After Disney just posted their biggest profit ever, much of it thanks to their new “Star Wars” movie, you would think that Exec’s would be on top of the world. So why is has Disney stock dropped 4% in after hours trading? Imagine, if you will, these initals: ESPN.
This mega-entertainment company posted their numbers on Tuesday and they are impressive; $1.63 per share for the quarter that ended January 2, 2016. This is an incredible $2.9 billion and far above industry analysts expectations of $1.45 per share. Much of this, of course, is due to their movie The Force Awakens, which has grossed $2 billion around the world, not to mention revenue from merchandising and licensing. In fact this Burbank, California, based company made $1 billion in profit last year just in their movie division.
So what is dragging down Disney stock? It’s Disney’s television division, of which ESPN is king. Although Wall Street is aware that Disney earns about $6 for every cable subscriber, the channel is very expensive to maintain. It’s the cost of ESPN that has investors jumpy and has caused a 6% drop in profit at Disney’s television division, the only division in this mega-corporation to lose money this quarter.
It’s programming costs that make this channel so expensive. When you consider that NFL games cost $1.9 billion each year, NBA games run $1 billion, and college football a cool $470 million, it’s easy to see how those numbers add up. Add to these costs the fact that ESPN lost 3 million subscribers last year alone and this mega-channel doesn’t look quite as rosy. Fewer subscribers means less revenue to pay for the games people want to see.
To get ESPN’s financial house back in order, Disney plans to get into less heavily bundled channel setups which many cable companies are now implementing. When cable customers want to cut costs, sports is often one of the first things that get sliced out of the family budget. The company is also considering offering their channel through internet based-TV channel companies such as Sling-TV and Apple TV.
Almost all cable companies, including Time Warner and Viacom, have been hammered lately as subscribers cut the cord and turn to other entertainment options such as Hulu and Netflix. Although Disney is one of the most diverse corporations in the world, with toys, movies, theme parks, merchandising, clothing, and television channels, Mickey is still viewed as a whole, not individual sectors. In this case, as ESPN goes, so goes Donald, Pluto, and the whole gang. Not even The Force can contend with Wall Street investors when they get the jitters.
Source: Time
xAfter Disney just posted their biggest profit ever, much of it thanks to their new “Star Wars” movie, you would think that Exec’s would be on top of the world. So why is has Disney stock dropped 4% in after hours trading? Imagine, if you will, these initals: ESPN.
This mega-entertainment company posted their numbers on Tuesday and they are impressive; $1.63 per share for the quarter that ended January 2, 2016. This is an incredible $2.9 billion and far above industry analysts expectations of $1.45 per share. Much of this, of course, is due to their movie The Force Awakens, which has grossed $2 billion around the world, not to mention revenue from merchandising and licensing. In fact this Burbank, California, based company made $1 billion in profit last year just in their movie division.
So what is dragging down Disney stock? It’s Disney’s television division, of which ESPN is king. Although Wall Street is aware that Disney earns about $6 for every cable subscriber, the channel is very expensive to maintain. It’s the cost of ESPN that has investors jumpy and has caused a 6% drop in profit at Disney’s television division, the only division in this mega-corporation to lose money this quarter.
History
It’s programming costs that make this channel so expensive. When you consider that NFL games cost $1.9 billion each year, NBA games run $1 billion, and college football a cool $470 million, it’s easy to see how those numbers add up. Add to these costs the fact that ESPN lost 3 million subscribers last year alone and this mega-channel doesn’t look quite as rosy. Fewer subscribers means less revenue to pay for the games people want to see.
To get ESPN’s financial house back in order, Disney plans to get into less heavily bundled channel setups which many cable companies are now implementing. When cable customers want to cut costs, sports is often one of the first things that get sliced out of the family budget. The company is also considering offering their channel through internet based-TV channel companies such as Sling-TV and Apple TV.
Almost all cable companies, including Time Warner and Viacom, have been hammered lately as subscribers cut the cord and turn to other entertainment options such as Hulu and Netflix. Although Disney is one of the most diverse corporations in the world, with toys, movies, theme parks, merchandising, clothing, and television channels, Mickey is still viewed as a whole, not individual sectors. In this case, as ESPN goes, so goes Donald, Pluto, and the whole gang. Not even The Force can contend with Wall Street investors when they get the jitters.
Source: Time
