Saturday, November 28, 2015
Disney Falls on ESPN Decline, Dragging Down Media Stocks
Subscriptions to the ESPN sports network, Disney’s most profitable channel, fell 3.2 percent to 92 million at end of October, according to a filing Wednesday after the market closed. ESPN’s subscriber totals had hovered around 100 million for years.
According to Bloomberg News, the report put a number on the extent of ESPN’s declines, after Disney chief executive Bob Iger told investors in August that the channel had experienced “some modest” subscriber losses. Those comments, and Disney’s darkened outlook about its cable TV businesses, sparked a sell-off in media stocks at the time. They highlighted the impact of cord cutting — Americans who drop traditional pay-TV packages for cheaper online alternatives such as Netflix and Hulu — on the entire television industry.
The “filing simply confirmed media investors’ fears that the big cable bundle, which has been good to all in the media ecosystem, may be under threat,” said Paul Sweeney, an analyst with Bloomberg Intelligence.
The decline equates to hundreds of millions of dollars in lost revenue and helps explain why ESPN has made cost-cutting personnel moves over the past year, letting go high-priced talent such as Colin Cowherd, Keith Olbermann and Bill Simmons. The network also is hamstrung by signing a nine-year, $24 billion deal to carry the NBA.
Friday’s declines show investors’ nervousness about the media industry since the August meltdown, which erased $60 billion in market capitalization in two days. While Disney reassured investors this month by posting earnings that beat analysts’ estimates, media stocks tanked on Nov. 4 after Time Warner lowered its 2016 earnings outlook.
Posted 8:38:00 AM