Is ESPN In Trouble (cord-cutter)

[mu03eng]

Then what are all these "smart grid" commercials I'm seeing on the ol' Philco?

Buzz words and marketing spin.....smart grid isn't going to be an actual thing for at least another 5 years. And it's not being driven because it's good for the users, it's being driven because it makes it easier/cheaper for the utilities to continue using the existing infrastructure without replacing or building more.

If Elon Musk gets his way....the grid will go poof, smart grid or not.

[mu03eng]

Major college sports has been mostly about money for decades now.

Correct, it was the only reason the Eastern Football conference never happened in the 80s. If that idea had germinated now it would have been gold Jerry, GOLD!

[GGGG]

Buzz words and marketing spin.....smart grid isn't going to be an actual thing for at least another 5 years. And it's not being driven because it's good for the users, it's being driven because it makes it easier/cheaper for the utilities to continue using the existing infrastructure without replacing or building more.

If Elon Musk gets his way....the grid will go poof, smart grid or not.

OK, not on this topic, but since when do we treat Elon Musk as some sort of future visionary who is all-knowing in these types of areas?

[mu03eng]

OK, not on this topic, but since when do we treat Elon Musk as some sort of future visionary who is all-knowing in these types of areas?

Marketing and spin. He's Howard Hughes without the OCD. America loves smart people that spin a tale of greatness regardless of the truth or actual knowledge in that area.

Basically we bow and scrape to those people we think are visionaries.

[Benny B]

OK, not on this topic, but since when do we treat Elon Musk as some sort of future visionary who is all-knowing in these types of areas?

There's a big difference between vision, knowledge and execution.  Groundbreaking innovation doesn't happen without all three... but we can't name the dozens of people in the second category and the hundreds and thousands of people in the third, so we name the one person that sits in the first column.

In other words, Elon knows where he wants to go, and it's someplace most of us have never imagined; that doesn't mean he has the slightest clue as to how to get there... so he employs dozens of people to figure out where the path should go and hundreds and thousands more to build the path.

[B. McBannerson]

This is such a unnatural carnal knowledgeing joke.

Isn't video just data?  Those that build the pipes and control the pipes will deliver the data.  Disney stock above $110 again.  Great company.

[jesmu84]

Isn't video just data?  Those that build the pipes and control the pipes will deliver the data.  Disney stock above $110 again.  Great company.

Hi Chicos

[Tugg Speedman]

Isn't video just data?  Those that build the pipes and control the pipes will deliver the data.  Disney stock above $110 again.  Great company.

(same chart as I used in the Apple post)

The chart below is the ratio of Disney's stock price to the S&P 500 Index.  It is a total return chart so dividends are included.  Highlighted on the chart are important milestones and peaks and troughs of the ratio.

To be clear, when the ratio is rising Disney is beating the overall market.  When it is falling it is lagging the overall market.

Disney's relative ratio peaked with it announcement on August 4, 2015 that it was losing ESPN subscribers.  According to the market, this was the single most important event of the last six years.

Let me sum it up.  Iger is an outstanding manager.  Everything he does it correct.  But if he cannot stop ESPN sub losses, and he cannot, he is nothing more than King Canute trying to stop the tide from coming out.

By not heeding the market's warning in August 2015, one lost years of relative performance in Disney. 

Remember every stock has an alternative, buy the overall market index (S&P 500).  You only own a stock because it will perform better than the index (or you think it will).  As of the August 4, 2015 Disney stopped being an out performer and it seems that only stopping subscriber losses at ESPN will change this.  Stopping subscriber losses to streaming is simply not possible.

Still in trouble.

[GGGG]

Yukon, is there a chart that shows performance independent of how the market performed as a whole?

[Tugg Speedman]

Yukon, is there a chart that shows performance independent of how the market performed as a whole?

[GGGG]

So in other words, Disney is performing pretty well despite the cord cutting?

[Tugg Speedman]

So in other words, Disney is performing pretty well despite the cord cutting?

If you think the alternative is nothing (cash in the bank) then it is performing pretty well.  I would argue this is the wrong alternative, the correct alternative is the overall market, like the ETF SPY (S&P 500).  That is why I use the ratio charts and they show Disney is not performing pretty well.

If you invest, you should start by "owning the market" (SPY).  After that make choices that will "beat the market."  I believe Disney will not beat the market so it should be sold and "the market" bought in its place.

Investing is not absolute, it is about competing alternatives.

[GGGG]

Then maybe I am misunderstanding your chart.  I thought you were showing me how Disney was performing versus the market as a whole.

[MU82]

If you think the alternative is nothing (cash in the bank) then it is performing pretty well.  I would argue this is the wrong alternative, the correct alternative is the overall market, like the ETF SPY (S&P 500).  That is why I use the ratio charts and they show Disney is not performing pretty well.

If you invest, you should start by "owning the market" (SPY).  After that make choices that will "beat the market."  I believe Disney will not beat the market so it should be sold and "the market" bought in its place.

Investing is not absolute, it is about competing alternatives.

So, in other words, kind of the way AAPL has beaten SPY the last 1, 3, 5, 10 and 15 years. Thanks!

(Couldn't resist.)

[Tugg Speedman]

Disney Q1 Revenue Weighed Down By ESPN Struggles
Media networks reported a dip in revenue and profit
February 7, 2017 @ 1:09 PM

http://www.thewrap.com/disney-q1-revenue-weighed-espn-struggles/

Cable networks, particularly ESPN, have been an albatross on Disney’s stock price even as the company’s two other major prongs, movies and theme parks, continue to perform well. As cheaper TV alternatives began to proliferate, ESPN hemorrhaged subscribers during the course of 2016 and is now at less than 88 million, compared with a peak of 100.1 million in 2011. At an estimated $7 per subscriber, that dip has been a substantial hit to Disney, especially considering media networks made up 49 percent of Disney’s profits during fiscal 2016.

At the same time, rights fees for the live sports ESPN specializes in broadcasting continue to go up, as there’s plenty of competition for one of the few pieces of programmed television that still delivers monster ratings. ESPN will pay $7.3 billion for content this year – the biggest price tag among all media companies. Operating income at Disney’s cable networks division — primarily ESPN — plunged 11 percent compared with the same time the previous year. Disney attributed that drop entirely to lower ESPN revenue.

[brandx]

Disney Q1 Revenue Weighed Down By ESPN Struggles
Media networks reported a dip in revenue and profit
February 7, 2017 @ 1:09 PM

http://www.thewrap.com/disney-q1-revenue-weighed-espn-struggles/

Cable networks, particularly ESPN, have been an albatross on Disney’s stock price even as the company’s two other major prongs, movies and theme parks, continue to perform well. As cheaper TV alternatives began to proliferate, ESPN hemorrhaged subscribers during the course of 2016 and is now at less than 88 million, compared with a peak of 100.1 million in 2011. At an estimated $7 per subscriber, that dip has been a substantial hit to Disney, especially considering media networks made up 49 percent of Disney’s profits during fiscal 2016.

At the same time, rights fees for the live sports ESPN specializes in broadcasting continue to go up, as there’s plenty of competition for one of the few pieces of programmed television that still delivers monster ratings. ESPN will pay $7.3 billion for content this year – the biggest price tag among all media companies. Operating income at Disney’s cable networks division — primarily ESPN — plunged 11 percent compared with the same time the previous year. Disney attributed that drop entirely to lower ESPN revenue.

One thing that needs to be repeated because it is always said wrong.

Report after report talk about ESPN hemorrhaging subscribers. It is actually cable in general that is the problem. There is no standalone ESPN that people are cancelling. They are cancelling their cable contract and dragging ESPN (along with all other channels) with them.

It is just more dramatic to go after eSPN. But FX, AMC, Comedy Channel, etc. are losing the same number of subscribers - it is just that they are never mentioned. NBO made the decision to offer its channel ala carte, so they are somewhat immune to the losses.

I expect the same from ESPN before too long. Contracts will be re-negotiated where need be and it will get done.

[Tugg Speedman]

One thing that needs to be repeated because it is always said wrong.

Report after report talk about ESPN hemorrhaging subscribers. It is actually cable in general that is the problem. There is no standalone ESPN that people are cancelling. They are cancelling their cable contract and dragging ESPN (along with all other channels) with them.

It is just more dramatic to go after eSPN. But FX, AMC, Comedy Channel, etc. are losing the same number of subscribers - it is just that they are never mentioned. NBO made the decision to offer its channel ala carte, so they are somewhat immune to the losses.

I expect the same from ESPN before too long. Contracts will be re-negotiated where need be and it will get done.

100% correct on all of this.

But remember that ESPN is the most expensive cable channel at $7/month.  So ESPN (Disney) has the most to lose by cord cutting.  And it is worth reminding everyone that every single person of those 88 million subscribers they have left, down from 100 million in 2011 (see a few post above) pay $7/month because ESPN is a "must have" on basic cable.  The problem is the vast majority never watch it even thought they are paying for it.  This is why cable bills are through the roof and everyone is cord cutting. 

Just today on Bloomberg TV an analyst said that if ESPN went totally streaming (via WatchESPN) it would have to charge $80/month to keep revenues the same (meaning about 10% of cable viewers value ESPN enough to pay a premium for it while the other 90% don't care).  He said no one will pay $80/month of ESPN so they should expect revenues to continue to fall.  ESPN is almost half Disney's revenues and this is why the stock is suffering.  Half its revenues base is declining and Bob Iger (DIS CEO) cannot stop that.

And yes, I also said on previous pages that this will filter through to sports leagues and college conferences getting less in broadcasting rights.  But sports leagues and conferences have costs too high and this will impact them at every level, including the product on the field.

[brandx]

100% correct on all of this.

But remember that ESPN is the most expensive cable channel at $7/month.  So ESPN (Disney) has the most to lose by cord cutting.  And it is worth reminding everyone that every single person of those 88 million subscribers they have left, down from 100 million in 2011 (see a few post above) pay $7/month because ESPN is a "must have" on basic cable.  The problem is the vast majority never watch it even thought they are paying for it.  This is why cable bills are through the roof and everyone is cord cutting. 

Just today on Bloomberg TV an analyst said that if ESPN went totally streaming (via WatchESPN) it would have to charge $80/month to keep revenues the same (meaning about 10% of cable viewers value ESPN enough to pay a premium for it while the other 90% don't care).  He said no one will pay $80/month of ESPN so they should expect revenues to continue to fall.  ESPN is almost half Disney's revenues and this is why the stock is suffering.  Half its revenues base is declining and Bob Iger (DIS CEO) cannot stop that.

It is a ridiculous hypothetical from Bloomberg TV as that would NEVER happen, so the $80 is meaningless. Then they make the even dumber comment that revenues will continue to fall cuz no one will pay the $80 number that they just pulled out of their a$$.

Yes, we all know people are sick of cable and their thieving ways. ESPN is smart enough to know this and so are the leagues that are under contract. The money owed to them by ESPN becomes less valuable as fewer eyes see their games. Hence, contracts will be re-negotiated in the future. All of the sports leagues need a strong ESPN as well as other sports networks. This is how they market their teams. They are not going to let it go away.

[Tugg Speedman]

Again, the ESPN business model works because it gets most cable subscribers pay for something they don't use.  This has bloated ESPN revenues and both Disney and sports leagues (and conferences) have structured their costs based on these bloated revenues.

Now that streaming is here, cable has to get efficient.  That means people that do not use the product (ESPN) will are no longer playing it via cord-cutting. 

So for those that care about ESPN (like everyone here) Wall Street estimates the $7/month we pay now (along with everyone else) has to rise to as much as $80/month given the universe of those that want it.  Some think it might be $40 to $50. 

The point is no one is going to pay this much for ESPN so revenues are going down.  Yes, the leagues will have to adjust.  That is a nice way of saying Scott Boros and the rest of the agents will have to agree their clients will get less money in the future.

Before that happens, their will be upheaval.  Probably strikes and canceled post seasons and or entire seasons (hockey almost had that happened about 10 years ago).  So getting to that point will be messy.

The sports bubble high was the moment Syracuse and Pitt jumped to the ACC.  A pure greed move that happened at the high.

[brandx]

So for those that care about ESPN (like everyone here) Wall Street estimates the $7/month we pay now (along with everyone else) has to rise to as much as $80/month given the universe of those that want it.  Some think it might be $40 to $50. 

Again, that is wrong.

It only has to rise to $40 or $50 or $80 if EVERYBODY gets rid of cable. That is NOT going to happen.

[Tugg Speedman]

Again, that is wrong.

It only has to rise to $40 or $50 or $80 if EVERYBODY gets rid of cable. That is NOT going to happen.

Why? 

With gigabit and smart TVs, why keep cable?

With Netflix, Hulu and Amazon producing original context, the "good stuff" isn't even on cable anymore.

Old people (sweater vests) will because they are resistant to change.  But they will die off soon.

Besides young people don't even watch TV on some big screen on the wall.  They watch it on their devices.

Cable is going away.  We are arguing about the time of death.

[brandx]

Why? 

With gigabit and smart TVs, why keep cable?

With Netflix, Hulu and Amazon producing original context, the "good stuff" isn't even on cable anymore.

Old people (sweater vests) will because they are resistant to change.  But they will die off soon.

Besides young people don't even watch TV on some big screen on the wall.  They watch it on their devices.

Cable is going away.  We are arguing about the time of death.

Quite simply, you are wrong.

"Besides young people don't even watch TV on some big screen on the wall.  They watch it on their devices."

What a silly statement. Yes, a minority of young people watch things on their phone. But, you made a blanket statement that was ludicrous.

And, there are a myriad of reason why the vast majority of people have cable. Whether you or I disagree with their reason for keeping cable is meaningless.

Yes, some will continue to ditch cable. 20 years from now, the majority will still have it.

[MU82]

I am a parent of a 30-year-old and a 29-year-old. They do sometimes watch crud on their phones and tablets. But both have TVs, and both pay for cable (or DirecTV, I'm not certain). As do just about all of their friends.

Like most of us, they don't want to watch a sporting event on a 5x2 inch cellphone screen; they want to watch it in HD on a 50- or 60-inch screen with surround sound.

[Tugg Speedman]

I am a parent of a 30-year-old and a 29-year-old. They do sometimes watch crud on their phones and tablets. But both have TVs, and both pay for cable (or DirecTV, I'm not certain). As do just about all of their friends.

Like most of us, they don't want to watch a sporting event on a 5x2 inch cellphone screen; they want to watch it in HD on a 50- or 60-inch screen with surround sound.

If they have a smart TV, with one swipe on your phone, you can mirror with you're watching on the 60 inch TV in surround sounds.   I do it all the time.

Don't need $120/month DTV or Cable account.

[jesmu84]

If they have a smart TV, with one swipe on your phone, you can mirror with you're watching on the 60 inch TV in surround sounds.   I do it all the time.

Don't need $120/month DTV or Cable account.

Depends on your TV brand and your phone. That isn't 100% true for every smart TV/phone combination. Sometimes you also need an accessory like Amazon fire TV or Google Chromecast