We’ve chronicled here how ESPN’s subscriber base has fallen. And now with reduced ad revenues it’s beginning to show on its parent company’s Disney’s bottom line. The company reported its 2015 third quarter revenues and according to Bloomberg, it fell short of analyst estimates.
That has caused Disney’s stock to fall in early-day trading on Wednesday and raising concerns about ESPN. As of July, ESPN was available in 92.9 million homes, down from its peak of almost 100 million five years ago. That and along with performances at its foreign theme parks have caused a drain on Disney’s revenues.
Because ESPN’s ad revenues and subscribers are going down and doesn’t appear to be reversing the tide anytime soon, analysts are now nervous about its performance here on out.
A Bloomberg analyst reflects the word on the street:
“Investors have become increasingly concerned about what kind of growth, if any, they can count on for ESPN going forward,” said Paul Sweeney, a Bloomberg Intelligence analyst. “This guidance cut will not allay any of those fears.”
Some analysts have called for ESPN to go direct to consumers like CBS, HBO and Showtime, but Disney CEO Robert Iger said that won’t happen for at least five years. Another Wall Street analyst tells the Associated Press online services like Netflix are now eating into traditional television audiences:
“Until now, we’ve seen all the growth at Netflix, Amazon and others has not really cannibalized more traditional ways to view content,” said Robin Diedrich, an analyst with Edward Jones. “But I think the worry is that’s starting to turn a bit.”
But during an investor conference call, Iger poo-pooed the reports of cord cutting:
Iger came out swinging in defense of ESPN, adding that Disney is confident in its performance and that while it has had some subscriber losses, 80% of them are due to an overall decline in the number of multichannel households across the country. He added that actual subscriber losses were lower than what has been released in some reports.
And he stressed there’s no rush to go over the top as the best way to distribute ESPN is through television:
“When we look at the universe we don’t really see dramatic declines over the next five years or so and therefore we are not taking what I would call radical steps to move our products into over-the-top businesses,” Iger said. “We don’t think right now that is necessarily the greatest opportunity. We just don’t think it’s necessary.”
So as ESPN ventures into the second half of this decade, it will be wading into some murky waters, but as Disney’s CEO is spinning ESPN’s performance, we’ll see what it means for future bidding of sports properties.
The network is set for now as the ACC, Australian Open, MLB, NBA, NFL, SEC, U.S. Open and Wimbledon are locked into well into the next decade, but how this will affect the thinking in obtaining other properties such as the Big Ten and the English Premier League will be interesting to watch.
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