With a highly volatile political climate putting broadcast television networks under a microscope operated by the FCC and under the influence of the White House, should The Walt Disney Company dismantle ABC and shift all of its valued programming to digital platforms?
That’s precisely the recommendation of two Needham & Company analysts.
Needham Managing Director and Senior Internet & Media Analyst Laura Martin and Equity Research Analyst Dan Medina came together to make the suggestion in an investor note distributed last week — well before resolution of the “Jimmy Kimmel Live!” suspension and preemption of the late-night program by Sinclair Inc. and Nexstar Media Group over protests surrounding the host’s comments about the suspected assassin of conservative political activist Charlie Kirk.
The idea Martin and Medina have effectively would allow Disney to thumb its nose at the Trump Administration and FCC Chairman Brendan Carr by shifting all ABC News, ESPN-branded sports aired on ABC, prime-time programming and essentially every element of the broadcast network on Hulu and the ABC-branded app Disney also offers as an OTT option.
With the absence of an ABC Television Network through a wind-down, Martin says ABC would force Disney to write off about $1.7 billion-$2.7 billion of free spectrum value, in addition to about $1.4 billion of lost free cash flow per year. This is roughly $8.3 billion of value based on current TV trading comps.
If that’s the case, why would Disney do such a thing?
Martin, joined by Medina, explained that value destruction would be as low as a percent of Disney’s $204 billion market capitalization, “and one-time only, which Wall Street would add back.” News of their report first surfaced in Forbes over the weekend.
That said, there is likely little chance that ABC would suddenly disappear, leaving network affiliates in the lurch as to how to fill hours of programming. Then, there are the ABC Owned Stations themselves, which remain some of the nation’s most-watched when it comes to local newscasts, in particular.
Martin and Medina aren’t impressed, shrugging off the fact that ABC is averaging some 2.4 million in prime-time across its broadcast and cable networks and that the ABC Television Network and ABC Owned Stations generate some $4 billion in revenue. That is down by 11% from 2024, they say.
But, could all of this be of long-term benefit to Disney? The Needham analysts believe a company with a movie studio (now subject to a 100% foreign film production tariff) should avoid any political issues and taking a stand on a sensitive issue as the entire industry is being impacted by the rise of generative AI.
