Disney CEO: Banking on ESPN, ready for ad-free streaming
David Livingston

All eyes in the streaming world are on the high-profile introduction of ad-supported service at Netflix and Disney (NYSE:DIS), and Disney chief Bob Chapek visited the topic head-on at an investor conference.
The company's ad-supported Disney+ (coming in early December) will have the same margins as regular ad-free Disney+ "at worst," Chapek said at Goldman Sachs Communacopia. Pricing power may come into that, as Chapek says the company's streaming services are "way underpriced." (There, he echoes similar sentiment from Warner Bros. Discovery (WBD) Chief Financial Officer Gunnar Wiedenfels about WBD's streaming services.)
Hulu could be integrated into Disney+ in the U.S. in time, Chapek says - but that's dependent on a party Disney doesn't control: Hulu stake owner Comcast (CMCSA).
Comcast holds a one-third stake in Hulu, and due to an unusual 2019 agreement, Disney can force Comcast to sell back its stake in 2024 - but valuation will be a sticking point for a streaming service whose value seemed to swell to $60B during the COVID-19 pandemic.
"I do believe that we'd have to have full ownership of Hulu to integrate it into Disney+. We would love to get to the endpoint earlier. But that obviously takes some level of propensity for the other party to, you know, have reasonable terms for us to get there," Chapek said. He can wait, he suggests: "Yeah, 2024's not that far away."
As for an Amazon Prime-like approach to a new subscription program, Chapek says that while the company has simplified its structure (down to two business units from a previous five), "the way the consumer looks at it, it's one entity."
If the company can recognize that a person who spent seven days in Disney's Parks is also the sort of person who watches particular content on Disney+ streaming, "that's going to put us in a tremendous position of competitive advantage." Parks and streaming together will fuel a Disney program membership, he said.
Third Point investor Daniel Loeb famously reiterated a call for Disney to spin off ESPN, but Loeb backed off that call saying he had a "better understanding" of Chapek's dedication to sports' "worldwide leader."
"There's a lot of people that are interested in getting a piece of ESPN, but we like our own hand," Chapek says. "We like how it sits, we like our long-term strategic plan. And we're confident that the best place for ESPN is within the Walt Disney Co."
Sports gambling is definitely part of that calculus, he said. It's "one piece of the proposition as to why we think this is a good long term - can I say bet? - for the Walt Disney Co." The company has found that linking out to an ESPN-branded sports betting site would mean no impact on brand equity for Disney, but "a very positive impact on the brand equity for ESPN, because our younger audience is demanding that."