Disney spent years floating the idea of cutting ESPN loose. Its new CEO just said no.
ESPN will stay inside Disney for now, the network's most decisive piece of news in a decade.
Business Insider reporter Peter Kafka reported Tuesday that Disney has "decided against" an ESPN spinoff. "Instead, the sports network will stay inside the media giant, which thinks its presence will help its pivot to streaming," Kafka wrote.
The call comes from new Disney CEO Josh D'Amaro, who took the top job in March.
D'Amaro could "revisit" the decision later, but the spinoff is currently a "non-discussion," Kafka wrote.
ESPN was once the cash cow that funded the rest of Disney's empire, until cord-cutting started in 2015.
Today, ESPN's operating income is about one-third of Disney's experiences division - the theme parks and cruises business - which made the math look like a logical spin-off candidate. Disney (DIS -0.86%) shares fell on Tuesday.
ESPN still anchors the pay TV bundle, since people keep paying for cable mainly to watch live sports. That makes ESPN's economics decline slower than other cable networks.
Disney recently launched a new direct-to-consumer ESPN streaming product, with the bet being that it can replicate the cable bundle's profit on a digital platform. Almost every other media company has struggled to make that math work in streaming.
D'Amaro is betting ESPN can.
Other conglomerates went the other way. Earlier this year, Comcast (CMCSA) cut most of its cable channels into a separate company called Versant.
Warner Bros. Discovery was prepared to spin off its cable networks before Paramount stepped in and bought the entire company.
Disney is now alone among the giants in keeping its sports cable network attached to the streaming business.
ESPN may still sell minority stakes, with the NFL recently buying 10% of the network - the kind of deal that brings in cash and aligns ESPN with a key sports partner without separating it from Disney.
That option likely stays on the table.
The next signal is whether D'Amaro can stabilize ESPN's traditional cable revenue while the streaming product scales. If both lines grow, the spinoff debate goes quiet.
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