ESPN And Theme Parks To Shine For Disney

Disney (NYSE: DIS) reported its fiscal Q3 (April-June) earnings on Wednesday, August 9th. (Fiscal years end with September.)  We believe 2016 to be a good year for Disney’s growth. We expect ESPN to bounce back from its subscriber losses as the company benefits from various digital streaming services such as Sony Vue and a new platform to be launched by the end of this year. Additionally, Disney’s theme parks should be strong driver for future growth, due to the ongoing international expansion.

Here Is How ESPN Can Curb Subscriber Losses

ESPN accounts for more than 25% of Disney’s valuation, according to our estimate. With the earnings, the company announced $1 billion investment in BAMTech to secure a 33% stake. BAMTech is a leading technology services and video streaming company formed by Major League Baseball and at present has 7.5 million subscribers.  Through this relationship, BAMTech will be a key partner in streaming video and other digital content from the Disney/ABC Television Group and ESPN. Given the intricacies of current broadcasting relationships, certain content will be witheld from the service, though the intent is clearly to establish a video streaming platform for ESPN and its other sports properties.  Cord-cutting continues to remain significant issue.  The number of subscribers for ESPN has fallen from 100 million in 2010 to less than 90 million in May, 2016. The availability of ESPN on over the top (OTT) services such as Sony Vue and the aforementioned new investment of Disney should  help reverse the revenue loss ESPN incurred from declining subscribers.

Theme Parks And Resorts May Have A Silver Lining

Despite the shifting of Easter to Q2 this year, the alligator attack at one of the Disney theme parks and the Paris terrorist attacks, theme parks and resorts revenues were up by 6% in the third fiscal quarter. This was due to higher per capita spending on admissions, food and beverage. Domestic per capita spending continues to be an important revenue driver for theme parks.

We believe that theme parks, which currently account for 30% of the valuation of the company as per our estimates, will be an important driver for Disney’s long term growth. The launch of Disney’s Shanghai theme park has been a success, as the park demonstrated 95% occupancy this quarter and more than 1 million guest during its first month. There is also an Avatar-style expansion planned for one of its theme parks by 2017. Disney’s Cruise Line is gaining momentum, with two additional cruise ships expected to join its fleet by 2023.

Source:

[1] The Walt Disney (DIS) Robert A. Iger on Q3 2016 Results – Earnings Call Transcript, Seeking Alpha, August 09,2016

Have more questions about Disney? See the links below.

• What To Expect From Disney’s Earnings?
• How Important Is ESPN For Disney?
• How Important Are Theme Parks For Disney?
• What’s The Revenue Breakdown For Disney’s Business Segments?
• Is Non-Advertising Becoming More Significant Revenue Contributor To Disney’s Media Networks?

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively.

For precise figures, please refer to our complete analysis for Disney

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