Hidden behind the thin veneer of the Happiest Place on Earth lies one of the best-run business empires in the United States. Although The Walt Disney Company (NYSE:DIS) started with film operations, eventually becoming Disney Studios, and is best known by its signature theme parks, investors know Disney's true strength over the past three decades has been inside the boardroom.
More recently, however, other major media companies have taken note of Disney's smart acquisition strategy, especially as it relates to viral, mobile-friendly digital publishers in a bid to grow ad revenue. Comcast's (NASDAQ:CMCSA) NBCUniversal has invested in both Vox Media and Buzzfeed, AOL purchased The Huffington Post, and Disney itself owns FiveThirtyEight.
So it came as quite a surprise to many, including me, when Disney's ESPN announced it was immediately shuttering its Grantland website.
Couldn't the site be sold? How about a different monetization model?
Ending the site was perhaps the oddest choice to make from a financial perspective, as it's the option that ends in the lowest exit value: Notwithstanding possible tax benefits, and perhaps curbing future operational losses, Disney receives zero for the company. Recently, in contrast, Business Insider sold itself to Alex Springer at a valuation of $442 million and announced that the site has 76 million unique visitors.
And while it should be noted that Grantland wasn't even close to that visitor figure -- Web analytics company Compete reports it had 3.7 million unique visitors in September -- it had a very committed reader base thanks to its quirky blend of long-form sports articles and pop culture. It was this unique perspective that should have led to lucrative marketing opportunities, or even a hybrid-based subscription model, such as what its parent ESPN offers with Insider access.
Long story short, it's hard to think there was no demand within the industry for a well-written long-form site with an established voice and brand.
A problem with selling Grantland
In terms of selling, though, there was a risk in parting ways with the company. Right now, ESPN.com is now refocusing its efforts on the digital realm, redesigning its site for the first time since 2009 earlier this year, under pressure from newer, viral sites such as Bleacher Report and Deadspin. ESPN recently trumpeted its September unique visitor figure of 94.4 million, and it would be embarrassing, to say the least, to sell a digital property if you're worried the new owners could grow that website to hurt your traffic growth.
To use a sporting analogy, that would be the equivalent of having Nancy Kerrigan sell Tonya Harding the police club that eventually kneecapped her. Or having a Jets quarterback run into the hind quarters of his own lineman and then fumbling the ball into the hands of a defender who eventually scores a touchdown. Or letting the band on the field too early in the ending moments of a game, preventing your defense from making the last play. You get the point.
Long story short, it's possible ESPN thought selling the property could be more risk than its current valuation allowed. To me, however, that's more of an acknowledgment that it may have been mismanaging the brand and may have wanted to commit more resources to let it reach its full potential.
Can we expect a change in Nate Silver's FiveThirtyEight?
In the end, though, I expect ESPN will try to bring a great deal of Grantland's signature style to Nate Silver's FiveThirtyEight website. For ESPN, Grantland was an awkward holding after it parted ways with its brash founder, Bill Simmons. In a way, the site's brand was haunted by his absence. Luckily for ESPN fans, that doesn't seem to be the case for the "30 for 30" documentary series Simmons created, although I'd be remiss not to mention that the series should be renamed now that there are over 100 films.
As for the website, hitting reset and taking what worked for Grantland over to Silver's site may boost traffic for FiveThirtyEight, which has struggled as compared to data-driven website Vox, which now boasts nearly three times the monthly unique visitors, as the latter has expanded beyond its explainer journalism to include pop features such as movie and television reviews, subjects Grantland folded into its sports-related coverage with ease.
For Disney investors, however, this is not a big deal. Grantland was never a large part of ESPN, which itself is a large part -- but only a part -- of Disney's far-flung empire. However, as a bolt-on acquisition, this is a rare miss for Disney. Oh, well: I guess Disney investors will have to be content with ESPN ... and ABC ... and Pixar, Marvel, Lucasfilm, and Maker Studios.
Jamal Carnette has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.