Weekend Investor: The Week That Was

I hope you had a wonderful week!

Earnings season gets into full swing this week, so that will be my focus for most of the next few weeks. At Asymmetric Investing, I will publish one free article during the week, a new spotlight and a TBD article for premium subscribers, plus the free weekend article next week.

In case you missed it

Here’s some of the content I put out this week. Enjoy!

• Smiling Curve: The Smiling Curve should be taught in every economics course today, but it isn’t. So, I covered the keys here.

• Tesla Isn’t Leading Autonomous Driving, This Company Is: If you’re interested in facts about autonomous driving that’s actually happening today, check out this video. It gives an idea of why I did this spotlight.

• Why Coinbase is up 66%: Premium members got my thoughts on Coinbase popping 66% since June 1’s spotlight article.

Disney’s Nuclear Option

Let me be clear, Bob Iger is an egomaniac. He is 72 years old and has a reported net worth of $350 million, yet he just signed on to be Disney’s CEO through AT LEAST 2026!

What the hell, Bob?!?

Thanks for letting me get that off my chest. Now on to what Disney is doing long-term.

Earlier this year, Bob Iger announced that ESPN will be a separate division in earnings reports, which sent out alarm bells that maybe ESPN’s days under Disney are numbered. We got some related news about that. Iger confirmed that:

• Disney is looking for strategic partners for ESPN.

• ABC and cable networks could be sold.

• Disney will combine Disney+, Hulu, and ESPN+ into a single app by the end of the year.

• ESPN will go direct to consumers this year.

In other words, Iger is willing to blow up Disney as we know it. Here’s what we know:

1. Parks are the cash cow, generating $5.2 billion of the company’s $6.3 billion in operating income in the past six months. This is untouchable.

2. ESPN is cutting costs, announcing major on-air cuts just last week. This follows multiple rounds of layoffs in recent years. Reading the tea leaves, ESPN sees less value in shows like Sportscenter and more in being the distribution channel for sports like NFL and the NBA.

   1. Given the fact that ESPN could be looking for partners, I wonder if an ESPN app that includes TNT and other high-value sports content could be in the works.

3. Iger said linear (cable) networks — including ABC — “may not be core to Disney” and could be sold. Make no mistake, Disney is looking to exit the cable and network TV business if possible, but it will keep studios for content that will feed its own streaming service and potentially others.

I have written about the economics of the internet being vastly different than that of physically bound businesses and this is Iger acknowledging that. The major change over the past four years is that cable is dying faster than expected. If cable is dying, what does Disney’s content and distribution look like?

Maybe the content doesn’t change, whether that’s Pixar, Disney animation, Star Wars, or even ESPN. But the method of getting content to people’s TVs will change. Cable is no longer the gatekeeper, so why keep the channels that serve the gatekeeper?

Disney’s future is as a content house and a distribution (streaming) business. Anything that takes away from focus in either of those areas is a distraction.

Disclaimer: Asymmetric Investing provides analysis and research but DOES NOT provide individual financial advice. Travis Hoium may have a position in some of the stocks mentioned. All content is for informational purposes only. Asymmetric Investing is not a registered investment, legal, or tax advisor or a broker/dealer. Trading any asset involves risk and could result in significant capital losses. Please, do your own research before acquiring stocks.