In a bid to lure an outside investor, the media giant last month disclosed the financials of ESPN that revealed declining sales and profit at the network considered to be the crown jewel of its traditional TV business.
CEO Bob Iger has said Disney wants to keep ESPN and will try to create a streaming app for it by either forming a joint venture or finding a buyer for a minority stake in the network.
That means a 36% interest in ESPN would be up for sale, assuming Disney intends to retain a 51% majority interest and accounting for media company Hearst’s 20% stake, BofA analysts led by Jessica Reif Ehrlich wrote in a note published Wednesday.
Interested parties could include leagues like the National Football League and the National Basketball Association, newcomers like Apple and Amazon.com, which are jostling to get into live sports, and distributors like Verizon and Comcast, the note said.
Disney would gain a lot from the deal as more capital would mean ESPN would be able to strengthen its offerings, keep the option of a spin-off open and help the network focus on high-growth streaming, the brokerage said. Rising cord-cutting has hit the linear television business, and acquiring sports rights has become an increasingly expensive affair, with future sports rights expected to be north of $69 billion. Benefits to prospective buyers, however, appear “nebulous”, BofA said.
“ESPN is still a strong business and a premier brand, but it sits at the nexus of possible major business transformation. Transitions have historically proven difficult and typically not conducive to significant growth,” it added.