×
You will be redirected back to your article in seconds

Disney’s Confidence in Its TV Business May Be Misplaced

The Walt Disney Co.’s annual 10-K report, released Nov. 23, does little to back up management’s confidence in a turnaround in 2017.

The report indicates that almost all of Disney’s major cable networks were down by 2 million or more subscribers compared with last year. Even worse, A&E, ESPN, and ESPN2 are down by 8 million, 9 million, and 10 million, respectively, over the last three years.

None of this is surprising. Pay TV subscriptions peaked in 2013, and many subscribers are trading down to smaller packages that exclude prominent channels. Emerging online-channel bundles like AT&T’s DirecTV Now seem likely to continue to eat into the traditional pay-TV subscriber totals.

sources: Company Reporting, jackdaw research Analysis

This has been having an impact on Disney’s annualized cable revenue. This past quarter’s numbers aren’t as dramatically bad as they seem because of a quirk in the company’s fiscal calendar, but the overall trend is still one of slowing growth.

Add to this the rising cost of content, especially in sports, and these problems become even more acute. Cable networks provide 70% of Disney’s TV revenue and 87% of its TV profit, so the ESPN and broad- er cable-networks business can significantly affect the company’s entire TV business.

Yet while Disney executives now appear to acknowledge many of the challenges they have played down in the past, they sound strangely optimistic. Pressed by analysts on the November earnings call, management cited the rise of skinnier online bundles as a potential savior for ESPN. These new offerings, they contend, will lead to a resurgence in subscribers from segments of the market the company hasn’t been able to reach — notably, millennials.

sources: Company Reporting, jackdaw research Analysis

But many consumers seek out these slimmer bundles in an attempt to rid themselves of expensive channels they don’t watch — which, not infrequently, include ESPN.

Over time, Disney sees going direct-to-consumer with its sports offerings as a potential driver of growth; its investment in Major League Baseball’s BAM Tech operation is intended to further this goal. However, Disney has dabbled in the direct-sales space only overseas and has pushed back against suggestions it would launch ESPN as an online service in the U.S. anytime soon.

While Disney execs continue to paint a rosy picture for the future, all the major trends seem to be working against the company, especially its ESPN channels. Given the firm’s track record of cord-cutting denial, we’ll have to take its optimistic claims with a grain of salt until some evidence for them emerges.

Jan Dawson is the founder and chief analyst at Jackdaw Research, an advisory firm for the consumer technology market.

Popular on Variety

More Voices

  • Margot Robbie, Nicole Kidman, Charlize Theron.

    Charlize Theron Could Win Second Oscar for Playing Megyn Kelly in 'Bombshell'

    Charlize Theron walked on stage before a screening of “Bombshell” at West Hollywood’s Pacific Design Center on Sunday night and announced to the crowd, “I’m about to s— myself.” The Oscar winner had good reason to be nervous. The screening of the Jay Roach-directed drama about the fall of Fox News boss Roger Ailes was [...]

  • Tom Hanks Mr Rogers A BEAUTIFUL

    Tom Hanks' Portrayal of Mister Rogers May Put Him Back in Oscar's 'Neighborhood'

    Sony recently hosted a SAG-AFTRA screening of “A Beautiful Day in the Neighborhood,” the Marielle Heller-directed drama starring Matthew Rhys as a magazine writer who befriends Fred Rogers, played by Tom Hanks. While the screening didn’t include a guild Q&A with cast or the film’s creative team, the audience was greeted with a video message from [...]

  • Joe Pesci, Al Pacino, Martin Scorsese,

    Martin Scorsese and 'The Irishman' Enter Oscar Race With World Premiere at NYFF

    Even with its three-hour run time and a short 28 days in theaters before it’s available on Netflix, Martin Scorsese’s “The Irishman” is likely to be a major contender at the Oscars. The 57th New York Film Festival opened on Friday night with the world premiere of the epic real-life mob drama. Scorsese and his [...]

  • Brad Pitt Once Upon a Time

    How Much Does Hitting the Awards Season Circuit Really Matter to Stars Like Brad Pitt?

    “Do you want an Oscar?” That’s the first question one top awards consultant asks any potential contender when they first start talking. Everyone is wondering how Brad Pitt would answer that question these days. He recently raised eyebrows and made headlines when he proclaimed that he would not be campaigning this awards season. “Oh, man. I’m [...]

  • Renee Zellweger'Judy' film premiere, Arrivals, Samuel

    'Judy's' L.A. Premiere: Renée Zellweger Takes Another Ruby Step Toward the Oscars

    Renée Zellweger continues to follow the yellow brick road to the Oscars. The Los Angeles premiere of Judy on Thursday night in Beverly Hills kept the Academy Award winner on track for a possible second win come February. “We’re just so happy we’re able to share it with you tonight,” Zellweger said to the crowd [...]

  • Barry Bill Hader

    Emmys 2019: Clear Favorites and Top Challengers for This Year's Winners (Column)

    If this felt like the longest, most expensive Emmy campaign in history, you might be right. For one thing, the 2019 Primetime Emmys will be held Sept. 22, which is the latest the ceremony has taken place since 2013. That also happened to be the last year of TV’s quaint, pre-streaming era, before outlets like [...]

  • Fleabag Succession Emmys

    Could 'Fleabag' and 'Succession' Be Spoilers on Emmy Night? (Column)

    At the onset, this year’s Emmy Awards felt a bit anticlimactic, as the final seasons of “Game of Thrones” and “Veep” appeared to have this year’s drama and comedy categories locked up before campaigning even began. But that’s how upsets happen: Just when we’re pretty confident about how things might go, a couple of wild [...]

More From Our Brands

Access exclusive content