Break-Up Potential: DIS Booming on Movies, TV Lags Behind – Can DIS Find Value in A Spinoff?
Nov 28, 2016
The Walt Disney Company (DIS) is in the midst of two opposing forces, positive and negative, as the outlook of the various businesses in its portfolio differs. On one hand, it is benefiting from a boom in its movie business, thanks to a slew of captivating franchises, which can be milked for recurring revenue, as well as in the theme park/resorts business, which provides steady cash flows. On the other hand, its television business is facing a secular long-term decline as the infotainment world moves away from TV to online streaming (on computers/tablets/mobile). DIS is feeling the heat as subscribers have begun to move away from its highly-demanded sports channel – ESPN.
We believe that with the divergent trends in play, DIS would do well by separating its businesses, especially those having low synergies. This move will help the company implement growth strategies more effectively by allowing these businesses to scale up on their own, and provide the management the bandwidth necessary to tackle the challenges facing the sports/entertainment TV business model…