Disney earnings: Is Disney positioning itself for the future, or clinging to the past?

Feb 6, 2018

For the first quarter in a while, the crucial issue surrounding Walt Disney Co. won’t be: What’s happening with ESPN?

During its fiscal first quarter, Disney announced plans to acquire key TV and entertainment assets from 21st Century Fox Inc. in a $52.4 billion deal. The proposed acquisition includes Fox’s 20th Century Fox film division and TV studio, as well as its international and cable TV businesses.

Earnings: Disney is expected to report per-share earnings of $1.61, according to analysts tracked by FactSet. That would be a 4.5% increase compared with the same period a year ago and an increase of 51.4% compared with the company’s most recent fiscal fourth quarter. Disney has outperformed on earnings, beating FactSet’s consensus in seven of the last 10 quarters.

Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, expects Disney to report earnings of $1.63 per share.

Revenue: Analysts expect the media and entertainment company to report revenue of $15.48 billion for the quarter, up 4.8% from the year-earlier period, and up 21.2% compared with the company’s most recent quarter. Disney has missed FactSet’s revenue consensus in eight of the last 10 quarters. Estimize contributors on average expect Disney’s revenue to be $15.23 billion.

The company’s media business, which includes cable and broadcasting networks, is expected to bring in $6.34 billion for the fourth quarter, with the majority of that coming from Disney’s cable networks. Disney’s theme parks and resorts are expected to contribute $5.23 billion, while the film business contributes $2.60 billion and the consumer products business brings in $1.66 billion.

Disney CEO Iger: ESPN streaming service to cost $4.99 per month

Disney CEO Bob Iger said it will cost $4.99 to stream new ESPN services, provided you are already a subscriber.

The company announced in August it would launch its own ESPN video streaming service in early 2018. The platform, which will feature about 10,000 sporting events each year, will have content from the MLB, NHL, MLS, collegiate sports and tennis' Grand Slam events.

Comcast Moves to Hijack Murdoch’s Deal for Sky With $31 Billion Offer

Approach for U.K. broadcaster complicates deal for Disney to buy assets from 21st Century Fox

Feb. 27, 2018

Comcast Corp. is planning a takeover bid for European pay-TV giant Sky PLC, putting the cable giant on a collision course with rivals 21st Century Fox and Walt Disney Co.

Early Tuesday Comcast said it was planning a Ł22.1 billion ($30.9 billion) offer for Sky, topping a rival bid from Fox to consolidate ownership of the U.K. broadcaster—and moving to peel away one of the most attractive overseas assets that Disney has separately agreed to buy from Fox.

Comcast is offering Ł12.50 a share for all of Sky, significantly higher than the Ł10.75-a-share offer from Fox for the 61% of Sky it doesn’t already own.

Sky’s shares soared more than 20% to Ł13.47—well above the Comcast offer—with investors gearing up for a potential bidding war. Sky’s stock had already been trading above Fox’s offer price amid expectation Fox would need to raise its bid.

Late last year, Disney agreed to buy a big chunk of assets from Fox, including its stake in Sky, for more than $52 billion. Sky was seen as a particularly attractive asset in the package—a way Disney could grow its overseas footprint.

That’s the same rationale Comcast Chief Executive Brian Roberts said is driving his interest. In an early Tuesday conference call, he said he values Sky’s unusual position as both a telecom operator—selling TV, internet and wireless plans across Europe—and a media company that broadcasts its own channels and produces original sports, entertainment and news programming. Sky has about 23 million customers in the U.K., Ireland, Germany, Austria and Italy.

The Comcast bid is the latest move in complicated, four-way deal talks that have been under way for more than a year between, first, Fox and Sky, then Fox and Disney and, separately, Fox and Comcast. Over the course of those negotiations, Rupert Murdoch has pivoted from buyer—aggressively moving to consolidate its ownership of Sky after failing to do so several years earlier—to a seller of assets.

Mr. Roberts said Tuesday that Comcast preferred to buy 100% of Sky, including Fox’s current 39% stake. He said Comcast would also settle for a majority stake, and would be prepared to be co-owners with either Fox or Disney.

The offer puts the ball in the courts of Fox and Disney. If Fox was to raise its bid—a move that shareholders would expect given Sky’s soaring share price—it would likely need to discuss the structure of any new bid with Disney.

Fox, meanwhile, is in a difficult position somewhere in the middle. Its 39% interest in Sky makes it a big potential beneficiary of the significantly sweetened bid. But accepting the Comcast offer changes the major contours of the Disney-Fox deal. The fine print of the Disney deal stipulates that Disney must approve of any sale of Sky shares. It’s unclear whether Disney would want to end up partners with Comcast. Mr. Murdoch’s son, James, is Sky’s chairman.

Fox would be required to pay Disney a $1.53 billion breakup fee if Fox’s board changed its recommendation for the Disney deal. Similarly, Disney would have to pay Fox the same breakup fee if a change in Disney’s board recommendation for the merger caused Fox to end the pact.

Another option for Fox: Hold on to its 39% stake, making it a partner with Comcast in Sky, at least until Disney completes its Fox takeover.

Disney earnings: The ‘Black Panther’ bump is just the beginning

May 7, 2018

When Disney reports second-quarter earnings after the bell Tuesday, the success of Marvel’s “Black Panther” will be a huge focus, as the blockbuster film opened about halfway through the quarter and added hundreds of millions to Disney’s movie revenue and profit. The first Marvel movie with an African-American lead has become one of the top 10 box-office successes of all time, and is No. 3 for domestic returns, behind only “Star Wars: The Force Awakens” and “Avatar."

It appears “Black Panther” will not stay in its current spots on the all-time lists for long, however, as purple-hued Marvel villain Thanos takes center stage. Marvel’s “Avengers: Infinity War” has become the fastest movie to surpass $1 billion in box-office returns, taking less than two weeks to hit that number, and early returns made Marvel the fastest studio to hit $1 billion in box office in a year in history, according to Forbes.



The success is helping to push expectations for Disney’s studio business higher, as the company continues to profit from its acquisitions of Marvel, “Star Wars” studio Lucasfilm and Pixar. Analysts have added about $100 million to their quarterly forecasts for that segment of Disney’s business since “Black Panther” came out in February, pushing the total to $2.19 billion.

Disney is expected to report operating profit of $3.75 billion for the quarter, according to FactSet, which would make “Black Panther” worth about 10% of Disney’s total.

Analysts have also added to Disney’s expected earnings thanks to Marvel’s success. While the average expectations have moved higher by just a penny a share since the end of February, UBS analysts added 10 cents to their second-quarter estimate, which was due to the outperformance of “Black Panther.” UBS has a buy rating and $128 price target on the stock.

Any reticence to push estimates higher could be stemming from disappointment elsewhere, namely from Disney’s other main movie opening of the quarter. “A Wrinkle in Time” opened to a disappointing $33.1 million (playing second fiddle on its first weekend to “Black Panther,” which was already in its fourth), stressed Daniel Salmon of BMO Capital Markets, who has a Market Perform rating and $100 price target on the stock.

Earnings: Analysts on average expect Disney to report earnings of $1.70 a share, according to FactSet, up from $1.50 a share a year ago. Contributors at Estimize, which crowdsources estimates from analysts, fund managers and academics, expect profit of $1.73 a share on average.

Revenue: Analysts expect total revenue of $14.1 billion on average, FactSet reports, up from $13.3 billion a year ago. Estimize contributors on average predict sales of $14.3 billion.

Disney revenue has historically broken down into four segments which the company calls Media Networks, Parks & Resorts, Studio Entertainment and Consumer Products & Interactive. On average, analysts expect sales of $6.09 billion for media networks, with $4.22 billion coming from cable networks and $1.86 billion from broadcast; $4.69 billion from Parks & Resorts; $2.19 billion for Studio Entertainment; and $1.14 billion for Consumer Products & Interactive.

What analysts are saying

Analysts are excited to hear about ESPN, a big focus of investors for the past couple of years as the sports family of cable networks has been losing subscribers who are cutting the cable cord. With this update, Disney’s overall streaming strategy could also be discussed. Disney launched a new direct-to-consumer ESPN service late in its fiscal second quarter, part of a strategy that will also eventually include a Disney streaming-media service expected to launch after the company’s contract with Netflix Inc. ends.

“We feel that Disney’s broader shift to DTC/OTT is correctly the top point of investor focus right now,” BMO analysts wrote in a note on April 25, in which they bumped Disney’s rating to market perform from underperform.

“Strategizing around Disney’s overall OTT strategy beyond just ESPN+ is becoming increasingly important given the growing proportion of Disney viewership that is happening on alternative distribution platforms," wrote Macquarie analysts, who have an outperform rating on the shares with a $125 price target.

The effort is likely to have a negative effect in the short-term, as Disney spends to build the services, but is expected to begin showing fruit in a couple of years.

“Overall, we expect the Disney-branded service to be a powerful consumer offering that enhances the Disney ecosystem and brand, but notable content investments and lost licensing fees over the next couple of years are likely to drive losses before the service ramps to roughly break-even by F2021 with ~13m subscribers,” JP Morgan analysts wrote in an April 30 note devoted entirely to Disney’s streaming plans. “Meanwhile, we expect ESPN+ to have a very modest financial benefit by F2020, although given the complementary nature of the offering, we do not expect it to be a meaningful financial driver but rather become an important technology and digital infrastructure platform for the company as the media landscape becomes increasingly on-demand.”

“Driven by strong results in our parks and resorts and studio businesses, our Q2 performance reflects our continued ability to drive significant shareholder value,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company.

Cable Networks decreased 4% to $1.7 billion. Lower operating income was primarily due to a loss at BAMTech and decreases at Freeform and ESPN.

The decrease at ESPN was driven by higher programming costs, partially offset by affiliate revenue growth and higher advertising revenue. Affiliate revenue growth reflected contractual rate increases, partially offset by a decline in subscribers. Higher advertising revenue was due to an increase in rates, partially offset by lower impressions driven by fewer units delivered and a decrease in average viewership.

Pixar Co-Founder to Leave Disney After ‘Missteps’

June 8, 2018

John Lasseter, the animation titan who has been on leave from the Walt Disney Company since November because of what he called “missteps” that made some staff members feel “disrespected and uncomfortable,” will not return to the conglomerate.

Disney said on Friday that Mr. Lasseter — the co-founder of Pixar Animation Studios who has long been one of Disney’s most important creative executives, serving as a force behind the “Toy Story,” “Cars” and “Frozen” franchises — would take on a consulting role at the company until the end of the year and then leave permanently. He will not have an office in the interim.

Mr. Lasseter, 61, served as chief creative officer of Pixar and the separate Walt Disney Animation studio. Disney did not name replacements. Jennifer Lee, a director of “Frozen,” is expected to be promoted at Walt Disney Animation, and Pete Docter, the director of films like “Up” and “Inside Out,” is expected to take on greater responsibilities at Pixar, according to a person briefed on the matter, who spoke on the condition of anonymity because plans had not been finalized.

21st Century Fox Agrees to Higher Offer From Disney

June 20, 2018

Walt Disney Co. raised its offer to purchase most of 21st Century Fox to more than $70 billion in cash and stock, topping an unsolicited offer from rival Comcast Corp. as the bidding war for the coveted media properties escalates.

Disney’s new offer is far higher than the price of its original deal, $52.4 billion in stock, and surpasses Comcast’s all-cash offer of roughly $65 billion. Disney will pay Fox shareholders roughly 50% in cash and 50% in stock.

The assets in play include the Twentieth Century Fox film and TV studio; U.S. cable networks including FX and regional sports channels; international assets including Sky PLC and Star India; and Fox’s one-third stake in the streaming service Hulu.

Neither proposed deal includes Fox News, Fox Sports 1, the Fox broadcast network or its television stations. In either scenario, those assets would be spun off into a new company, for the moment, dubbed “New Fox.”

A continuing bidding war could be a strain on both companies’ balance sheets. Disney Chief Financial Officer Christine McCarthy said the company no longer expects to complete a $20 billion share repurchase announced with the initial deal in December.

Mr. Iger said on a conference call Wednesday that the possibility of meeting with Comcast to divide the Fox assets among the two companies is a nonstarter. “We have an agreement in place with [Fox] that precludes that,” he said.

On a per-share basis, the new deal values the Fox assets at $38 a share, compared with the original Disney deal of $28 a share and Comcast’s offer of $35 a share.

Disney’s offer puts a “collar” on the stock portion, saying Fox shareholders would receive Disney shares equal to the $38 price so long as Disney’s stock price is between $93.53 and $114.32. Following the latest Disney deal, Fox shareholders would own 19% of the combined company, compared with 25% under the old deal.

Exodus from Pay TV Accelerates Despite OTT Partnerships

Cord-cutters to jump more than 32% this year

Jul 24, 2018

Even as traditional pay TV providers form partnerships with former over-the-top (OTT) rivals to retain customers, cord-cutting continues to outpace projections.

According to eMarketer’s latest figures, the number of cord-cutters—adults who have ever cancelled pay TV service and continue without it—will climb 32.8% this year to 33.0 million. That’s higher than the 22.0% growth rate (27.1 million) projected in July 2017.



Overall, 186.7 million US adults will watch pay TV (cable, satellite or telco) in 2018, down 3.8% over last year. That’s slightly higher than the 3.4% dip in 2017. Satellite providers will have the biggest decline, followed by telco.

“Most of the major traditional TV providers [Charter, Comcast, Dish, etc.] now have some way to integrate with Netflix,” eMarketer senior forecasting analyst Christopher Bendtsen said. “These partnerships are still in the early stages, so we don’t foresee them having a significant impact reducing churn this year. With more pay TV and OTT partnerships expected in the future, combined with other strategies, providers could eventually slow—but not stop—the losses.”



Meanwhile, the streaming platforms are growing at the expense of pay TV losses. In fact, eMarketer has increased its future viewership estimates for YouTube, Netflix, Amazon and Hulu. Growth is being fueled by more original programming and demand for multiple services.

“The main factor fueling growth of on-demand streaming platforms is their original content,” eMarketer principal analyst Paul Verna said. “Consumers increasingly choose services on the strength of the programming they offer, and the platforms are stepping up with billions in spending on premium shows. Another factor driving the acceleration of cord-cutting is the availability of compelling and affordable live TV packages that are delivered via the internet without the need for installation fees or hardware.”

New research shows Netflix's big bet on the future is working, as it continues to outpace its competition

May 8, 2018

- Netflix 's investment in original content appears to be paying off more and more in the eyes of consumers, according to research from Morgan Stanley.

- In an annual survey from the firm, respondents have increasingly viewed Netflix as having the "best original programming," compared to premium cable outlets and other streaming services.

Netflix will have over 1,000 original TV shows and movies on its service by the end of the year

May 14, 2018

Netflix is set to hit a milestone with its original TV shows and movies by the year's end, as the company's massive investment in its brand of "Netflix Originals" continues to pay off for the service.

Netflix chief content officer Ted Sarandos said on Monday, at a MoffettNathanson media summit, that the streaming service would have over 1,000 pieces of original content by the end of the year, with 470 of those originals set to premiere between now and end of 2018, Variety reports .

Sarandos said around 90% of Netflix's users regularly consume Netflix original programming.

NBA Finals ratings were not especially impressive in 2018, but the numbers were about as strong as one could expect given the sweep.

The four-game Warriors-Cavaliers NBA Finals averaged a 10.0 rating and 17.7 million viewers on ABC, down 12% in ratings and 14% in viewership from last year’s five game series between the same two teams (11.3, 20.4M), and down 12% and 13% respectively from their seven-game matchup in 2016 (11.4, 20.2M).

This year’s finals ranks as the lowest rated and least-watched since 2014, the last time the event did not pit Golden State against Cleveland (Spurs-Heat: 9.3, 15.5M).

It snapped a streak of three straight years in which the NBA Finals delivered its largest audience since 1998.

Of the 20 NBA Finals since 1998, this year’s series ranks 13th in ratings and eighth in viewership. With that said, it was the third-most watched NBA Finals through four games since 2001, behind last year (19.4M) and the first Warriors-Cavs matchup in 2015 (18.9M).

This year’s four games rank among the eight least-watched in the four-year run of Warriors-Cavaliers series (22 telecasts), joining Games 2, 3 and 4 in 2016 and Game 1 in 2015.

Notably, this year marks the first time since 2009 that not a single basketball game — college or pro — attracted at least 19 million viewers.

Anyone else have incorrect daily price change percentages wrong for options?

It seems like every option, be it a call or put is listed as positive, for every stock I've searched. Obviously this cannot be correct. Anyone else encountering this error?

Yes. RH been broken all week.

Broken for more than a week. Puts are positive even though the underlying stocks have been soaring.

Yes. With every option I’ve bought so far. I’ve been doing my own math instead of relying on the app, lol.

Disney Is Seeking ‘Star Wars’ Rights Back From TBS, TNT

Aug. 2, 2018

Walt Disney Co. is suffering from seller’s remorse.

The world’s largest entertainment company tried to buy back TV rights to “Star Wars’’ movies from AT&T Inc.’s Turner Broadcasting so that it can offer them on a new streaming video service, according to two people familiar with the matter.

Disney made a preliminary inquiry about regaining the rights, but met resistance, according to the people, who asked not to be identified because the talks were private. Turner has the rights to show the films on its cable networks, which include TNT and TBS, and online until 2024. The programmer would want financial considerations and programming to replace the lost films, one person said. The talks haven’t advanced further.

The “Star Wars’’ films are among the highest grossing in Hollywood, and content from the space saga figures to be a bedrock part of a new Disney streaming service that’s expected to debut next year. The company has said the service will include a catalog of movies and TV shows, as well as new, original programming such as a “Star Wars” TV series. It also wants the freedom to offer “Star Wars” movies on the service at will, one person said.

Disney sold certain rights to Turner in 2016, before it completed plans for the streaming service. The company has released four new Star Wars films since it acquired LucasFilm in 2012, and plans to release another in December 2019. Turner paid about $275 million for the six Star Wars movies released between 1977 and 2005, plus the newer titles.

Studios have long sold rights to their most popular films to TV networks to make more money after movies end their run in theaters. Paid networks like HBO, Showtime and Netflix acquire the rights to show movies a few months after they leave theaters, and then basic cable networks like FX and TNT buy the rights after they leave the premium services.

But media companies like Disney are now looking to build their own streaming services to compete with Netflix Inc. and finding some of their biggest features may be unavailable for years.

Disney has already said it won’t renew a deal with Netflix that gave the company rights to new releases, including four “Star Wars’’ titles. That accord expires at the end of this year.