“When Disney’s ESPN sneezes, the rest of the media industry gets a cold,” reports Claire Atkinson in the New York Post, as media stocks took a fall on Wednesday, Aug. 5, 2015.
Wrote Meg James in the Los Angeles Times, “Disney’s shares plunged $11.16, to $110.53 a share, on Wednesday [down 9.2 %], which led a larger sell-off of media stocks, including Time Warner Inc., Viacom Inc., Discovery Communications, Charter Communications and CBS Corp.
“Investors appeared spooked after top Disney executives warned that the company’s cable networks group, anchored by the sports juggernaut ESPN, probably would not achieve earlier profit estimates for next year.”
Wrote Atkinson, “Discovery Communications fell 12 percent, while Time Warner dropped 8.5 percent, Viacom was off 7.5 percent, 21st Century Fox was down 6.7 percent and CBS fell 4.5 percent.”
Furthermore, she noted, “The Disney contagion took the legs out from under the S&P 500 media index. On Wednesday, the index fell 6.3 percent — its worst single-day decline since a 7.1 percent drop on Aug. 8, 2011 …
“Indeed, Disney’s 9.2 percent fall put the entire Dow Jones industrial average into the red for the day, off 10.22 points. Excluding Disney, the index would have risen 61 points.”
One of the reasons for investor unease may have been, as BloombergBusiness noted, that Disney, through Tuesday, “had been the top-performing stock in the Dow Jones Industrial Average this year with a record of stellar sales and profit…”
BloombergBusiness also said that Disney’s reduced forecast had “underscored the number one concern for media investors: the unraveling of the traditional pay-TV package, according to Paul Sweeney, an analyst at Bloomberg Intelligence. Fewer Americans are paying for bundles of hundreds of channels, which has underpinned the TV industry’s business model for decades, opting instead for online video services like Netflix Inc. or smaller packages.”
Wrote Atkinson at the Post, “The issues spooking investors, according to S&P media analyst Tuna Amobi, included:
- Advertising weakness
- Cord-cutting
- Distributors’ desire to create skinny cable bundles, which shrink the number of channels customers have to take
- Growth of subscription-video-on-demand platforms such as Netflix, Hulu and Amazon
- Growth of ad-supported video platforms such as Google’s YouTube”
In other words, Cable’s greed is now starting to bite everyone’s posterior.
It isn’t just cable. The networks have added boring network after network to their packages forcing cable companies to buy them all in order to get the channels that people want. The greed falls into a lot of places and customers pay the price. But the end is coming faster than expected. We will see if Disney shareholders will let them hold ESPN out of full time streaming for five years like they are saying.