Is ESPN In Trouble (cord-cutter)

[Tugg Speedman]

I caution you against making long-term proclamations based upon short-term market movements.

If you truly think Disney is doomed, you should be mortgaging your house and selling everything you own to short the stock big-time. Then you'll be rich, rich, rich and you can laugh at the millions of pitiful Disney shareholders.

BTW, I do not own DIS. But I will be a buyer if it drifts under 100 again, and maybe even before that.

ESPN and Disney's other media networks are the company's largest sales and profit contributor, accounting for 44% of revenues and 54% of income.

Stop calling it Disney and start calling it ESPN and things will make a lot more sense.

And Disney is not a short, it is dead money.  ESPN growth is going to suck and drag the entire companies growth prospects down.  You'll get a chance to buy it under $100 many times over the next many years.  I don't bother with investments that will return 0% to -10%.  I look for things that are going up.

[MU82]

ESPN and Disney's other media networks are the company's largest sales and profit contributor, accounting for 44% of revenues and 54% of income.

Stop calling it Disney and start calling it ESPN and things will make a lot more sense.

And Disney is not a short, it is dead money.  ESPN growth is going to suck and drag the entire companies growth prospects down.  You'll get a chance to buy it under $100 many times over the next many years.  I don't bother with investments that will return 0% to -10%.  I look for things that are going up.

OK.

[brandx]

ESPN and Disney's other media networks are the company's largest sales and profit contributor, accounting for 44% of revenues and 54% of income.

Stop calling it Disney and start calling it ESPN and things will make a lot more sense.

And Disney is not a short, it is dead money.  ESPN growth is going to suck and drag the entire companies growth prospects down.  You'll get a chance to buy it under $100 many times over the next many years.  I don't bother with investments that will return 0% to -10%.  I look for things that are going up.

I notice that on this subject, just as with every other subject that is brought up, that you ONLY deal with absolutes. If something is happening today, that means it will always be that way.

That is why you say that a lock for the Dem nomination has no chance - because you read an article that Bernie gained ground one week. Which, to your way of thinking, means he will continue to gain every week until he crushes HRC.

There is only one absolute. Things change! That is something you should have been taught at a very young age.

[jesmu84]

I notice that on this subject, just as with every other subject that is brought up, that you ONLY deal with absolutes. If something is happening today, that means it will always be that way.

That is why you say that a lock for the Dem nomination has no chance - because you read an article that Bernie gained ground one week. Which, to your way of thinking, means he will continue to gain every week until he crushes HRC.

There is only one absolute. Things change! That is something you should have been taught at a very young age.

[MU82]

I notice that on this subject, just as with every other subject that is brought up, that you ONLY deal with absolutes. If something is happening today, that means it will always be that way.

That is why you say that a lock for the Dem nomination has no chance - because you read an article that Bernie gained ground one week. Which, to your way of thinking, means he will continue to gain every week until he crushes HRC.

There is only one absolute. Things change! That is something you should have been taught at a very young age.

Plus, Heisy is fortunate to be an expert on so very many things: Basketball, politics, crime, racial issues, the stock market, whatever. Hence my last response to him: "OK." It's impossible to converse when somebody is highly opinionated and totally unyielding.

[Tugg Speedman]

Gee and I thought I was watering down my opinions to make them sounds more nuanced here.

I gets I should stop kittenfooting around and tell you what I really think.

[ChicosBailBonds]

At least a few of the analysts today properly said they can't go OTT for quite awhile, which is what I've been saying for years.  They would lose their ass.  They are stuck between a rock and a hard place on that.

Iger was on Bloomberg today, and also correctly stated that ESPN is still immensely profitable and will be just fine for many years to come. 

[MU82]

At least a few of the analysts today properly said they can't go OTT for quite awhile, which is what I've been saying for years.  They would lose their ass.  They are stuck between a rock and a hard place on that.

Iger was on Bloomberg today, and also correctly stated that ESPN is still immensely profitable and will be just fine for many years to come.

I thought Iger said all the right things.

[Tugg Speedman]

At least a few of the analysts today properly said they can't go OTT for quite awhile, which is what I've been saying for years.  They would lose their ass.  They are stuck between a rock and a hard place on that.

Iger was on Bloomberg today, and also correctly stated that ESPN is still immensely profitable and will be just fine for many years to come.

The issue is not profitability, it's growth.  DIS stock gets a hefty premium because on the belief that it will continue to produce big growth rates (trailing P/E is 21, 12 month forward P/E is 19).  That is now in question (because of subscriber reductions at ESPN).

That's why I said it was dead money and not a short.  It trades $90 to $100 for years (versus $106 now) because it is profitable with much lower growth.

Meanwhile ESPN dominance in the sector starts to erode.

[Tugg Speedman]

Dougie Kass is a hedge fund manager and short seller.  I posted him above.  Here is his latest musing (just post a little while ago.)

All of this gets me to my analysis of Walt Disney Co. (DIS). I outlined my bearish case for Disney back on Nov. 27, shorting the stock at $116.25 a share at the time.

Well, Disney closed $10 a share below that yesterday. I remain short on the stock, and have even added to this position over the last several weeks.

Lo and behold, well-respected BTIG analyst Richard Greenfield dropped the hammer on Disney last week. He cited a point I previously made -- that the publicity surrounding the new Star Wars movie is distracting investors from the drain of subscribers at ESPN.

Disney CEO Robert Iger slammed Greenfield's report yesterday when he appeared on Bloomberg TV for a lengthy interview. Those with Bloomberg terminals can watch the entire talk, while others can check out these excerpts:

•   Iger attacking BTIG position and ESPN's risk from fixed sports-rights deals. http://bit.ly/bbiger12-21-15
•   The CEO talking about ESPN and cable TV's maturity, and on direct-to-consumer opportunities. http://bit.ly/ESPNMature
•   Other clips from Iger's appearance. http://www.bloomberg.com/search?query=iger&startTime=-1d

As for Greenfield, he defended his ESPN views yesterday on CNBC. His comments contrast with Iger's about ESPN's readiness to go direct to consumer, which the BTIG analyst sees as challenging. http://bit.ly/CNBCDisney12-21-15

Greenfield also expanded on his thoughts in a missive (http://www.btigresearch.com/2015/12/21/watch-iger-vs-greenfield-is-espn-direct-to-consumer-viable/) on BTIG's Web site entitled Iger vs. Greenfield (free registration required). And Andrew Ross Sorkin wrote about Greenfield's views and Disney's challenges in a well-documented New York Times column this morning. http://www.nytimes.com/2015/12/22/business/dealbook/at-disney-a-dark-force-looms-large-unbundling.html?ref=business&_r=0%20-

Of course, shorting Disney or any other stock isn't for everyone. The point of my analysis wasn't just to recommend a DIS short, but to provide reasons why those who are long on the stock might consider paring back or even eliminating their stakes.

[MU82]

Dougie Kass is a hedge fund manager and short seller.  I posted him above.  Here is his latest musing (just post a little while ago.)

All of this gets me to my analysis of Walt Disney Co. (DIS). I outlined my bearish case for Disney back on Nov. 27, shorting the stock at $116.25 a share at the time.

Well, Disney closed $10 a share below that yesterday. I remain short on the stock, and have even added to this position over the last several weeks.

Lo and behold, well-respected BTIG analyst Richard Greenfield dropped the hammer on Disney last week. He cited a point I previously made -- that the publicity surrounding the new Star Wars movie is distracting investors from the drain of subscribers at ESPN.

Disney CEO Robert Iger slammed Greenfield's report yesterday when he appeared on Bloomberg TV for a lengthy interview. Those with Bloomberg terminals can watch the entire talk, while others can check out these excerpts:

•   Iger attacking BTIG position and ESPN's risk from fixed sports-rights deals. http://bit.ly/bbiger12-21-15
•   The CEO talking about ESPN and cable TV's maturity, and on direct-to-consumer opportunities. http://bit.ly/ESPNMature
•   Other clips from Iger's appearance. http://www.bloomberg.com/search?query=iger&startTime=-1d

As for Greenfield, he defended his ESPN views yesterday on CNBC. His comments contrast with Iger's about ESPN's readiness to go direct to consumer, which the BTIG analyst sees as challenging. http://bit.ly/CNBCDisney12-21-15

Greenfield also expanded on his thoughts in a missive (http://www.btigresearch.com/2015/12/21/watch-iger-vs-greenfield-is-espn-direct-to-consumer-viable/) on BTIG's Web site entitled Iger vs. Greenfield (free registration required). And Andrew Ross Sorkin wrote about Greenfield's views and Disney's challenges in a well-documented New York Times column this morning. http://www.nytimes.com/2015/12/22/business/dealbook/at-disney-a-dark-force-looms-large-unbundling.html?ref=business&_r=0%20-

Of course, shorting Disney or any other stock isn't for everyone. The point of my analysis wasn't just to recommend a DIS short, but to provide reasons why those who are long on the stock might consider paring back or even eliminating their stakes.

Thanks for providing this interesting information.

[ChicosBailBonds]

Disney's Iger Says ESPN Paid High Rights Fees To "Perpetuate A Competitive Advantage"

Published December 22, 2015 Font Size 

Iger says he has no second thoughts about long-term rights fees for ESPN
Disney Chair & CEO Bob Iger yesterday said the company, despite recent stock downgrades from analysts, "will continue to derive growth from ESPN," but it will "just not be at the rate we have seen before.” Iger appeared on Bloomberg TV and said of ESPN's long-term rights fees, "We haven’t second-guessed that at all. Our cable fees are going up per subscriber, but as I’ve said, ... we have lost some subscribers." Iger: "We made a decision to license ... the NFL and Major League Baseball, the NBA, and the College Football Championships to name a few, for one main reason. That is to serve the ESPN fan well and really to essentially perpetuate a competitive advantage that ESPN has and to continue to support the strength of its brand and the consumer proposition that it makes." Iger said of the current TV model, "It is a business that is relatively mature, the multichannel television business, so you’re not going to see growth in households that’s anything close to what the business experience over the last decade or two decades. There’s some pricing leverage, there’s still some price increases that can and will be taken, certainly by the best channels in my opinion. By the way, we believe we will continue to see some growth in that business, but it won’t grow at the rate that we saw in the past." Iger: "If you’re in a market that is being disrupted, you obviously want the best products that are out there in a disrupted market, and we believe we have that at the company, including obviously ESPN. If you’re in a market that is changing, you’d rather have a very strong hand, so I’ve said what’s better than ESPN in that regard?"

OVER THE TOP: Bloomberg TV’s David Westin asked, "How important is direct-to-consumer for ESPN’s future?” Iger said, “We believe in the multichannel model, and we believe that it’s not only not going away, but the predictions about its demise were, we think, overstated. That said, we talked about growth being limited in many respects, or more limited than before. We think at some point, if that business model were to fall apart, there are opportunities to go direct-to-consumer.” Iger: "Long-term, ESPN will be just fine, but we refuse to have our head in the sand or be Pollyannaish about what we’re seeing in the marketplace and others may be seeing things differently. We believe there’s disruption going on and there’s more disruption ahead and we’re spending a fair amount of time making sure we’re well positioned in that market. Obviously ESPN is we believe something of great value even in this disrupted world.”

SHOTS FIRED? Iger said of BTIG analyst Rich Greenfield, who yesterday questioned Iger's claim that an ESPN OTT net could launch immediately if the company wanted, "The analyst that came out with that report has been wrong about us on a number of occasions, and so one would have to question, if he’s been wrong so often before how valid were his comments this time around? He’s entitled to his opinions and the other thing I would say, I don’t know where the accountability is. When he’s wrong, I don’t know who he’s accountable for" ("Bloomberg West," Bloomberg TV, 12/21).

CRYSTAL BALLERS: In N.Y., Andrew Ross Sorkin notes Greenfield on Friday "became the only analyst to have a 'sell' rating" on Disney. Most analysts "wave off concerns about ESPN, arguing that this won’t be a problem for some time and that live sports will remain the most desirable programming for viewers who still want a bundle of channels." Rosenblatt Securities Senior Research Analyst Martin Pyykkonen said, "The turmoil and disruption will most be felt by the distributors and some of the weaker programming content companies. For Disney, we think it’s a reasonable bet that they will be a necessary part of almost any skinnier programming package going forward." Sorkin notes it is also possible that shifts in TV-viewing habits will "change more slowly than some of the most dire predictions." Disney "may have seen all of this coming," as it has "spent the past decade diversifying its business by adding big franchises like Star Wars, Marvel and Pixar while expanding its theme park business." So while the entire TV industry "may be challenged, perhaps Disney will be able to weather the storm better than many others" (N.Y. TIMES, 12/22). The WALL STREET JOURNAL's Ben Fritz writes despite a record-breaking opening for "Star Wars: The Force Awakens," some Wall Street analysts "remain concerned about cord-cutting pressures" on ESPN and are "taking the current hoopla as an opportunity to sell." Jefferies analyst John Janedis yesterday said that the success of the film "doesn’t change his core thesis that slowing media-industry growth and rising sports-rights costs at ESPN will limit further upward earnings revisions." ESPN is Disney’s "biggest single business and Wall Street has been sensitive to any signs that its growth rate is slowing as fewer customers pay for cable-television bundles" (WALL STREET JOURNAL, 12/22).

[Tugg Speedman]

Star Wars came out December 18 (sneak peek December 17).  It is now the fastest movie to $1 billion in revenues (9 days).

December 16 (day before sneak peek) to now Disney stocks crushed for a loss of 6% (was 8% until yesterday's bounce back).

Their is information is the stock price action.  And the fact that Disney's stock is going straight down while lines are around the block for Star Wars speaks volumes.

Cutting to the chase, all the comments here about the Star Wars property are proving correct.  We now have hard numbers to confirm it.  But that still cannot offset the worry about Disney's death star - ESPN.  The worry is ESPN is seeing massive cord cutting is so palpable that not even the greatest movie release in human history can save Disney's stock.

This is a long thread so here is the Cliff Notes version ...


First  ESPN accounts for 44% of revenues and 54% of earnings at Disney.  Disney might as well change its ticker symbol from DIS to ESPN.

Two years ago ESPN had 99 million subscribers.  Last update this fall from Disney was ESPN was down to 92 million.  This is a collapse. 

When ESPN pays billions and billions for broadcast rights for everything from Monday Night Football to ACC basketball, this kind of cord cutting is so worrisome for Wall Street that even Star Wars cannot save Disney's stock.

Anticipating Chicos response ... Disney CEO Bob Iger will correctly say ESPN is still profitable.  Like the window washer that fell from the 10th floor and said "so far so good" as he crossed the third floor, Wall Street's concern is Disney's 92 million subscribers are 85 million in a year and 73 million in two years and ESPN's fixed costs (broadcast rights) cannot be cut to fall with its declining subscribers (revenues) so the fear is losses are coming.

Want Disney's stock to go back to $125 to $130?  Convince Wall Street cord-cutting will end at 91 million, or ESPN can just jack it fees 15% to 20% and cover the cord-cutters.  That argument cannot be made so the stock suffers.

Restated simply, the sports broadcasting bubble has popped.  What follows next is the mess.

[ChicosBailBonds]

Sigh


"Despite the mounting worries about ESPN, though, most investors see the diversity of Disney's business units as a big plus. Analysts, on average, think Disney could be worth $119 a share in 18 months, which would be 13% upside from the current price"

[brandx]

OVER THE TOP: Bloomberg TV’s David Westin asked, "How important is direct-to-consumer for ESPN’s future?” Iger said, “We believe in the multichannel model, and we believe that it’s not only not going away, but the predictions about its demise were, we think, overstated. That said, we talked about growth being limited in many respects, or more limited than before. We think at some point, if that business model were to fall apart, there are opportunities to go direct-to-consumer.” Iger: "Long-term, ESPN will be just fine, but we refuse to have our head in the sand or be Pollyannaish about what we’re seeing in the marketplace and others may be seeing things differently. We believe there’s disruption going on and there’s more disruption ahead and we’re spending a fair amount of time making sure we’re well positioned in that market. Obviously ESPN is we believe something of great value even in this disrupted world.”

In other words, we will see stand-alone ESPN in the near future - under 2 years is my prediction.

[brewcity77]

Just got a letter from DirecTV about my costs going up. I think I'll have to call Time-Warner to get an estimate. I don't want to go away from DirecTV, but my satellite/Internet is already over $200 per month and the only real extras I have are the DTV sports package, HBO, Cinemax, and Showtime. I'd much rather stick with DirecTV than go to TWC (who is generally terrible in my estimation) but man...$200/month feels really steep. Especially when my Netflix/Amazon Prime combination comes in at under $20 per month. Add Hulu and what's the point?

Honestly, the only real attraction left is live sports. That might be the next big Internet opportunity. If some company could become the Netflix of live sports, streaming ESPN, FS1, NBCSN, and all the other major sports networks, that would be a goldmine. I have to imagine most sports fans would pay $30/month for that at the least. Do that, then include an archive feature for old games and events and you'd have an easy billion-dollar business. Someone must be working on that by now.

[MU82]

Star Wars came out December 18 (sneak peek December 17).  It is now the fastest movie to $1 billion in revenues (9 days).

December 16 (day before sneak peek) to now Disney stocks crushed for a loss of 6% (was 8% until yesterday's bounce back).

Their is information is the stock price action.  And the fact that Disney's stock is going straight down while lines are around the block for Star Wars speaks volumes.

Cutting to the chase, all the comments here about the Star Wars property are proving correct.  We now have hard numbers to confirm it.  But that still cannot offset the worry about Disney's death star - ESPN.  The worry is ESPN is seeing massive cord cutting is so palpable that not even the greatest movie release in human history can save Disney's stock.

This is a long thread so here is the Cliff Notes version ...


First  ESPN accounts for 44% of revenues and 54% of earnings at Disney.  Disney might as well change its ticker symbol from DIS to ESPN.

Two years ago ESPN had 99 million subscribers.  Last update this fall from Disney was ESPN was down to 92 million.  This is a collapse. 

When ESPN pays billions and billions for broadcast rights for everything from Monday Night Football to ACC basketball, this kind of cord cutting is so worrisome for Wall Street that even Star Wars cannot save Disney's stock.

Anticipating Chicos response ... Disney CEO Bob Iger will correctly say ESPN is still profitable.  Like the window washer that fell from the 10th floor and said "so far so good" as he crossed the third floor, Wall Street's concern is Disney's 92 million subscribers are 85 million in a year and 73 million in two years and ESPN's fixed costs (broadcast rights) cannot be cut to fall with its declining subscribers (revenues) so the fear is losses are coming.

Want Disney's stock to go back to $125 to $130?  Convince Wall Street cord-cutting will end at 91 million, or ESPN can just jack it fees 15% to 20% and cover the cord-cutters.  That argument cannot be made so the stock suffers.

Restated simply, the sports broadcasting bubble has popped.  What follows next is the mess.

I understand your viewpoint and, except for the fact that you like to beat pretty much every subject bloody, a lot of what you say makes sense. Much of it is factual, too. The film IS a huge success and the share price IS going down despite that great news.

I do have a couple of quibbles, though.

First, Disney's stock price has not gone "straight down." It traded between 95 and 105 from Aug. 20 to Oct. 8, almost for two months solid. It moved up to 120 on Nov. 20 -- which I guess could have been termed "straight up" -- and then has drifted steadily downward since. Its loss has hardly been a catastrophe; DIS hasn't even retreated to where it was 6 weeks ago. It has experienced a couple of notable single-day falls, which always accentuate the negative.

Second, going from 99 million subscribers to 92 million subscribers over a two-year span -- a reduction of 7% -- is that really a "collapse"?

Heisy, you like to be a little bombastic with your wording and you like to be a lot all-or-nothing in your declarations. And goodness knows, you're always 100% certain you are right ... even about Hillary not being the Democratic nominee for president.

Maybe you do know a lot about the disaster that is Disney's future better than, say, the people at Morningstar, who rate DIS a 4-star buy and give it a $134 fair value.

I guess we'll see soon enough, although I'm more willing to wait a few months, or even years, before I make definitive declarations. Then again, I am an investor and not a trader, so I don't mind being patient.

BTW, I do not own a single share of Disney stock. It is on my watch list, however, and I very well could initiate a position if it moves back under 100.

[Tugg Speedman]

Just got a letter from DirecTV about my costs going up. I think I'll have to call Time-Warner to get an estimate. I don't want to go away from DirecTV, but my satellite/Internet is already over $200 per month and the only real extras I have are the DTV sports package, HBO, Cinemax, and Showtime. I'd much rather stick with DirecTV than go to TWC (who is generally terrible in my estimation) but man...$200/month feels really steep. Especially when my Netflix/Amazon Prime combination comes in at under $20 per month. Add Hulu and what's the point?

Honestly, the only real attraction left is live sports. That might be the next big Internet opportunity. If some company could become the Netflix of live sports, streaming ESPN, FS1, NBCSN, and all the other major sports networks, that would be a goldmine. I have to imagine most sports fans would pay $30/month for that at the least. Do that, then include an archive feature for old games and events and you'd have an easy billion-dollar business. Someone must be working on that by now.

Conceptually here is the problem (don't hold me to the exact numbers but I think they are close).

ESPN has 92 million subscribers on Cable and Sat.  They pay $6.65/month just for ESPN (plus ESPN2, ESPNnews and so on).  The majority of cable subscribers never watch ESPN.  But the minority that do are so passionate about live sports that they demand it be carried on basic cable so that means everyone pays for it (otherwise someone else will, a competing cable or Sat carrier, and they will lose all those subscribers immediately).   And this is just ESPN, now think of TWC or Comcast carrying local baseball games.  Maybe 10% of the subscribers want that yet 100% pay for it.

What I'm getting at is if someone made a Netflix for live sports with all the channels, it will have a small minority of very loyal subscribers (say 15 to 20 million) and to make money given the broadcaster rights, it would probably cost over $100/month.

Sports right fees are extremely bloated because the business model assumed that all of America would pay for it via their cable bill because a passionate few demand live sports channels that carriers had to offer and they could charge a mint for it (ESPN is far and away the most expense channel we all pay for).  Cord-cutting is blowing up this model (the sports bubble is popping).  First the TV carriers get crushed because they have the fixed cost of paying agreed upon broadcast rights.  Later it will be the sports leagues (or conferences) as they find their broadcast rights will attach less money.

As I noted before the Big East is in a good place only because they have 9 years left on their deal.  This is 2024 problem for them.

[Tugg Speedman]

First, Disney's stock price has not gone "straight down." It traded between 95 and 105 from Aug. 20 to Oct. 8, almost for two months solid. It moved up to 120 on Nov. 20 -- which I guess could have been termed "straight up" -- and then has drifted steadily downward since. Its loss has hardly been a catastrophe; DIS hasn't even retreated to where it was 6 weeks ago. It has experienced a couple of notable single-day falls, which always accentuate the negative.

The chart below is the last five years of Disney's stock.  The August 2015 announcement of subscribers losses is very apparent.  It change the trend.  Restated, the single biggest thing to happened to Disney stock in the last five years was the ESPN announcement that it is losing subscribers.  It single-handily ended the $30 to $120 uptrend. 

So yes a stock that was in a relentless never look back uptrend for five years.  Nothing stopped Disney.  Then ESPN announces larger than expected cord-cutting and the roof fell in.  So now it is stumbling 8% on the release of the highest grossing film ever.  In my book, that is getting "crushed."  (As I noted before, I don't think it necessarily goes down.  Five years of uptrend is over.  I think the stock is $110 in five years, hence my comment on a previous page that it is "dead money.")



Second, going from 99 million subscribers to 92 million subscribers over a two-year span -- a reduction of 7% -- is that really a "collapse"?

If it stops at 92 no it is not a big deal.  The fear is this is the early innings of cord-cutting.  See the chart above, that is what it says.

Maybe you do know a lot about the disaster that is Disney's future better than, say, the people at Morningstar, who rate DIS a 4-star buy and give it a $134 fair value.

I guess we'll see soon enough, although I'm more willing to wait a few months, or even years, before I make definitive declarations. Then again, I am an investor and not a trader, so I don't mind being patient.

BTW, I do not own a single share of Disney stock. It is on my watch list, however, and I very well could initiate a position if it moves back under 100.

"Despite the mounting worries about ESPN, though, most investors see the diversity of Disney's business units as a big plus. Analysts, on average, think Disney could be worth $119 a share in 18 months, which would be 13% upside from the current price"

I mentioned that I work on Wall Street (although in Chicago, not NYC).  I can tell you that the largest money managers in the world pay absolutely no attention to these calls.  They do not view them as credible.  The reason is this is their call on every stock!  Including Disney in August right before the ESPN announcement.

I don't either.

[ChicosBailBonds]

Just got a letter from DirecTV about my costs going up. I think I'll have to call Time-Warner to get an estimate. I don't want to go away from DirecTV, but my satellite/Internet is already over $200 per month and the only real extras I have are the DTV sports package, HBO, Cinemax, and Showtime. I'd much rather stick with DirecTV than go to TWC (who is generally terrible in my estimation) but man...$200/month feels really steep. Especially when my Netflix/Amazon Prime combination comes in at under $20 per month. Add Hulu and what's the point?

Honestly, the only real attraction left is live sports. That might be the next big Internet opportunity. If some company could become the Netflix of live sports, streaming ESPN, FS1, NBCSN, and all the other major sports networks, that would be a goldmine. I have to imagine most sports fans would pay $30/month for that at the least. Do that, then include an archive feature for old games and events and you'd have an easy billion-dollar business. Someone must be working on that by now.

Time Warner...raised prices
Dish...raised prices
Comcast...raised prices
Cox...raised prices

Pretty simple.  Econ 101

The cost of sales goes up every year at the first of the year because contracts start a new and Disney, Fox, CBS, etc, etc all get rate increases.   Now Fox is starting to pull back from Netflix as are others.  More price increases across the board.

http://www.watertowndailytimes.com/news03/time-warner-cable-directv-and-dish-network-raising-prices-in-2016-20151227

http://www.godanriver.com/work_it_sova/news/cable-bills-are-rising-again/article_f5f34c6c-aa62-11e5-a58d-af6e5a992e26.html

[ChicosBailBonds]

Below

Conceptually here is the problem (don't hold me to the exact numbers but I think they are close).

ESPN has 92 million subscribers on Cable and Sat.  They pay $6.65/month just for ESPN (plus ESPN2, ESPNnews and so on). NOPE...incorrect number and it continues to go up yearly.  For obvious reasons I cannot state what the number is, but that number is wrong and low.   The majority of cable subscribers never watch ESPN.  But the minority that do are so passionate about live sports that they demand it be carried on basic cable so that means everyone pays for it (otherwise someone else will, a competing cable or Sat carrier, and they will lose all those subscribers immediately).   Partially true, but it isn't the minority demanding it on basic cable, it is the Walt Disney company.  Just as NewsCorp demands Fox be on basic cable, and AMC demands it, and Discover demands it, etc, etc. And this is just ESPN, now think of TWC or Comcast carrying local baseball games.  Maybe 10% of the subscribers want that yet 100% pay for it.  More like 40% of the subscribers and 85% pay for it.

What I'm getting at is if someone made a Netflix for live sports with all the channels, it will have a small minority of very loyal subscribers (say 15 to 20 million) and to make money given the broadcaster rights, it would probably cost over $100/month.  Yes, some have looked at this...some on this very board have been very very very very involved in this very idea...and with lots of crazy smart people concluded in today's day and age it cannot be done.  Though your $100 is too high, nevertheless it is a tidy sum.  TV is a subsidized game, that's how great content is created.  Much like the drug industry. You want great movies, series, etc, well most don't succeed and you need a few to hit, plus you need predictable revenue streams.

Sports right fees are extremely bloated because the business model assumed that all of America would pay for it via their cable bill because a passionate few demand live sports channels that carriers had to offer and they could charge a mint for it (ESPN is far and away the most expense channel we all pay for).  Cord-cutting is blowing up this model (the sports bubble is popping).  First the TV carriers get crushed because they have the fixed cost of paying agreed upon broadcast rights.  Later it will be the sports leagues (or conferences) as they find their broadcast rights will attach less money.  TBD.  You are partly correct, but also wrong just the same.  Sports rights exploded for many reasons, including RATINGS and advertising.  It is DVR proof, and that means you get to charge a pretty penny.  The other parts you talk about, sure there is some truth to this.

However, much like did with DVD sales, taxis, etc, you put things in the buried column years before you need to.  All credible analysis show Pay TV model is here for a LONG time to come.  It will erode some with subscribers, but revenues will be solid.  Projections are that still 85% plus of the US will be pay TV into the 2020's.  Furthermore, who do you think is getting into the cord cutting business?  Verizon.  Check.  AT&T \ DIRECTV.  Check.  Dish. Check.  Comcast.  Check.  So they're still going to get theirs, just at different margins, but also at different expenses.  Let me give you an example.  Dish and DIRECTV spend about $900 to acquire a customer.  That is why they need two year contracts, because the SAC cost is so high for the marketing, equipment, installer, etc.  They are now selling OTT products with a SAC of about $150.  Now, are they getting the revenues for OTT or the two year contract?  Nope, but they are also clearing money in the first few months that they weren't clearing on other subs until much later.  It's a trade they can live with, to a certain point.  For the customer, there is good and bad.  They don't get as quality a service, have to rely on their own connections and data plans, limited to 2 concurrent streams or less, etc, etc.

As I noted before the Big East is in a good place only because they have 9 years left on their deal.  This is 2024 problem for them.

[MU82]

First, Disney's stock price has not gone "straight down." It traded between 95 and 105 from Aug. 20 to Oct. 8, almost for two months solid. It moved up to 120 on Nov. 20 -- which I guess could have been termed "straight up" -- and then has drifted steadily downward since. Its loss has hardly been a catastrophe; DIS hasn't even retreated to where it was 6 weeks ago. It has experienced a couple of notable single-day falls, which always accentuate the negative.

The chart below is the last five years of Disney's stock.  The August 2015 announcement of subscribers losses is very apparent.  It change the trend.  Restated, the single biggest thing to happened to Disney stock in the last five years was the ESPN announcement that it is losing subscribers.  It single-handily ended the $30 to $120 uptrend. 

So yes a stock that was in a relentless never look back uptrend for five years.  Nothing stopped Disney.  Then ESPN announces larger than expected cord-cutting and the roof fell in.  So now it is stumbling 8% on the release of the highest grossing film ever.  In my book, that is getting "crushed."  (As I noted before, I don't think it necessarily goes down.  Five years of uptrend is over.  I think the stock is $110 in five years, hence my comment on a previous page that it is "dead money.")



Second, going from 99 million subscribers to 92 million subscribers over a two-year span -- a reduction of 7% -- is that really a "collapse"?

If it stops at 92 no it is not a big deal.  The fear is this is the early innings of cord-cutting.  See the chart above, that is what it says.

I mentioned that I work on Wall Street (although in Chicago, not NYC).  I can tell you that the largest money managers in the world pay absolutely no attention to these calls.  They do not view them as credible.  The reason is this is their call on every stock!  Including Disney in August right before the ESPN announcement.

I don't either.

OK, Heisy, nicely done. You mostly -- MOSTLY -- stuck to facts here and in so doing, you basically are admitting to being over the top earlier.

For example:

The chart below is the last five years of Disney's stock.  The August 2015 announcement of subscribers losses is very apparent.  It change the trend.  Restated, the single biggest thing to happened to Disney stock in the last five years was the ESPN announcement that it is losing subscribers.  It single-handily ended the $30 to $120 uptrend.

Yep, and that is still very different -- and far more truthful --  than saying the stock has gone "straight down" as you did earlier.

Unfortunately, I own a stock that has gone straight down: KMI. (Thankfully, I sold most of it before it plummeted, but I still own a little unfortunately.) The difference between KMI going "straight down" from 44 to 15 and DIS going down and then going sideways and then going up and now trending downish is -- as your hero would say -- youge! As this chart you presented shows.

If it stops at 92 no it is not a big deal.  The fear is this is the early innings of cord-cutting.  See the chart above, that is what it says.

Yes, that is the fear, and it very possibly is a valid fear despite what Iger says (CEOs fib all the time in an effort to prop up their stock). Again, this statement of yours is a big difference from your earlier statement calling it a "collapse." It might indeed collapse down the line; it has not collapsed yet. Again, you seem to acknowledge that with this toned-down rhetoric.

I mentioned that I work on Wall Street (although in Chicago, not NYC).  I can tell you that the largest money managers in the world pay absolutely no attention to these calls.  They do not view them as credible.  The reason is this is their call on every stock!  Including Disney in August right before the ESPN announcement.

Wow. I hope you got rich-rich-richer-than-rich following the fortune-telling abilities of your buddies by shorting DIS right before the ESPN announcement! If so, can I borrow a million or two?

[brandx]

Now Fox is starting to pull back from Netflix as are others.  More price increases across the board.

They aren't going to pull back very far when Netflix pays as much as $750,000 per episode for streaming rights.

And if the networks want to stack shows for bing-watching via Video on Demand, then Netflix lowers their fees for those shows accordingly.

In the long run, though, Netflix, Hulu, and Amazon Prime will find a way to work with the networks. They will find a way for all sides to maximize profits.

Despite all of CBB's protestations that Netflix was in trouble, they are the driver here.

[ChicosBailBonds]

The other aspect about DIS stock that few seem to take into consideration.  The dividend.  It is an income producing stock.  Great companies can afford to pay dividends.  It is not a high yield dividend like AT&T, but a dividend nonetheless in the neighborhood of an Apple and others. 

This past year, two dividends were paid out for Disney stock.  This year a 7.6% increase on the dividend from the previous year.  For a long time DIS was doing one dividend a year, now its twice per year.  That's real money. 

[Tugg Speedman]

The other aspect about DIS stock that few seem to take into consideration.  The dividend.  It is an income producing stock.  Great companies can afford to pay dividends.  It is not a high yield dividend like AT&T, but a dividend nonetheless in the neighborhood of an Apple and others. 

This past year, two dividends were paid out for Disney stock.  This year a 7.6% increase on the dividend from the previous year.  For a long time DIS was doing one dividend a year, now its twice per year.  That's real money. 

Wall Street is all about what the dividend growth rate will be in coming years, not the last five years.