Walt Disney Co. reports record net income in its Q3 2015 earnings report

Mouse TrapAug 08, 2015

Not to mention ESPN has a lot of major college football games and the college football playoffs locked up until 2025. That alone will make ESPN very sought after for streaming packages.

jt04Aug 08, 2015

I guess nobody realizes that a lot of the ESPN channels are on Slingtv. Disney put their toe in the water months ago. And who knows how long they have been planning. MLBtv has been streaming for years. That is where the industry is heading long term. In the meantime expect a lot of growing pains and upheaval. IMO. Good time to invest in theme parks to capture those leisure dollars. And gaming. IMO.

Frankie The BeerAug 08, 2015

You want my honest opinion? Unless Disney starts putting money into developing a way to provide its own content, ESPN is going to start losing subs. While that might seem far fetched, Disney was smart to lock up long term deals with cable providers like Comcast, but those won't last forever. In that time, more people will cut the cord, and it will effect Disney's bottom line. The street pundits were shocked at how ESPN is already starting to feel the slice of the cord cutters already, most were caught with their pants down and some dumped stock. I have to believe, or hope to believe Disney is being proactive in this because it will have to be dealt with under Iger's watch, the death of cable is moving far to fast and fluid. The easiest solution is to invest in the parks since the parks are a cash cow at the moment. Star Wars is going to bring in huge merchandising revenue, couple that with the film and it will go toe to toe with ESPN's profits at first. It won't sustain but it don't have to. It will carry Disney's 2016 first quarter to record highs, and record high stock prices.

Mouse TrapAug 08, 2015

You underestimate the power of the force. No, but really I don't think an extra few billion should be considered "chump change". It isn't too wild to say Star Wars alone will provide an extra 10 billion in revenue over the next 5-6 years. Star Wars will have a huge trickle effect on revs for the next few years. Movies, merchandise, theme parks...it'll all go hand in hand and make lots of money. Compared to ESPN though? Yeah it pales in comparison, but will help offset the losses. Hopefully mid-way through the Star Wars slate we will see ESPN in some sort of bundle or independent streaming. Oh and by the way, rumored Apple presentation in September? New Iphone and TV package we've been discussing?

ford91exploderAug 07, 2015

Yes, If the picture does say 2B the most DIS will see after distribution is $500-$700 million which is indeed chump change compared to the cable networks or P&R.

BairstowAug 07, 2015

Won't all the revenue from the new Star Wars and its associated merchandise still be chump change compared to how ESPN will be performing at the time?

Frankie The BeerAug 07, 2015

DIS lost 11% of its value and already its starting to creep back up. Pity to those who foolishly dumped their shares before the new Star Wars film releases. As for ESPN, it will still remain profitable as long as Disney has the NFL. When the NFL gets smart and decides to program their own content including games, then all major sport providers are in trouble. People are cutting the cable cord, that's the real issue, and ESPN's sub losses are reflected in people, finally, getting smart. Its not coincidence a week before earnings Iger was talking about ESPN and other Disney owned channels being offered direct, the problem is Disney from what I can gather don't have a solution in place yet to do it themselves. I read constant speculation about Disney and Apple teaming up for some kind of all in one cable solution but until I see massive infrastructure developments, its just rumors. DIS is still a bull. For now.

rael ramoneAug 07, 2015

I go back to Jim Stewart from NYT's comments on CNBC. The current model is not long for this earth. There is only so much desirable live content. More companies want a share of distributing it (including the content providers themselves). If the shift results in more $$$ in the pockets of the consumer, then that is coming from somewhere. Whoever has the most leverage gets to keep the most of what they have now. While this might be nuclear for MLB (the VAST majority of spending $$$ comes from local cable deals), I strongly suspect football will not only dig its heals in, but might want another significant raise. MNF may become a loss leader for the Mouse. And right now if you live in a major metro area and have rabbit ears, you get 2-3 NFL sunday games (including the sunday night game - the only one that has a flex option later in the season to improve the matchup), plus several college games (including the SEC game of the week on CBS) gratis. Trying to push these games behind a pay wall may not sit well with lawmakers (since many are playing in taxpayer funded stadiums). Bundles in of themselves may not go away - unless Congress enacts a la carte which they have threatened to do. Once that happens nobody who doesn't watch ESPN will pay for it - and if the result raises the prices for the rest many may decide to watch at the local watering hole instead - esp. if they force a year subscription and you only care about football.

Mouse TrapAug 07, 2015

I agree with most of what you said with a few points. Disney is and will remain a great growth stock for at least the next 2-3 years in my opinion. A record quarter almost entirely across the board is something we take too lightly. Secondly, and more importantly is that Disney has EVERYTHING to gain from the shift to digital from cable. Content creators will become extra wealthy during this transition because of the three things everyone wants from this shift... 1. Better pricing 2. Better content 3. They want it immediately ESPN rolled into a streaming package (Apple pls) would mean snip snip snip for a few million cable subscribers. Everyone in the industry knows how precious of a commodity ESPN is. A full Disney package...ESPN...ABC Family...Disney Channel....in a streaming package would be huge. That alone covers almost every family dynamic. Disney has lots to gain from this transition and if they can package their content right and find a good suitor (APPLE!!!11!!111!) there will be tons of money to be made.

rael ramoneAug 07, 2015

Yes, the precious buybacks. Either they will be buying in full force once the SEC regulations allow, or they are waiting for a better price themselves if they believe the bottom isn't in yet :eek:. The new stuff in the swamps will still happen, but cuts will happen (either there or elsewhere). As far as growth is concerned we can't forget about China. Not only about the possible slowdown there, but the Shanghai opening fiasco shows that the CCP is fully intent on putting a 'governor' on the Mouses IP growth in the Mainland.

rael ramoneAug 07, 2015

Which part? The 'priced to perfection' part? (I heard Cramer say that). Or the ESPN Correction/ESPN Bear part? (that's all me, whoever said that must be following me here :). Does this mean 'Mouse Arrest Band', "Cockerell Fries', and 'Igerville' will become part of the CNBC vocabulary :D? Anyway the most important thing about $DIS is - It isn't a value stock (certainly not w/ a 23 P/E). And definitely not a income stock (not with a measly 1.09% yield). It's a growth stock. Growth stocks are expected to grow. Growth stocks w/ large PE/s are expected to grow big. If you want value, you sniff around the oil patch to see who will survive low oil. If you want income/safety you pick up AT&T/Verizon or some big utility. The Mouse is NOT a Consumer Staple company. People need Colgates toothpaste, Proctor & Gambles shampoo, Kimberly Clarks toilet paper (and for those who are addicted - Altrias cancer sticks). They don't need 3D movies, expensive vacations/cruises, and it sounds more & more they don't need the Mouses cable content at the price the Mouse wants for it. It's a Consumer Discretionary company - a category by definition offering a potential larger return then a Staple but also having a higher risk profile. Not only do people not need what you sell when things are good, they'll use it even less if a recession hits. (An article I'm reading on Seeking Alpha right now the author says the next recession will accelerate cord cutting). . http://seekingalpha.com/article/3413796-cord-cutting-eating-into-disneys-operating-income?auth_param=pe5d:1as9bjc:d5cc9fb4400b68490a3c85bea01f7765 On CNBC right now (10:21 AM): The cable industry is a business based on getting you to buy something you. do. not. want. (Just said by NY Times's Jim Stewart on CNBC). Everyone who isn't watching ESPN is subsidizing those who do (again JS). The minute they sell the 'cost cutting' story, they aren't growth stocks anymore. (this guys on fire) (In fairness he said that everyone will have to take a haircut - both the media as well as the sports themselves).. ps - the ESPN/Duffy Bear joke is awesome :D:D:D:D:D:D:D

ford91exploderAug 07, 2015

What you describe is exactly what Iger's team has done all along cut and increase prices in the P&R business, If SW does NOT break 2B in December watch out as the cuts fly. Prime example instead of moving ESPN to an on demand internet platform NOW! Iger's team decided to make huge budget cuts and fire ESPN on-camera talent (ie one of the prime reasons other than live games people watch ESPN) which of course will exacerbate the loss of subscribers problem. Now we all know Disney has not seen stellar success in the internet space however the talent to succeed in the internet space IS out there IF Disney had the wisdom to hire some of them and actually LISTEN to them. Iger's team is not good at creative solutions they look to financial engineering to solve their issues, To prop up the share price they have a share buyback program which absorbs much of DIS free cash flow, Instead of creating new products and experiences DIS resorts to quality cuts. I've been expecting a train wreck and it looks like the conditions are finally coming into alignment for that train wreck to occur, Two kinds of companies are susceptible to train wrecks 1 - Companies whose products/services are 'ahead of their time' they enter with a big splash and then crash and burn 2 - Companies who rely on financial engineering these are generally mature companies who lost the desire to compete in the marketplace and pour all their creativity into the finance side of the business while cutting back quality of products and services. The train wreck for these companies usually occurs as part of changes in the regulatory environment and/or changes in foreign markets.

ford91exploderAug 06, 2015

And people said that I was crazy for having this view just a few weeks ago and that DIS and ESPN would go up forever...

ford91exploderAug 06, 2015

Lots more share price losses on DIS to come, The share price has been based on buybacks and the invincibility of ESPN now with studies coming out that less than half of households would PAY for ESPN and that neatly coincides with about 1/3 of the people I know are rabid sports fans. Yes ESPN has college games but once again only the rabid fans in the family actually watch. We actually had an interesting dynamic on our family christmas trip GV at BLT, DBIL wanted to have ESPN on in the living room the rest of us basically said we have no INTEREST in sports and there are 5 other TV's in this suite take the sports ELSEWHERE. This is the dynamic which DIS is fighting soon they will not be able to strong arm carriers into the Disney package ie ESPN, A&E networks and Disney Channels for each sub, I suspect most of us want the A&E packages but ESPN and Disney channels well Sports Nuts and Families with small children.