Activist investor Dan Loeb eases push for Disney to spin off ESPN

Loeb's investment firm Third Point disclosed that it had repurchased a 'significant' stake in Disney in August

Activist investor Dan Loeb has reversed course after proposing that Disney consider spinning off ESPN.

"We have a better understanding of @espn's potential as a standalone business and another vertical for $DIS to reach a global audience to generate ad and subscriber revenues," Loeb tweeted on Sunday. "We look forward to seeing Mr. Pitaro execute on the growth and innovation plans, generating considerable synergies as part of The Walt Disney company."

Loeb's tweet comes after Disney CEO Bob Chapek told the Financial Times that the company has been "deluged" with interest from companies looking to buy the sports network.

"If everyone wants to come in and buy it or spin it with us, I think that says something about its potential," Chapek told the outlet. "I think its potential is within the Disney company."


"We have a plan for it that will restore ESPN to its growth trajectory," he added.  "When the rest of the world knows what our plans are, they will be as confident about that proposition as we are."

The request to spin off ESPN came in an open letter in August in which Loeb disclosed that his investment firm Third Point repurchased a "significant" stake in Disney. In addition to the spinoff, Loeb proposed the following changes:

- A cost-cutting program that addresses margins and "the disposal of excess underperforming assets."

- Preserving a suspension of its dividend initiated during the COVID-19 theme park closures and using free cash flow to pay down debt, repurchase shares or organically reinvest in the business.

- Acquiring Comcast's 33% minority stake in Hulu prior to its contractual deadline in early 2024 and integrating the streaming service into Disney+.

- Refreshing the company's board with members who have experience in technology, advertising, and consumer engagement.

In response to the letter, Disney touted its strong financial performance and "record streaming subscriptions" and defended its board's "significant expertise in branded, consumer-facing and technology businesses as well as talent-driven enterprises."


In its latest quarter, Disney reported a total of 221.1 million subscribers across its platforms. Hulu and ESPN+ account for 46.2 million and 22.8 million subscribers, respectively, while Disney+ makes up the remaining 152.1 million. 

Disney continues to expect that Disney+ will become profitable in 2024. However, the company now anticipates that its total subscribers will fall to 215 million to 245 million by the end of fiscal 2024, compared with previous guidance of 230 million to 260 million.

Starting Dec. 8, Disney+ in the U.S. will cost $7.99 per month with ads and $10.99 per month for the ad-free version. Meanwhile, ESPN+ now costs $9.99 per month with ads and Hulu will cost $7.99 per month with ads and $14.99 without ads starting on Oct. 10.