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Walt Disney Co Likely To Sell Fusion Stake

Disney is reportedly in talks with Univision Communication to sell its stake in Fusion as it shifts focus to other ventures

Walt Disney Co (NYSE:DIS) is said to be in negotiations with Univision Communications Inc. to sell its stake in Fusion – a joint cable and digital news network. The Wall Street Journal (WSJ) reported that the deal is expected to be finalized by the end of the year.

Fusion was launched in October 2013 after the merger between Disney’s ABC News and Univision, a Spanish language broadcaster. It was originally seen as a channel that targeted the English-speaking Hispanic community, but eventually went for a broader audience, especially millennials. The content is mostly focused on news, pop culture, and technology.

The basic idea behind Fusion was to give ABC News access to the fast-growing Hispanic population in the US. Univision got exposure to the younger demographic as a result.

According to the terms of the partnership, Univision used to handle the content of the channel, while Disney was responsible for distribution and advertising. Fusion has not however, managed to do well and advertising numbers are not impressive, which is one of the major reasons behind Disney’s decision to sell its stake.

Fusion had struggled to keep pace with other ambitious editorial startups such as BuzzFeed, Vice Media, and Vox. According to SEC filings, the joint venture lost nearly $35 million in 2014. At the same time Disney announced recently that it has doubled its investment in Vice Media to $400 million. Vice announced its first cable channel earlier this year, and since then Fusion has become less important for Disney. Vice launched the channel in collaboration with A&E Networks which is also partly owned by Disney.

In its regulatory filing on October 3, Disney disclosed that ESPN has lost three million subscribers in the past year, and seven million over the last two years. The report highlighted investors’ concerns about viewers aggressively transitioning to online streaming services. ESPN dominates Disney’s cable-networks division and contributes 46% of company’s operating profit and 32% of its revenue. It is also pay-tv’s most expensive channel with a monthly fee of $6.10 per subscriber.

This is a concern for Disney because of the significant contribution the sports channel makes to earnings and revenue. Even though Star Wars: The Force Awakens has done amazingly well at the box office analysts at BTIG say that unless the movie breaks $2 billion Disney will miss consensus earnings estimates for FY2016.

The firm also believes Disney’s guidance for upcoming years is “far too high” and has downgraded the stock to a Sell with a price target of $90.

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