Has The Sports Bubble Popped?

[mu03eng]

Not so sure this chart reflects anything unique about the value of Disney's stake in ESPN.  The 3-month graph of DIS looks pretty similar to the S&P 500 graph over the same period.

Plus Disney's fundamentals are more than just ESPN. ABC is kind of a mess(all over the air TV is), if there is an economic downturn, those expensive vacations to Disneyland are one of the first things to go. It's an indicator of concern for sure, but I don't think the market is reacting to CFP at all.

[Tugg Speedman]

Not so sure this chart reflects anything unique about the value of Disney's stake in ESPN.  The 3-month graph of DIS looks pretty similar to the S&P 500 graph over the same period.

Disney stock is down 3x the stock market,  it's being driven by wall Street downgrades about the prospects for ESPN.   

The chart is all about ESPN

[GooooMarquette]

Disney stock is down 3x the stock market,  it's being driven by wall Street downgrades about the prospects for ESPN.   

The chart is all about ESPN

What time period are you talking about?  For the 3-month period reflected in the graph you posted earlier, DIS tracks the S&P 500 very closely.

http://www.nasdaq.com/symbol/dis/stock-chart?intraday=off&timeframe=3m&splits=off&earnings=off&movingaverage=None&lowerstudy=volume&comparison=on&index=sp500&drilldown=off

[Tugg Speedman]

What time period are you talking about?  For the 3-month period reflected in the graph you posted earlier, DIS tracks the S&P 500 very closely.

http://www.nasdaq.com/symbol/dis/stock-chart?intraday=off&timeframe=3m&splits=off&earnings=off&movingaverage=None&lowerstudy=volume&comparison=on&index=sp500&drilldown=off

Just about every stock in the S&P 500 has the same pattern as the index and Disney is no exception.  What is key, and what is misleading about your chart, is Disney has declined 2x versus the stock market over the period shown.  (3x since the release of Star Wars that was supposed to save Disney)

Disney stock is all about one thing right now ... ESPN (as explained in the other thread).  It's nearly half their revenues and Wall Street thinks it is now a giant no growth death star.  Not even a record star wars movie could save it.

The record low sports ratings and cable cutting are killing ESPN, and by extension Disney.  The bubble of live sports because they are DVR-proof has popped.  That game is now over.


Disney theme parks are only about 10% of revenues, they are not that big a deal.

[classof2k]

Disney theme parks are only about 10% of revenues

Recheck your numbers.  Media networks >> Parks & Resorts (revenue and especially operating income), but WDPR is more than 30% of revenues.

It will be interesting to see what impact Shanghai will have.  Opens in June.

[brandx]

You're right. Parks & Resorts bring in $16 billion as opposed to Media Networks $21 Billion. Almost a third of their income (31%) as opposed to 43% by Espn, ABC, A&E, Disney Channel, etc.

Not like Heisy to fudge the numbers

[ATL MU Warrior]

True, but the CFP was not a routine volume. I posted an article previously in this thread.....the make-up far exceeds the saved ad space in future broadcasts.

So the next time ESPN goes looking to sell ads, the question is whether or not they can sell at a higher price point. I don't think it has a big impact, but if this happens a couple of more times the ad revenue won't be as robust at the same time that ESPNs content costs are going up....not a winning recipe.

Absolutely agreed.  We'll have to wait and see whether this was a one-time blip or a longer term trend.  The advertiser demand for this type of content is not going away...my bet is that ESPN will be just fine.

[Tugg Speedman]

Absolutely agreed.  We'll have to wait and see whether this was a one-time blip or a longer term trend.  The advertiser demand for this type of content is not going away...my bet is that ESPN will be just fine.

Again Wall Street disagrees.  the average S&P 500 stock has 85% buy recommendations.  Disney has 53% (40% "holds" which is Wall Street code for "sell").  Why? ESPN's prospects.

They don't think ESPN will be fine and it those that do have lost about a quarter of their money in the last few months. (see the chart above)

Again, cord cutting and crappy sports ratings for EVERYTHING but the NFL is why Disney is suffering.  The CFP's crappy ratings is part of a larger whole.

Wall Street thinks you guys are arguing yesterday's story about sports programming.  Wall street thinks tomorrow's story is different and not nearly as good.

[Tugg Speedman]

I just got this from a hedge fund manager, this is what a lot on Wall Street think

----------------------------

Stock quotes in this article:
 DIS

I first outlined The Many Peaks I See in June 2015, and have added "Peak Icahn," "Peak Trump" and others since then.

Now, I'm adding "Peak Sports Viewership" to the list, which is bad news for ESPN ownerWalt Disney Co. (DIS).

I outlined my bearish case for Disney in November, shorting the stock and adding it to my "Best Short Ideas" list at $116.25 a share. DIS has dropped some 20% since then, and I remain short.

Although I wouldn't be surprised to see Disney shares bounce over the next few weeks following their recent schmeissing, that doesn't change my view on Peak Sports Viewership.

Recent reports show that:
•   The NCAA semifinal College Bowl Series saw nearly a one-third slippage in ratings.
•   Viewership for the NHL's Winter Classic dropped by 20% from 2015 levels and 40% from 2014.
•   Ratings for college football's national championship declined 15%.

Peak Sports Viewership apparently arrived a few years ago, but few investors have realized that it's occurred. There are a number of possible explanations for sports TV's declining popularity, including:

•   Oversaturation of product.
•   The quality of play, which has has arguably eroded.
•   Poor refereeing and a lack of league discipline.
•   Unsavory player behavior on and off of the field.
•   Asinine commentators who all want to mimic ESPN's Chris Berman. (There's only one Chris Berman!)
•   Numerous viewing alternatives and market segmentation. In a social-media-driven world, there's just so much time each day for sports TV.
•   "Cord-cutting" among cable TV customers.
•   Other important reasons that I'll discuss in greater depth later this week.

All of this spells trouble for Disney and its heavy reliance on ESPN for revenues and profits. As I've previously noted, I expect Disney's secular growth rate to fall far short of consensus forecasts.
So, I recommend not going long on Disney given the stock's still-elevated valuation, which I believe incorporates faster profit growth than the firm might ultimately see.

Position: Short DIS (small)
 
Douglas A. Kass
Seabreeze Partners Management Inc.

[Benny B]

The record low sports ratings and cable cutting are killing ESPN, and by extension Disney.  The bubble of live sports because they are DVR-proof has popped.  That game is now over.

Was it actually a bubble because it was DVR-proof... because ESPN - whose bread and butter is subscription fees - proabably doesn't care whether or not you DVR their programming, or at least not as much as CBS, FOX or a cable channel with low subscription fees.

[GGGG]

Peak Sports Viewership apparently arrived a few years ago, but few investors have realized that it's occurred. There are a number of possible explanations for sports TV's declining popularity, including:

•   Oversaturation of product.
•   The quality of play, which has has arguably eroded.
•   Poor refereeing and a lack of league discipline.
•   Unsavory player behavior on and off of the field.
•   Asinine commentators who all want to mimic ESPN's Chris Berman. (There's only one Chris Berman!)
•   Numerous viewing alternatives and market segmentation. In a social-media-driven world, there's just so much time each day for sports TV.
•   "Cord-cutting" among cable TV customers.
•   Other important reasons that I'll discuss in greater depth later this week.

While I agree with some of the reasons, any analyst who thinks the bolded are reasons why people are watching less sports probably should turn in their analyst license. 

[brandx]

•   Unsavory player behavior on and off of the field.

I'm guessing pro athletes do more good works than the average sports watcher.

[MU82]

I just got this from a hedge fund manager, this is what a lot on Wall Street think

----------------------------

Stock quotes in this article:
 DIS

I first outlined The Many Peaks I See in June 2015, and have added "Peak Icahn," "Peak Trump" and others since then.

Now, I'm adding "Peak Sports Viewership" to the list, which is bad news for ESPN ownerWalt Disney Co. (DIS).

I outlined my bearish case for Disney in November, shorting the stock and adding it to my "Best Short Ideas" list at $116.25 a share. DIS has dropped some 20% since then, and I remain short.

Although I wouldn't be surprised to see Disney shares bounce over the next few weeks following their recent schmeissing, that doesn't change my view on Peak Sports Viewership.

Recent reports show that:
•   The NCAA semifinal College Bowl Series saw nearly a one-third slippage in ratings.
•   Viewership for the NHL's Winter Classic dropped by 20% from 2015 levels and 40% from 2014.
•   Ratings for college football's national championship declined 15%.

Peak Sports Viewership apparently arrived a few years ago, but few investors have realized that it's occurred. There are a number of possible explanations for sports TV's declining popularity, including:

•   Oversaturation of product.
•   The quality of play, which has has arguably eroded.
•   Poor refereeing and a lack of league discipline.
•   Unsavory player behavior on and off of the field.
•   Asinine commentators who all want to mimic ESPN's Chris Berman. (There's only one Chris Berman!)
•   Numerous viewing alternatives and market segmentation. In a social-media-driven world, there's just so much time each day for sports TV.
•   "Cord-cutting" among cable TV customers.
•   Other important reasons that I'll discuss in greater depth later this week.

All of this spells trouble for Disney and its heavy reliance on ESPN for revenues and profits. As I've previously noted, I expect Disney's secular growth rate to fall far short of consensus forecasts.
So, I recommend not going long on Disney given the stock's still-elevated valuation, which I believe incorporates faster profit growth than the firm might ultimately see.

Position: Short DIS (small)
 
Douglas A. Kass
Seabreeze Partners Management Inc.

My only comment on this is:

Thank goodness there is only one Chris Berman. One is one too many!

[ChicosBailBonds]

I'd be a LOT more worried about FS1 right now, and in more ways than one....including how it impacts MU.

[Tugg Speedman]

I'd be a LOT more worried about FS1 right now, and in more ways than one....including how it impacts MU.

Explain .... FS1 just put in a bid for Thursday Night Football.  Sounds like they're perfectly happy losing more money. The difference is ESPNis not.

[ChicosBailBonds]

Explain .... FS1 just put in a bid for Thursday Night Football.  Sounds like they're perfectly happy losing more money. The difference is ESPNis not.

FS1 is not going to win that bid. 

[MU82]

I just got this from a hedge fund manager, this is what a lot on Wall Street think

----------------------------

Stock quotes in this article:
 DIS

I first outlined The Many Peaks I See in June 2015, and have added "Peak Icahn," "Peak Trump" and others since then.

Now, I'm adding "Peak Sports Viewership" to the list, which is bad news for ESPN ownerWalt Disney Co. (DIS).

I outlined my bearish case for Disney in November, shorting the stock and adding it to my "Best Short Ideas" list at $116.25 a share. DIS has dropped some 20% since then, and I remain short.

Although I wouldn't be surprised to see Disney shares bounce over the next few weeks following their recent schmeissing, that doesn't change my view on Peak Sports Viewership.

Recent reports show that:
•   The NCAA semifinal College Bowl Series saw nearly a one-third slippage in ratings.
•   Viewership for the NHL's Winter Classic dropped by 20% from 2015 levels and 40% from 2014.
•   Ratings for college football's national championship declined 15%.

Peak Sports Viewership apparently arrived a few years ago, but few investors have realized that it's occurred. There are a number of possible explanations for sports TV's declining popularity, including:

•   Oversaturation of product.
•   The quality of play, which has has arguably eroded.
•   Poor refereeing and a lack of league discipline.
•   Unsavory player behavior on and off of the field.
•   Asinine commentators who all want to mimic ESPN's Chris Berman. (There's only one Chris Berman!)
•   Numerous viewing alternatives and market segmentation. In a social-media-driven world, there's just so much time each day for sports TV.
•   "Cord-cutting" among cable TV customers.
•   Other important reasons that I'll discuss in greater depth later this week.

All of this spells trouble for Disney and its heavy reliance on ESPN for revenues and profits. As I've previously noted, I expect Disney's secular growth rate to fall far short of consensus forecasts.
So, I recommend not going long on Disney given the stock's still-elevated valuation, which I believe incorporates faster profit growth than the firm might ultimately see.

Position: Short DIS (small)
 
Douglas A. Kass
Seabreeze Partners Management Inc.

Serious question: Who is Douglas A. Kass and why should anybody care? Does he have a proven record of being right 90% of the time? 75%? 50%? 33%? 25%?

[Tugg Speedman]

Serious question: Who is Douglas A. Kass and why should anybody care? Does he have a proven record of being right 90% of the time? 75%? 50%? 33%? 25%?

He is a successful hedge fund manager of some reputation.  He is a "short seller" often betting on stocks that will go lower.  He writes a column on thestreet.com.  Finally, Warren Buffett is a big fan and has Dougie as his "resident bear" at his annual meeting so someone can provide "the other side."

If this matters, I've known Dougie for many years and have the utmost respect for him.  I know, my endorsement probably buried him!

[Herman Cain]

He is a successful hedge fund manager of some reputation.  He is a "short seller" often betting on stocks that will go lower.  He writes a column on thestreet.com.  Finally, Warren Buffett is a big fan and has Doug as his "resident bear" at his annual meeting so someone can provide "the other side."

If this matters, I've known Dougie for many years and have the utmost respect for him.  I know, my endorsement probably buried him!

Ditto on all counts.

[Herman Cain]

Watching FS1 after the Creighton game. Monster Energy Supercross in a sold out Anaheim stadium. Production Values are excellent. I would say the Sports Bubble is alive and well in this corner of the sports world.

These guys have some serious ability by the way.

[Tugg Speedman]

Watching FS1 after the Creighton game. Monster Energy Supercross in a sold out Anaheim stadium. Production Values are excellent. I would say the Sports Bubble is alive and well in this corner of the sports world.

These guys have some serious ability by the way.

But FS1 is not paying them hundreds of millions for broadcasting rights.

Definition of the sports bubble ... years of ever rising broadcasting rights has lead to ESPN now pay $6 billion a year for programming (and some number more for production).  This was based on the fact that they had 100 million subscribers paying $6 month for ESPN ($8/month for ESPN and ESPN2) and this number would never go down and ESPN could raise their month fee anytime they wanted and by however much they wanted.

Now that the bubble has popped, they still have the $6 billion a year in rights, and will for years to come.  Their 100 million subscribers is now 92 million and will continue to head south ... pretty much forever.  Gone are the day of raising the month charge and that might have to start down too.  So way too high fixed costs that will not change and falling revenue growth that will eventually turn negative is the definition of the sports bubble popping.

Bottom line, the popping of the sports bubble means that people that don't watch sports will stop paying for it.

[Herman Cain]

But FS1 is not paying them hundreds of millions for broadcasting rights.

Definition of the sports bubble ... years of ever rising broadcasting rights has lead to ESPN now pay $6 billion a year for programming (and some number more for production).  This was based on the fact that they had 100 million subscribers paying $6 month for ESPN ($8/month for ESPN and ESPN2) and this number would never go down and ESPN could raise their month fee anytime they wanted and by however much they wanted.

Now that the bubble has popped, they still have the $6 billion a year in rights, and will for years to come.  Their 100 million subscribers is now 92 million and will continue to head south ... pretty much forever.  Gone are the day of raising the month charge and that might have to start down too.  So way too high fixed costs that will not change and falling revenue growth that will eventually turn negative is the definition of the sports bubble popping.

Bottom line, the popping of the sports bubble means that people that don't watch sports will stop paying for it.

In this case I am sure Monster Energy is writing a big ticket to sponsor this event. They agree to buy ads from FS1 etc. Probably a good deal for all the parties.

I agree that the next round of TV sports pricing may change dynamics. However, good quality product will still command top dollar.

Implication for MU is that the Big East as whole needs to be a damn good product and College Basketball has to be view positively. I think the way the conference is currently defined it will be. NBA will eventually go to two and done or something like baseball , either of which will enhance College basketball.

[ChicosBailBonds]

Watching FS1 after the Creighton game. Monster Energy Supercross in a sold out Anaheim stadium. Production Values are excellent. I would say the Sports Bubble is alive and well in this corner of the sports world.

These guys have some serious ability by the way.

I went two weeks ago to Anaheim Stadium for the motocross...put on by same production company.  Passed on tonight. 

Thing is, costs for this kind of stuff is cheap. It's filler.  That being said, I don't think the bubble is over by any stretch, but FS1 has some issues right now....not on quality, in other areas.   My former boss is the president of FS1.  Very smart guy.  He has a tough gig right now.

[MU82]

He is a successful hedge fund manager of some reputation.  He is a "short seller" often betting on stocks that will go lower.  He writes a column on thestreet.com.  Finally, Warren Buffett is a big fan and has Dougie as his "resident bear" at his annual meeting so someone can provide "the other side."

If this matters, I've known Dougie for many years and have the utmost respect for him.  I know, my endorsement probably buried him!

Thanks for the answer. Your endorsement is no indictment of him, nor is it a huge thumbs-up for him in my eyes.

Whenever I hear so-and-so "expert" says such-and-such, my immediate question is, "OK, what is his or her record on predictions of this kind?" You probably don't know, and that's fine. I'd rather you say what you did than make up a percentage. But it really doesn't prove anything about the gentleman's record.

[Tugg Speedman]

Thanks for the answer. Your endorsement is no indictment of him, nor is it a huge thumbs-up for him in my eyes.

Whenever I hear so-and-so "expert" says such-and-such, my immediate question is, "OK, what is his or her record on predictions of this kind?" You probably don't know, and that's fine. I'd rather you say what you did than make up a percentage. But it really doesn't prove anything about the gentleman's record.

90% of all restaurants fail after a year.  So when people ask how the restaurant down the block is doing, if it has been in business for more than a year, it's doing good!

Likewise, 90% of hedge fund struggle.  Dougie is a hedge fund manager that positions exactly the way he writes.  After years and years he still in business, so he's doing well.