‘Worldwide leader’ turns Disney downer
Disney served shareholders a big turkey going into Thanksgiving with the disclosure that its biggest growth driver, ESPN, shed 3 million subscribers in its most recent fiscal year.
That news — buried in a late Wednesday regulatory filing — did not escape the notice of investors, who sent Disney’s stock down 3 percent, to $115.13, during Friday’s shortened trading session.
Fresh evidence that increasing numbers of cable subscribers are cordcutting also dragged down other media stocks, including Viacom (off 2.2 percent) and Time Warner (down 0.8 percent).
ESPN’s subscriber loss in fiscal 2015 brought the twoyear total to 7 million, leaving the sports network with 92 million subscribers — and investors with doubts about Disney’s ability to reverse the trend.
Wells Fargo analyst Marci Ryvicker estimated Friday that ESPN’s declining subs shaved Disney’s fiscal 2015 revenue by $700 million and pretax earnings, or Ebitda, by $200 million.
ESPN, the selfdescribed “Worldwide Leader in Sports,” not only dominates Disney’s cablenetworks division, but accounts for 46 percent of the company’s operating profit and 32 percent of revenue.
But its high sportsrights costs make it especially vulnerable to subscription downturns. ESPN is payTV’s most expensive network by far, with monthly fees of about $6.10 per subscriber. That is paid by cable and satellite companies, which in turn pass the cost along to consumers.
Disney Chief Executive Bob Iger sparked a broad media selloff in August, when he said during an earnings call that ESPN had suffered “some modest sub losses.”