Wednesday, February 8, 2017

Massive ESPN Financial, Subscriber Losses Drag Down Disney’s First-Quarter Sales

A year that saw arguably the five greatest championship game performances of all time should have helped right the ship for ESPN, and at the very least stopped the trend of massive subscriber losses which have plagued the Bristol-based sports giant for the last few years.

Well, that did not happen, and ESPN appears to be a sinking ship, dragging parent company Disney down with it.

Bloomberg reports that ESPN badly hurt Disney’s first quarter sales, falling well short of projections.

According to The Wrap, “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.”

In other words, everyone else at Disney met or exceeded their projected goals, except for ESPN who lost more than twelve million subscribers in just under six years.

But, the problem for ESPN goes deeper than just losing subscribers and money. The Wrap explains, “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.”

Less cash on hand means less cash to purchase rights to sporting events, which can prove particularly harmful to an entity that considers itself a sports network. Now, Disney and ESPN have laid much of the blame for their subscriber loss at the feet of ...Read More HERE

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