for now — speculation surrounding a possible purchase of Netflix during an investor event held concurrently during CES in Las Vegas.

Speaking at the Citi 2017 Internet, Media & Telecommunications confab, McCarthy reiterated the media giant’s ongoing merger and acquisitions (M&A) plans, which she said include an international scope and would involve a “transformational” purchase, along the lines of previous buys: Pixar ($7.4 billion), Marvel ($4 billion) and Lucasfilm ($4 billion).

Of course, observers contend such a large-scale M&A could involve Netflix. Disney, which has an exclusive $300 million annual pay-TV streaming deal with Netflix for first-run theatrical releases, would reportedly have to ante up as much as $25 billion to acquire the SVOD pioneer.

Without naming the 800-pound gorilla, McCarthy dodged the unasked question, reiterating Disney’s M&A outlook.

“I, too, have heard that narrative, but nothing has changed in our approach to M&A … [which] is still a part of our overall growth strategy,” McCarthy said.

The CFO said any potential acquisition goes through a “very rigorous” screening process and “very thorough” evaluation process.
“And at the end of it all, we are going to do transactions that we believe that are going to create long-term sustainable shareholder value.”

Indeed, on the heels of Disney’s $1 billion investment in BAMTech, a streaming technology provider co-owned with Major League Baseball Advanced Media and the National Hockey League, the company is moving ahead with plans to roll out ESPN as a standalone over-the-top video service this year.

While ESPN has always fielded a TV Everywhere WatchESPN app for pay-TV, the software wasn’t available independently by subscription.

Since bowing on Sling TV in 2015 — the first time outside the pay-TV ecosystem — ESPN has become a mainstay in the burgeoning online TV market, which includes PlayStation Vue, Charter Spectrum TV Plus and DirecTV Now. The pending Hulu online TV service will also include ESPN.

And Disney in late 2015 launched DisneyLife in the United Kingdom, a £9.99 monthly streaming service offering movies, TV shows and books in five languages. 

“[The ESPN OTT service] will have sports and sporting events that aren’t [on pay-TV ESPN], and that is consistent with ESPN’s strategy of super-serving sports fans of all types,” McCarthy said.

ESPN in August 2019 will launch the Atlantic Coastal Conference (ACC) Network, a college football pay-TV channel patterned after the Southeastern Conference (SEC) Network, launched in 2014.

“We believe that, with our kind of content, that any new [online TV service], when they look at what they want to provide to their consumers, Disney content is going to be high on the list, if not the top of the list, because our content is compelling,” McCarthy said. 

 

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