Disney Might Be Getting Ready to Sell ABC to Nexstar

Key Takeaways

• Reports are circulating that Walt Disney Co. has discussed selling ABC to Nexstar, a local broadcaster
• Media magnate Byron Allen reportedly offered $10 billion for ABC, FX, and National Geographic
• Disney has not confirmed plans to sell

Disney just intensely battled it out with Charter Communications Inc. over distribution rights, then gave lower forecast numbers for Disney+ subscriber numbers. It’s been a bit of a rough patch for Disney, that’s for sure. In response to reports of a potential ABC sale, Disney’s statement indicated that it’s considering options but that no decision has been made. Would a sale help Disney out of its slump? We’ll explore that below.

What deals are (potentially) on the table?

The potential Nexstar deal would be part of the company’s strategy to acquire assets from legacy media companies as they restructure and shift. Comments by Tom Carter, a former Nexstar exec and current senior advisor to the CEO, said Nexstar could acquire ABC stations with “little friction.” But he didn’t confirm any actual discussions with Disney.

Evan Young, an analyst at KeyBanc Securities, said in a note to investors: “a sale of ABC tells us that Disney’s view on pay-TV is that it will soon implode, which to us means applying meaningful discount rates to all linear cash flows.”

Separately, media mogul Byron Allen has offered Disney $10 billion for its ABC television network, in addition to the cable networks FX and National Geographic. Allen’s representatives have confirmed this bid, but sources have also said the specifics of it could change. Allen owns a mix of local stations and the Weather Channel.

What does this mean for Disney and the media landscape?

Disney CEO Bob Iger has said that some of the company’s television assets may no longer be core to the overall business strategy as streaming continues to take over. But, at the same time, Disney’s streaming business is losing money — $512 million in the most-recent quarter, to be specific. That means Disney+ has lost $11 billion since its launch in 2019.

Suffice it to say that Disney has been feeling some pressure lately. Most recently, Charter Communications took Disney-owned ESPN off its Spectrum TV service just in time for football season. Virtual cable packages, like YouTubeTV, also has ESPN, so Disney didn’t have a ton of leverage there. An eleventh-hour deal with Charter restored ESPN and other Disney channels back to Charter’s service after a week-long blackout period. It all worked out for Disney in the end there, but moving forward the company may want to have less to do with linear television channels.

The bottom line

If Disney moves forward with selling ABC (and, remember, that is still an “if” as Disney has yet to confirm the plan) experts think it will be more likely to go for a local broadcaster like Nexstar. But that will introduce a lot of complicated divestiture finagling for Nexstar.

Even with all of this up in the air, Disney shares were up 1.7% Friday morning after reports of the potential sale began to circulate, which may be an early sign of a turnaround for the media giant.