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In July, Walt Disney (NYSE:DIS) CEO Bob Iger made the stunning admission that the storied media and entertainment giant could walk away from parts of its television empire when he said the company would be “open-minded and objective” about the future of the TV business, adding some of it “may not be core to Disney.”
While Walt Disney (DIS) is likely to hold onto ESPN, the company is considering “potential strategic partnerships” for the worldwide leader in sports, including in distribution, technology, marketing and content.
One analyst believes that Apple (NASDAQ:AAPL) could be the answer.
Wedbush Securities analyst Dan Ives said that with Apple (AAPL) continuing to push its Apple TV+ streaming service further into sports (it already airs Friday Night Baseball and has a 10-year exclusive deal to air Major League Soccer), a deal for ESPN in some form or fashion could be an option.
“[T]he massive appetite for live sports content remains the laser focus for Cupertino now to boost its streaming future and further tap into its massive installed base of 2 billion iOS devices worldwide,” Ives wrote in a note. “We believe the answer and the shoe that fits for Apple is the golden ESPN assets which potentially may be on the table in one form or another as Iger and the Board strategically and carefully look at Disney’s core assets over the coming months.”
Ives added that ESPN is “much more attractive” to Apple (AAPL) than Disney (DIS) overall, as it would boost the tech giant’s offerings in the streaming race, allow it to gain “valuable” sports content, major TV rights for professional and college sports and cross-sell Apple TV.
However, given the price tag of ESPN, which Ives said could be worth $50B or more, it would be in stark contrast to Apple’s past M&A history. The company’s largest deal was in 2014, when it acquired Beats, co-founded by Andre Young (better known as Dr. Dre) and Jimmy Iovine for $3B. That deal ushered in a new era for Apple, as it helped the tech giant in music streaming, headphones and more.
Despite the lack of large deals for Apple (AAPL), Ives said he thinks the Tim Cook-led company sees there is a “closing window” for it to acquire content and “cement its footing” in live sports, especially after the company’s reported deals with the Pac-12 and the NFL fell through.
There has been a lot of chatter about Apple (AAPL) potentially buying Disney (DIS), with much of it speculative in nature. There are of course the regulatory issues that any deal would have to go through across the globe, while Apple’s lack of previous large-scale acquisitions and whether it makes strategic sense for both companies also come into play.
However, there is no denying the long-lasting relationship between the two companies. In 2005, Disney became the first media company to put its television shows on the Video iPod and just a year later, Disney acquired Pixar, co-founded by Apple co-founder Steve Jobs. Eventually, Jobs became Disney’s largest individual shareholder and would go on to be a member of its board of directors.
In the present day, Ives explained the “strong relationship” between Apple’s (AAPL) Cook and Disney’s (DIS) Iger could aid collaboration between the two companies, which at the very least, may result in a “major distribution partnership” between Apple TV and ESPN.
Despite its hefty balance sheet and pristine credit rating, Apple (AAPL) is likely to have competition for ESPN, assuming it wants to do a deal at all. Other companies that have been recently mentioned include some of the telecom companies, including Verizon (VZ), or perhaps Amazon (AMZN) or Google (GOOG) (GOOGL), both of which have pushed further into sports rights in recent years, notably with the NFL.
There’s also the possibility the major sports leagues – the NFL, NBA and MLB – could have some sort of strategic partnership with ESPN.
Regardless, it seems as if ESPN is likely to change drastically in some way or another in the not too distant future. And perhaps, at least according to Ives, it will be the House that Jobs built coming to the rescue of the House of Mouse.
