New York CNN  — 

Disney, like most media companies, had a rough year. But one Wall Street analyst has an idea for how Disney could get back on track.

Wells Fargo’s Steven Cahall thinks Disney should spin off cable sports giant ESPN and traditional TV network ABC… two slow-growth (and some would argue, dying) businesses.

Disney could then focus more on its namesake studio and theme parks, Marvel, Pixar and Star Wars producer Lucasfilm as well as the TV and movie franchises of Fox that it bought in 2019.

“Spinning ESPN/ABC is the best path forward and we see it as a reasonably probable late-’23 event,” Cahall wrote, adding that splitting off ESPN and ABC from Disney would mean that the remainder of the company would be “an attractive pure play [intellectual property] company.”

It’s not a new idea: Daniel Loeb, who runs the activist hedge fund Third Point, said in August that he wanted Disney to spin off ESPN. But it’s clear that Disney may need to do something to appease jittery investors.

The House of Mouse is losing money on Disney+ and Hulu as competition mounts and inflation-weary consumers grow increasingly tired of paying more money for streaming services.

Shares of Disney (DIS) have plunged nearly 45% this year, making it the third worst performer in the Dow in 2022. Only Salesforce (CRM) and Intel (INTC) have posted bigger drops.

The stunning slide for Disney is one reason why CEO Bob Chapek was forced out in November and replaced by former CEO Bob Iger. There has been a lot of speculation about what Iger will do to return the media giant to its former glory.

Cahall wrote in his report that “we think Bob Iger is returning to {Disney] ready to make big changes. In the near term we think the CEO and his key reports are focused on content and cost rationalization. However, over the longer-term we expect a deeper think on portfolio reshaping.”

Disney better off without sports?

ESPN, in theory, may have an easier time negotiating with sports leagues as part of a pure play media network. It also may make it easier for the company to try and get into the lucrative world of gambling, which may not be as easy a sell for a more family-friendly Disney.

Cahall also said that spinning off ABC along with ESPN makes sense because the two of them combined are an even bigger powerhouse in sports media.

“We think ESPN and ABC are integrally linked as the broadcast [network] improves negotiations in sports rights, and we’re seeing more of those sports on both networks,” he wrote.

Disney had no comment when asked by CNN about Cahall’s report.

But ESPN recently touted its 2022 performance in a press release this week, saying that “ESPN continued to build a strategic path forward, while connecting with audiences in innovative ways.” ESPN added that “throughout the year, ESPN successfully reached sports fans in record numbers.”

Not the first time

In a letter to then-CEO Chapek in August, Loeb wrote, “a strong case can be made that the ESPN business should be spun off to shareholders with an appropriate debt load” to reduce Disney’s overall debt. Loeb didn’t discuss ABC in his letter.

But Loeb noted that ESPN would be better off free from Disney because “ESPN would have greater flexibility to pursue business initiatives that may be more difficult as part of Disney, such as sports betting,” and added that “customers of ESPN and sports leagues would be better served by a focused management team.”

Loeb quickly changed his mind though. Just one month after his letter to Chapek, Loeb wrote in a tweet that “we have a better understanding of ESPN’s potential as a standalone business and another vertical for [Disney] to reach a global audience to generate ad and subscriber revenues.”