Weekly Media Notes: Star Wars, Mortal Kombat XL, NFL And More

January 26th, 2016 by Trefis Team
+10.18%
Upside
113
Market
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Trefis
DIS: Walt Disney logo
DIS
Walt Disney

Media stocks remained fairly active last week, with Disney (NYSE:DIS) postponing the release of the next Star Wars title to December 2017, while Time Warner (NYSE:TWX) announced a new version of its popular video game Mortal Kombat. CBS (NYSE:CBS) and NBC may share the Thursday NFL games this fall as the NFL negotiates the telecast rights. Also, CBS-owned Showtime has inked a content licensing deal with Sky Europe to offer Showtime’s catalog on-demand for Sky subscribers. Below we discuss the developments related to these media companies over the last week or so.

Disney

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Disney has postponed the release of Star Wars: Episode VIII to December 2017 for unknown reasons. [1] The movie was earlier slated for a May release. Star Wars is an important asset for Disney; its first movie with Disney has already grossed close to $1.9 billion worldwide in the first month of its release. [2] Despite the massive success of Star Wars, Disney’s stock has dropped over 10% in the last month and is hovering around its 52-week-low of $90. This can partly be attributed to adverse market conditions amid continued concerns about a slowdown in China as well as low oil prices. However, Disney is also facing concerns over increased cord-cutting, which may impact its large cable networks such as ESPN. It will be interesting to see the company’s December quarter performance and if it can lift the stock in the coming days. The earnings release is scheduled for February 9th.

See Our Forecast For Disney’s Box Office Market Share

  • Trefis has a $120 price estimate for Disney’s shares, translating into a $200 billion market cap. This is 25% above the current market price of $94.
  • We estimate the company’s revenues to be around $52.5 billion and earnings per share to be $5.00 for the calendar year 2015.

Time Warner

Time Warner’s studio has announced a new version of its popular video game Mortal Kombat. The new version will include every DLC (downloadable content) character released for the game. However, the new game will be available only for consoles such as PlayStation 4 and Xbox One. The studio has currently blocked new content for PCs. It also confirmed that PC players will not be able to buy future DLC for last year’s Mortal Kombat X. [3] Mortal Kombat is one of the most popular video games, and its previous version was the 9th best selling game of the year. [4] If the company decides to continue to block the new content for PCs, it will surely impact its sales. PC game sales are expected to be $29 billion in 2016 as compared to $28 billion for console games, according to research by PwC. The research also finds that the spending difference will widen in favor of PC in the coming years. [5]

See Our Forecast For Warner Bros. Consumer Products

  • Trefis has a $98 price estimate for Time Warner’s shares, translating into a $78 billion market cap. This is significantly ahead of the market price of $70.
  • We estimate the company’s 2015 revenues to be around $29 billion for earnings per share of $4.52, compared to a consensus of $4.68 according to Reuters.

 

CBS

CBS’ (NYSE:CBS) Showtime has inked a deal with Sky to license its catalog to Sky’s 21 million subscribers across Europe. Showtime owns around 80% of the content on its network and the deal primarily covers that content. However, it won’t include shows such as Homeland and Shameless, which are not owned by Showtime. [6] While the financial details of the agreement weren’t disclosed, it will surely aid CBS’ licensing revenues.

Separately, the NFL is negotiating a renewal of telecast rights for Thursday games, and it might split the games between multiple broadcasters. CBS and NBC are in the lead for the rights to 10 games, which may be priced as high as $600 million, according to The Wall Street Journal. Earlier, CBS paid $300 million for the rights to 8 games the previous fall. [7] This is important, as sports programming garners very high viewership and thus high ad prices, which offsets the decline in other advertising, due to a shift of viewership to digital platforms. CBS has benefited from its coverage of Thursday Night Football, with ad prices as high as $500k for a 30-second spot, and it might still be able to hold on to the rights in the ongoing negotiations. [8]

See Our Forecast For CBS’ Cable Networks Revenues

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Notes:
  1. Walt Disney Co (DIS) Postpones Release of “Star Wars: Episode VIII” by More Than 6 Months, Independent Reporter, Jan 21, 2016 [↩]
  2. Star Wars: The Force Awakens, Box Office Mojo [↩]
  3. Warner Bros. ignores PC players, drops Windows support for Mortal Kombat X, Ars Technica, Jan 21, 2016 [↩]
  4. 2015 NPD: The 10 best-selling games of the year, VentureBeat, Jan 14, 2016 [↩]
  5. Playing games on the PC is making a comeback, Cnet, Jun 14, 2015 [↩]
  6. CBS boosts Showtime’s international reach with Sky partnership, MarketWatch, Jan 21, 2016 [↩]
  7. NFL Throws Weight Around in Talks Over Thursday Night Football, The Wall Street Journal, Jan 21, 2016 [↩]
  8. Here’s How Much Ad Time in NFL Games Costs Marketers This Season, Advertising Age, Sep 15, 2015 [↩]