Disney Considers All of Its Options

Walt Disney Co.’s possible sale of its Anaheim sports operations is only one option that the company is considering as it struggles to cut costs and focus on businesses with growth potential, company officials and observers say.

And there are no assurances that any of what businesses call “non-core assets”--in Disney’s case such things as the Angels and Mighty Ducks--will be sold when the analysis is complete.

“The company is looking at lots of things--as it should be--but has made no decisions about any of them,” Raymond L. Watson, a longtime Disney director, said Tuesday. “At the end of the day we may wind up owning everything we own now.”

In the latest in a series of earnings reports that have disappointed Wall Street, Disney Chairman Michael Eisner recently announced a cost-reduction review that eventually could lead to annual savings of more than $400 million. Company operations from movie-making and ABC to retail stores and international operations are being drastically reshaped.

So far, the moves have had little effect on the investment community. Disney shares closed Tuesday at $25.62, down 12 cents for the day, near the 52-week low of $22.50 and 34% from a 52-week high of $38.69, reached in January.

Although baseball teams do not open their books, one management report claimed 23 of 30 major league teams lost money last year. On that score, Disney’s disillusionment with the financial side of the sport is par for the course, a high-ranking baseball source said.

“I know there’s a lot of unhappiness in a lot of places, because they’re losing money,” the source said. “Disney is no different.”

Baseball rules prohibit sellers from sharing financial information with potential buyers without the approval of the commissioner’s office. No such approval has been sought, the source said.

“I think they’re still in the internal discussion stage,” the source said.

According to some senior Disney executives interviewed Tuesday, Eisner has been asking managers to look at numerous scenarios that would cut costs. While having no direct knowledge of any possible Angel sale, the executives theorized that selling the team is one of several possible scenarios being discussed hypothetically.

In recent e-mails to his staff, Eisner tried to rally his troops by championing Disney’s animation division, which had a big hit with “Tarzan.” Eisner said the next four animated features--”Toy Story 2,” “Fantasia 2000,” “Dinosaur,” and “Kingdom of the Sun” also are “extraordinary.”

Eisner also cited “literally hundreds of other initiatives in the works throughout our company, ranging from international theme parks to new cable channels to redesigned Disney stores to a new ABC prime-time schedule to the invention of digital cinema to a dynamic reorganization of our wide-ranging Internet assets.”

News of late has been mainly of “such things as lawsuits, a drifting stock price and new competition,” Eisner acknowledged, adding, “overall corporate growth has stalled, which is simply not acceptable.”

He continued: “Profits, especially growing profits, keep our shareholders happy, the media complimentary, and our employees smiling backstage (we always smile onstage no matter what). But, even when the bottom line is not totally exciting, our products must be. Eventually, this will result in forward financial momentum.”

Some Disney watchers have suggested the company, a giant with more than $20 billion in annual sales, could benefit by selling secondary businesses such as its professional sports teams, publishing properties, ABC radio, the struggling Disney stores, and perhaps even its newly started cruise line. Such deals could be put together in such a way that Disney could keep an interest in its sports franchises for marketing purposes, while not actually owning the teams.

It’s a long established tactic for the company, which manages and receives licensing fees for its most successful theme park, Tokyo Disneyland, while having no ownership of the park.

Analysts also point out that pro sports may be too distracting and unprofitable for the company at a time when its hopes for a regional cable-sports channel have been shattered. And with the company in a cost-cutting mode, the Angels, who baseball sources say have lost more than $40 million the last three seasons, could suddenly be viewed as dispensable by Eisner.

“Teams are content and they represent great brands, but Disney has lost its leverage in regional sports,” a source at rival Fox television said. “It has no regional sports network, and the second-ranked [baseball] team in the region.”

Sources speculate that the Ducks could also be viewed as disposable, except that they are probably a better investment for Disney because of the favorable contract the team has with the Arrowhead Pond. “The Ducks are more viable than other teams because they have the best arena deal in the league,” one sports source said.

Disney retains the vast majority of Pond revenues from advertising, sponsorships and naming rights. If an NBA team moved into the Pond, Disney would share in revenues from luxury suites, club seats and advertising for NBA games, even if Disney did not own the team.

Still, the Ducks also lost an estimated $6-9 million last season.

Tim Ryan, the general manager of the Pond, and Greg Smith, who oversees the Pond and Edison Field for the city of Anaheim, each said he had no indication of a potential sale. Anaheim City Manager James Ruth, who negotiated the arena and stadium deals with Disney, said through a spokesman he also was unaware of any sale.

“If that’s the case, I’m shocked,” Smith said. “There’s been absolutely no clue given to me or anybody else in the city that I’m aware of.”

One Disney insider also suggested another reason why the company might be ready to get out of sports team ownership. Under this scenario, Disney initially bought into the Angels and Mighty Ducks to ensure its Anaheim operations wouldn’t be tarnished by the proximity of an aging, too-big baseball stadium and a municipal arena without a big tenant.

A deteriorating stadium district would have been particularly bad for Disney as it moved ahead with its $1.4-billion plans to open a second Anaheim theme park, along with a huge entertainment mall and luxury hotel, in 2001, said the insider. But now that the baseball park is modernized and the Mighty Ducks have become a viable hockey team, there is far less motivation for Disney to hang onto them, he said.

Times staff writers James Bates and Bill Shaikin contributed to this story.

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EXTRA-INNING LOSS

Manny Ramirez’s sacrifice fly in the 10th lifted Cleveland past the Angels, 2-1. Page 6