Daniel Loeb’s Third Point has taken a new stake in Disney and pushed the entertainment giant to spin off its sports network ESPN, according to a letter from CNBC’s David Faber.
Shares jumped 2% on the news.
In a letter to Disney CEO Bob Chapek, Loeb said there was a strong case for the ESPN business to be spun off and said the segment is currently generating significant free cash flow for Disney.
“ESPN would have greater flexibility to pursue business initiatives that might be more difficult as part of Disney, such as B. Sports betting,” said Loeb. “We believe that most of the agreements between the two companies can be contractually replicated, much like eBay spun off PayPal, while still using the product to process payments.”
ESPN+ has grown into a stronger product over the past year as Disney moves more exclusive live games to the service. Disney announced last month that it had increased the price of ESPN+ from $6.99 per month to $9.99 per month starting August 23, its largest price increase to date.
Second, Loeb urged the entertainment company to integrate streamer Hulu directly into Disney+’s direct-to-consumer platform.
Comcast has an agreement to sell its 33 percent stake in Hulu to Disney within two years. Loeb said Disney should “make every attempt” to acquire Comcast’s remaining minority stake before the 2024 deadline.
“We believe it would even be wise for Disney to pay a modest premium to expedite the integration,” Loeb said in the letter. “We know this is a priority for you and we hope there is a deal before Comcast is contractually committed to it in about 18 months.”
Disney just had a strong quarter, with streaming subscriber growth beating estimates. Disney also posted better-than-expected results on both revenue and bottom line, helped by higher spending at its domestic theme parks.
Loeb has a history as an activist investor in the media giant. He had held a stake for two years from 2020 to early 2022, pushing Disney to expand its streaming services.
Disney stock is down about 20% this year.
Disclosure: CNBC is part of Comcast’s NBCUniversal.