Media Notes: Disney’s Studio To See Solid Growth With Or Without Dreamworks Deal, While CBS Live Stream Of NFL Highlights Changing Landscape

+8.98%
Upside
114
Market
124
Trefis
DIS: Walt Disney logo
DIS
Walt Disney

Media stocks largely remained stable for the week and the industry at large remained active with talks of a split between DreamWorks and Disney. In another note, Australia’s Becker inked a video deal with 20th Century Fox Studios. In yet another, CBS will offer 2 regular season NFL games for live streaming. On that note, we discuss below the developments related to these media companies over the last week or so.

Disney

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Disney (NYSE:DIS) launched its Star Wars toys and other merchandise on Friday, with aggressive marketing push using popular platforms such as YouTube (Maker Studios) and ABC. (see – Disney To Push Star Wars Merchandise, So As To Drive Double Digit Segment Growth Near Term)

However, the buzz around Disney this past week was more around a rumoured split with Steven Spielberg’s DreamWorks. Both the companies inked a distribution deal back in 2009, which will expire in August 2016. While DreamWorks may be negotiating with various studios, it may be headed towards Comcast’s Universal, as the studio is essential for future dinosaur movies as well as theme park attractions. The relationship with Disney wasn’t fruitful for DreamWorks.  It was expecting Disney’s investment in its movies and DreamWorks was to join some of Disney’s projects.  Yet none of this came to pass. [1] Looking at Disney, it has been backing its in-house movies and already has a wide portfolio with Pixar, Marvel and Lucasfilm. Accordingly, losing DreamWorks doesn’t make much of difference for Disney. We maintain our bullish view on Disney’s studio operations, which is likely to see massive growth in the coming years, primarily driven by Star Wars and sequels around various Marvel characters (see – Disney: Sequels Around Marvel, Lucasfilm and Disney’s Characters Will Drive The Studio Business Growth).

  • Trefis has a $119 price estimate for Disney’s shares, translating into a $200 billion market cap. This is around 15% above the market price of around $102 seen over the week.
  • We estimate the company’s 2015 revenues to be around $52.60 billion for earnings per share of $5.00, in line with the consensus of $5.00, according to Reuters.

21st Century Fox

21st Century Fox’s (NYSE:DIS) studio, 20th Century Fox, recently inked a video deal with Australia’s Becker. The deal covers physical as well as video-on-demand (VoD) rights of old as well as current titles. [2] Like other studios, Fox has also seen massive growth in its movie and TV shows licensing. The segment revenues have grown at an average annual rate of over 12% over the last five years and the figure stood at $4.90 billion in 2014. With a new generation embracing video content on digital platforms, Fox is likely to see continued revenue growth in the coming years. We currently estimate the licensing revenues to be north of $8.5 billion and EBITDA of $1.7 billion by the end of our forecast period (see – Content Licensing Can Catalyze Fox’s Stock Price Movement).

  • Trefis has a $39 price estimate for 21st Century Fox’s shares, translating into a $80 billion market cap. This is roughly 45% ahead of the market price of around $27 seen over the week.
  • We estimate the company’s 2015 revenues to be around $30 billion for earnings per share of $1.72, compared to consensus of $1.70, according to Reuters.

CBS

CBS (NYSE:CBS) recently stated that it will offer 2 regular season NFL games, along with Super Bowl 50 and 4 playoff games for live streaming. The entire NFL on CBS coverage will be free and the viewers will not require any authentication. [3] CBS has been going aggressive with streaming options and NFL is a mammoth to offer, given that it generates very high advertising revenues. Last year advertisers paid around $5 million for a 30 second spot in Thursday Night NFL games. With this move, CBS is trying to reach out to audience, which increasingly watches video on various connected devices, such as mobile phones and tablets (see – NFL Coverage And Political Spending Will Aid CBS’ Growth In The Near Term). CBS itself has been aggressive with streaming options and it has launched over-the-top video service for CBS Network as well as Showtime (also see – How Will Showtime’s Streaming Service Impact CBS’ Performance?).

  • Trefis has a $64 price estimate for CBS Corporation’s shares, translating into a $31 billion market cap. This is roughly 45% ahead of the market price of around $44 seen over the week.
  • We estimate the company’s 2015 revenues to be around $14 billion for earnings per share of $3.30, compared to consensus of $3.41, according to Reuters.

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Notes:
  1. Steven Spielberg’s DreamWorks to Split From Disney, in Talks With Universal (Exclusive), The Hollywood Reporter, Sep 2, 2015 []
  2. Australia’s Becker Signs Video Deal With 20th Century Fox, Variety, Sep 1, 2015 []
  3. CBS Will Live-Stream Regular Season NFL Games for First Time, Variety, Sep 1, 2015 []