All rights reserved. Disney stock did hit its highest levels in almost three years last month, and briefly spiked to a new three-year high after fiscal Q4 earnings on the 8th. I had argued heading into earnings that DIS mch had a chance to take a tumble. And the business continues to head in the wrong direction, as detailed in the Disney K. But with little sign of those troubles coming to an end, I still believe the network is a big reason why returns in Disney stock will be equally modest going forward. That drop continues a steady erosion: the network has lost 13 million subscribers in the past five years, according to filings. Those fees mhch annually under contracts negotiated in the past.
Disney’s biggest sales and profit driver might not be what you would expect.
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The small screen is bigger
)}Reviewing how the House of Mouse is making its money should help put the big challenges and opportunities shaping the company’s stock performance in perspective. With franchises like the Marvel Cinematic Universe and Star Wars drumming up excitement at movie theaters and being featured on everything from pajamas to cereal boxes, a person could easily get the impression that movies are Disney’s main moneymaker. Let’s start with an overview of the company’s sales profile. The table below outlines Disney’s revenue contributions by segment in its most recently reported quarter:. Data source: The Walt Disney Company. Segment results for quarter ending March 31, For a broader look, the chart below shows Disney’s revenue and operating income contributions by segment over the trailingmonth period:. Disney’s media networks segment consists of public broadcast and cable businesses, with ABC representing the core of the broadcast unit and ESPN as the biggest performance driver on the cable. For each of the That rate is far above what other channels are able to command — a distinction that stems from ESPN’s strong ratings and importance to the standard cable package. This advantage has been a key factor in Disney’s fantastic performance over the last two decades, but reliance on the marquee sports channel and broader media networks segment represents a fault line for the company as the entire television industry faces challenges. Cable companies have traditionally bundled a large selection of channels together, but the rise of digital distribution is making it easier for viewers to get their desired content without buying a full-service package. Right now, there are households that pay for ESPN and other Disney networks even though they do not watch them, and consumers are understandably migrating to service packages that better fit their needs. That’s putting pressure on Disney’s core cable networks and has been a big factor in ESPN losing roughly Disney has been able to hike its carrier fees and advertising rates, but rising content costs continue to tamp down profitability in TV land.⓬
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The small screen is bigger
The Walt Disney Company DIS is one of the largest media and entertainment companies in the world, operating a vast international industry of television networks, film studios, and theme parks. On November 19, Disney reported that it had received unconditional approval from Chinese regulators for its acquisition of 21st Century Fox. Fusion is another of Disney’s joint ventures, equally held with Univision Communications. The multi-platform media company is targeted at Hispanic Americans. ESPN is a sports media and entertainment company with eight cable networks in the U. Walt Disney Parks and Resorts U. These operations include numerous company-owned hotels, retail and entertainment complexes, conference centers, and indoor and outdoor recreation facilities. Euro Disney S. Marvel Entertainment is a media and entertainment company with operations in publishing, television, and film. Top Stocks. Business Leaders.
Streaming services draw cash
Reviewing how the House of Mouse is making its money should help put the big challenges and opportunities shaping the company’s stock performance in perspective.
With franchises like the Marvel Cinematic Universe and Star Wars drumming up excitement at ,oney theaters and being featured on everything from pajamas to cereal boxes, a person could easily get the impression that movies are Disney’s main moneymaker. Let’s start with an overview of the company’s sales profile. The table djsney outlines Disney’s esppn contributions by segment in its most recently reported quarter:.
Data source: The Walt Disney Company. Segment results for quarter ending March 31, For a broader look, the chart below shows Disney’s revenue and operating income contributions by segment over the trailingmonth period:.
Disney’s media networks segment consists of public broadcast and cable businesses, with ABC representing the core of the broadcast unit and ESPN as the biggest performance driver on the cable. For each of the That rate is far above what other channels are able to command — a distinction that stems from ESPN’s strong ratings and importance to the standard cable package. This advantage has been a key factor in Disney’s fantastic performance over the last two decades, but reliance on the marquee sports channel and broader media networks segment represents a fault line for the company as the entire television industry faces challenges.
Cable companies have traditionally bundled a large selection of channels together, but the rise of digital distribution is making it easier muchh viewers to get their desired content without buying a full-service package. Right now, there are households that pay for ESPN and other Disney networks even though they do not watch them, and consumers are understandably migrating to service packages that better fit their needs. That’s putting pressure on Disney’s core cable networks and has been a big factor in ESPN losing roughly Disney has been able to hike its carrier fees and advertising rates, but rising content costs continue to tamp down profitability in TV land.
The table below shows year-over-year change for sales and operating income of Disney’s business segments across the last two quarters. Results for the six-month period ending March 31, That’s not necessarily a death sentence for Disney stock. While cord-cutting and the high cost of securing sports content have put pressure on the television business, other parts of Disney have picked up the slack — especially the company’s theme parks segment. Promising results from international expansion moneey have helped push theme parks forward and pricing increases at domestic locations are aiding in big sales and profit gains.
The company’s movie business accounts for a smaller share of sales, but it’s posting strong performance as well and plays a much bigger role than the raw numbers might imply. Successful movie properties become long-term draws at the company’s theme parks, inspiration for toys, clothing lines, and other merchandise, and they also add to the library of content that can be used for the company’s television networks and its upcoming streaming platforms.
In response to changing viewer habits, Disney is moving away from featuring its content on Netflix and other third-party platforms by launching its own streaming servicesincluding one that will leverage its extensive library of well-loved franchises and family-friendly content. Turning to consumer products: This division contributes the lowest share of overall sales and operating income, but it also produces better margins than any of Disney’s other businesses.
Most of the segment’s sales come from licensing the rights to make products featuring its characters to companies like Hasbro and Electronic Artsand this highly profitable business likely still has substantial room for growth. The media networks segment will continue to be the House of Mouse’s biggest sales and earnings generator in the near future. That means that investors should pay close attention to shifts in the cable industry and Disney’s efforts to meet these rising challenges, but it’s worth keeping in mind mmoney the company appears to be strengthening other areas of its business.
Jun 1, at AM. Author Bio Keith Noonan covers technology, entertainment, and other fields. Image source: Getty Images. Chart by author. Stock Advisor launched in February of Join Stock Advisor. Maek Articles.
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What are Disney’s cable channels worth?
)}Walt Disney Co. However, streaming remains a money-losing business for Disney, which is experimenting with a number of ways to take on Netflix and the rest of the cord-cutting universe. Hulu, the streaming entertainment service in which Disney owns a stake, is a big part of that business. Iger said «the goal is obviously to operate Hulu profitably,» but the company isn’t saying how long that will. In buying all three, the company «would give them an opportunity potentially at a discount or two for that matter,» he said. Sign up for free newsletters and get more CNBC delivered to your inbox. Get this delivered to your inbox, and more info about our products and services. All Rights Reserved. Data also provided by. Skip Navigation. Markets Pre-Markets U. Key Points. VIDEO Related Tags. Trending Now.⓬
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