- When Walt Disney (DIS +1%) posts earnings after the closing bell, observers will be looking to answers for a few questions (Will M&A be required to keep up with a merged AT&T/Time Warner, if it happens?) but firmly foremost is one: What's up at ESPN?
- Disney stock has been a DJIA laggard, falling 18.5% over the past 12 months (and 10% over the past six months). And declining subscriber numbers (and along with that, affiliate fees) have played perhaps the biggest role there, overshadowing success at the box office and with theme parks.
- Disney's expected to post EPS of $1.16 today (down 28% Y/Y) for its fiscal Q4, according to Capital IQ consensus, along with revenues of $13.52B. Along with ESPN, investors will watch for comments about media consolidation and some color on the company's film slate, which may be light in Q4 depending on the success of Star Wars stand-alone film Rogue One and animated feature Moana, and any legs from Marvel film Doctor Strange.
- ESPN has been a concern for a few quarters now, but the questions are more urgent than ever after Nielsen noted that the network had its worst month ever in terms of subscribers, with 621,000 losses. A sharp decline in football ratings should feature into the earnings call.
- Meanwhile, cable titan John Malone sees the possibility of an ESPN spin-off, saying Disney's being weighed down by the Worldwide Leader. "If I had to guess, what you will see is a split of Disney with ESPN spun off and, probably, ESPN could be owned and protected by a distributor in the U.S.," he says.
- As sports rights have skyrocketed, the network has gotten expensive, Malone says. "In order to solve the issue of having to pay more every time the contract comes up, they went long ... At the moment, that looks adverse."
- And if Disney clears itself of ESPN, he says, maybe Apple (NASDAQ:AAPL) wants Disney: "Fundamentally, Tim Cook is a global player, and fundamentally, ESPN is a domestic service."
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Disney earnings questions: ESPN, and ESPN
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