Disney Got Hammered Because ESPN Continues To Decline

 

Awful Announcing, on Disney’s stock tumbling 5% after earnings:

Disney’s cable networks division (which includes the ESPN networks) saw its second-quarter revenues fall 1.86 percent to $3.96 billion, a drop of over $73 million. That’s still above Disney’s other divisions (parks, studio, consumer and interactive), but that illustrates just how important the cable networks are to the whole company and how a downturn there has the potential for a wider impact.

The cable networks’ downturn is far from the whole miss on the targets (another part is the decision to pull the plug on Disney Infinity and get out of publishing videogames, which will involve 300 layoffs and a $147 million charge for the quarter), but it’s a significant part. Those network problems aren’t all about ESPN (another big one is that the transition from H2 to VICELAND has been expensive), but the Worldwide Leader is a substantial part of them, especially as ESPN ad revenue declined by 13 per cent in the quarter. There is some good news on the networks front, as operating income for the division rose 12.34 per cent thanks to lower costs and higher distributor fees, but that doesn’t seem to be enough to stave off those concerned about where ESPN’s going.

I was literally just watching Jim Cramer talk about this on CNBC, and it’s clear there’s a huge gap in perception of mainstream media between Baby Boomers and Millennials (not surprisingly). Cramer, as I’m guessing many 50+ people do, sees ESPN as invaluable to sports fans. That’s partly true – for everyone – given the fact that ESPN-ABC owns the broadcast rights to so many major events. But Cramer cited SportsCenter, draft coverage and fantasy football as reasons why he needs ESPN. But there’s a whole generation of folks for whom that’s simply not the case. Many of you defer to blogs – like this one, SB Nation, Deadspin, Barstool, Awful Announcing, The Big Lead – over traditional mainstream coverage for your everyday sports fix. Live event coverage is often more entertaining and informative on Twitter or Snapchat than it is on ESPN or any TV network (this is true for politics and breaking news as well). And other than for last-minute updates or background noise, few serious fantasy sports players, especially daily fantasy players, use ESPN or other mainstream outlets as their go-to resource. I pay for a Fantasy Labs subscription, which is exponentially more valuable for daily fantasy than anything ESPN could ever produce. And there are, of course, a whole host of other (FREE) resources for that sort of thing. So the notion that ESPN and its non-live sports productions are essential is simply not true for most people. Hence, the Disney stock drop, or at least part of the reason or it.

On the other hand – and as we’ve discussed on podcasts before – cord-cutting is widely feared by the big guys, but there’s still a lack of a reasonable alternative for most people. Disney, like Comcast, is behind much of the content you consume, and just because they’re losing subscriber fees in the short-term does not necessarily mean they’re doomed in the long-term. Just from a sports perspective, ESPN still has the rights to Monday Night Football, the NBA Finals and much more, and NBC still owns the rights to Sunday Night Football, the Olympics, the Stanley Cup Finals, and much more. No one has quite figured out how to efficiently monetize those holdings with cord-cutters, but eventually someone will.

Everyone views cord-cutting as a way to save money, but that’s simply not the case if you want to keep anywhere near the amount of content you currently have. Here’s what a typical sports fan cord-cutter might subscribe to (rounding off prices):

  • Broadband (~$50)
  • Netflix (~$10)
  • Hulu (~$10)
  • HBO Now (~$15)
  • MLB.tv (~$10– $130 yr)
  • NBA League Pass (~$10– $120 yr)

That’s about $100 per month, and it doesn’t include the problem of local sports fans having to workaround cumbersome blackout rules. You typically need a VPN (another $10 per month). Suddenly, you’re spending as much or more as you were a traditional cable bill and still getting less content. The problem is compounded by the fact that you have 6-8 different subscriptions, being billed at different times of the month, all with different login requirements and passwords across a host of devices. There is a need for – get this – someone to bundle together all of those services into one bill, allowing you to get economies of scale. And what does that look like? The cable bundle that you hate.

Someone, soon, whether it’s Apple, Amazon or Comcast, will figure out a way to roll all this stuff into one or two streaming subscriptions, and all this fear about networks, like ESPN, losing subscriber fees will go away, because they will be able to just bundle their stuff in as part of a larger package that includes HBO, Netflix, news channels and regional sports.

There’s certainly a correction coming for networks like ESPN, and the larger media companies, but it’s far from disastrous. Someone just has to figure out how to create the perfect streaming bundle.

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54 Comments

  • David Cohen May 11, 2016 at 12:09 pm

    Nothing on Comcast buying Dreamworks?

    Reply
  • Drew Stanton May 11, 2016 at 12:10 pm

    Thus disney cut the infinite toy line that cost them $140 million! It was profitable so thanks to espn its no more!

    Reply
  • AP May 11, 2016 at 12:12 pm

    $100 a month doesn’t even come close to the amount most people pay for monthly cable. I personally am spending over $200 a month just so I can watch the same 6 six shows, phillies, and flyers (their is no other cable alternative). The cord cutting people out there also own these boxes called “ott tv box” “dragon box” or any other name it might have. They are a one time fee and have all movies, tv shows, and live sports including PPV at their fingertips.

    Reply
    • Gary Barbera May 11, 2016 at 12:15 pm

      $200 a month just for TV or is your internet and phone bundled into that?

      Reply
      • Kyle Scott May 11, 2016 at 12:41 pm

        I just scheduled Fios for when I move, before dvr, router rentals and taxes (which is substantial) i come oI at $90 per month for 100-100 Internet, decent cable plan and phone. The cable and phone added little cost had I just gotten broadband.

        Reply
        • Peter King May 11, 2016 at 1:18 pm

          So you are looking at $125 with all the additions. That is standard promotional rates. After your 1 or 2 year promo, you will be at $200

          Reply
          • Kyle Scott May 11, 2016 at 1:30 pm

            My point is, there’s always a deal and cable winds up being not that much more, or even less, depending on how many things you subscribe to

          • Hextall's Glasses May 11, 2016 at 2:26 pm

            This is just wrong. No, there is not “always a deal.” My town has one option: Comcast. Our bill was $100 a month when we moved in and it shot up to around $190 after a year. At that point no amount of battling with customer service reps would get them to come back down. There is no alternate to switch to if you want to be able to watch the Phillies, Flyers, and Sixers because Comcast won’t release the CSN broadcast rights to DirectTV and Dish. There are plenty of other markets where Comcast is the only option.

            Using a VPN to bypass blackouts is also against every TOS and illegal. So if you’re doing that you might as well cancel your subscriptions, save another $30 a month or so and take advantage on the vast network of free streams that are laughably easy to find. You’re usually on point with these kinds of posts, but not this one.

          • Cable Facts May 12, 2016 at 8:20 am

            Think of the money you could save if you could call Comcast up and say “Cancel those two dog stations, CSN and TCN”? That would save you $25.00 a month. But the little secret is Fast Eddie Rendell as mayor and then governor teamed up with his aide and now #2 man at Comcast, David Cohen to enact all the cable regulations, so you can’t pick and choose what stations you want. Instead of six or seven you need each day, you are mandated to pay for over 100 stations, 90% that you never watch. Socialism in cable, all to benefit Brain Roberts and his crew. Think of it this way, Rendell enacted legislation as governor so that you had to pay to have him give that imbecilic analysis on Eagles’ games whether you watch him or not.

        • AP May 11, 2016 at 1:40 pm

          Fios is not yet in my area. Its either comcast or direct tv which is useless

          Reply
          • chuick May 11, 2016 at 11:33 pm

            i priced direct tv and they wanted $111 plus taxes a month after the first year. no bargain there.

        • Capt Clueless May 11, 2016 at 1:59 pm

          I have the ultimate package triple play for three TVs, and with taxes, I pay around 186 a month. That’s renting boxes, their gateway modem, and an unlisted number.
          My services have been great, minus this damn strike. And I plan on purchasing the NHL Center Ice for next season, and I may order the dvr at a later date.

          Reply
        • Jim Eisen third reich May 11, 2016 at 2:39 pm

          I love Fios’ package way more then Comcast, their On Demand isn’t as good but it is a better value I’d say. Internet is way faster. Got a $300 gift card for signing up also.

          Reply
        • Coz Carson May 11, 2016 at 10:59 pm

          Because you’re a new customer. Wait until your contract is up. You’re not getting that deal again.

          Reply
        • Cable sucks May 12, 2016 at 10:48 am

          When I first moved in to Philadelphia, I was charged $92/mo on annual promotions. Every year I would threaten to leave, and get free HBO/Showtime as the tradeoff. End result was an almost automatic 12% inflation on pricing, annually. My same plan went from $92/mo to $170/mo most recently. Switched to basic cable with 75mbps for $90/mo. Can’t wait to go through the exact same circuit again (sarcasm font). Thank god for the bar across the street that has every sports channel and decent burgers.

          Reply
      • AP May 11, 2016 at 1:39 pm

        Internet also, don’t use a landline.

        Reply
  • Dirk Spilling May 11, 2016 at 12:14 pm

    Everyone has broadband, and even with cable packages many have netflix, your calculations are crap. As for watching sports without cable, it isn’t that hard to find free alternatives existing on the Internet.

    Espn is missing the point and making more of their product restricted from cord cutters, through insider and the such, instead of just streaming this stuff and not restricting their reporting to those with subscriptions.

    Reply
    • Kyle Scott May 11, 2016 at 1:33 pm

      My calculations were very loose estimates. Everyone’s package will differ. But sports will cost you. Those shit free streaming hacks are not a scalable, mainstream solutions.

      Reply
      • chuick May 11, 2016 at 11:35 pm

        i only have broadband now.
        i can watch any game on vipbox.biz
        just watched the 7th game of the stars blues series.

        Reply
  • johnmatrix May 11, 2016 at 12:18 pm

    man i cannot remember a time when i watched ESPN for anything but MNF. left wing bull shit station. im surprised they even show football anymore.

    Reply
    • I threw a bracelet at game 3 May 11, 2016 at 12:42 pm

      Take the tin foil off your head, you cheap paranoid old man.

      Reply
  • Person May 11, 2016 at 12:27 pm

    Gargano – Very much an acquired taste. His voice and mannerism can come off as fake to some and genuine to others. His overly homer opinions and athlete suckling nature, again, can rub people the wrong way or be something people love. Has strong sports knowledge, but sometimes, like anyone, he gets things wrong and either gets overly defensive or ignores it. Seems very full of himself. The show has done a smart thing but playing sounds drops making fun of him. He is, often, a cartoon character and this can ground him. Marks is a fine sidekick, clearly does not have the ability to carry a show on his own. MCW sucked the right dick. She should be back answering Bloom’s phone. The Bro is fine.

    Delco Rob and Harry O – Probably the most uneventful pairing in the city. Can see how people find this bull or boring, but with that, does not come controversy. If you are bored by this, then you want wacky dudes and big personalities, and not everyone is going to like everyone of those. Think Innes, Cataldi, Gargano, etc. Are despised, and loved, by many. There’s very little to say about these guys.

    MM – An ego the size of the Sun and a temper shorter than Zach Berman. When no one challenges him and things are going well, he’s a fine listen. But that rarely happens. It’s not a shtick when puts himself above the audience. He really is that smug and arrogant in real life. His Bradford hot take was asinine, but it bought him weeks worth of content. When he’s wrong, which he often is, he cannot stand when the audience reminds him of it. BUT, it is very hard to navigate a compelling 4 hour drive time show and Mike has done that alone, successfully, for quite some time. Now you know he’s buying a vineyard in Virginia. Sidekicker Martinez is a joke. Acts like he knows the answers to the stupid general knowledge questions when he barely knows how to read.

    The Hammer – Appears to be next in line to take over for Mike whenever he retires. Not sure this is a good thing. Knowledgeable, sure, but he has a tendency to rant and speaks in a very relaxed, nonchalant tone. Comes off as indifferent and disinterested. Would best be serviced by having a sidekick, or someone to play off of (not Eytan Shander, who is seemingly always auditioning to be on First Take).

    Reply
    • Huge Tool of Mitch fans May 11, 2016 at 12:40 pm

      you feel better now…sharing the f-ing obvious? lunch time is over clown…back to work

      Reply
      • Bob May 11, 2016 at 1:24 pm

        That loser Person has way too much time on his hands to be worrying about some stupid radio host.

        Think it’s time for Person to leave his parents basement, shave and shower, and get a f u c k i n life/job.

        Reply
    • mikey misses boring and stupid sam bradford contract opinion May 11, 2016 at 2:43 pm

      wow – thanks for your summary – let me give you mine
      all radio shows run hot and cold
      Gargano – ok for the most part – but extremely sucky when he brings the boring Baldinger and the little Samoan Vai on the thur show and basically makes everybody turn off the station
      Harry & Rob – 2 really boring guys – Harry came off like a pussy douche during the Villanova run – whose main compliment is they are not as sucky as Borecan and mumble mouth.
      Miss Missy – runs hot and cold…smug obnoxious ahole 75% of the time…unlistenable when he decides to be a super dick and defend a stupid side of a story and fucking talk about it every fucking day (marriota, sam bradford being right to threaten a hold out)

      i’m finished

      Reply
  • Surprised May 11, 2016 at 12:38 pm

    I know you don’t get compliments here, but good objective report on this Kyle. I was expecting the typical blogger post talking about the death of traditional media because your 22 year old yuppie friends are cord cutters…and your little yuppie bubble represents society as a whole. Nice to see someone on the digital side with some sense about them.

    Reply
    • Trying to cut cord May 11, 2016 at 1:39 pm

      Does anyone know what Roku brings? Does it carry most of the cable channels?

      Reply
      • Cable sucks May 12, 2016 at 10:46 am

        Roku is similar to an AppleTV but allows you to use Amazon Prime, because there’s no internal competition.

        My friend runs a slingtv through it I believe, which allows him to get basic cable channels.

        Reply
  • railroad jumper May 11, 2016 at 12:40 pm

    1. Stephan A Smith
    2. Nonstop basketball coverage
    3. anything UFC related
    4. keeping skip bayless for more than 45 days
    5. Nonstop basketball coverage

    = failure

    Reply
    • I hate ESPN May 11, 2016 at 1:48 pm

      At least they fired Chris carter and that murderer Ray Lewis

      Reply
  • Paulie May 11, 2016 at 12:45 pm

    In reference to your last sentence of the post – “Someone just has to figure out how to create the perfect streaming bundle.” This will undoubtedly be one of the big conglomerates that already exist, the R&D is already in motion I am sure, and my bet is on Comcast and/or Facebook.

    Reply
  • ben dover May 11, 2016 at 12:50 pm

    ◦Broadband (~$50)

    I currently pay ~$70/month and I’m not sure if there is enough bandwidth to stream HD to three TVs at the same time.

    I also for some time have been fearing what happens when your cable provider (who is almost certainly your broadband provider) feels the hurt of you cancelling your cable subscription and getting all of your content via streaming.

    And what do you know… Last week I got a postcard from ATT notifying me that I will soon have a data limit on my household broadband service. If I exceed my limit I will be charged $10 for each additional 50 GB I use.

    OH! but none of that applies if I subscribe to U-Verse (not available in my neighborhood) or DirecTV.

    Reply
    • Kyle Scott May 11, 2016 at 1:34 pm

      Yep. Even more to my point. Broadband will just wind up costing more.

      Reply
      • mikey misses boring and stupid sam bradford contract opinion May 11, 2016 at 2:37 pm

        due to comcast lobbying congress to limit internet alternatives…all the more reason to say a polite ‘fuck you’ to comcast and brian roberts

        Reply
  • Ben Dover May 11, 2016 at 12:56 pm

    hey bone smuggler…get your own handle

    Reply
    • guy who doesn't think coming up with the name "ben dover" is an act of genius May 11, 2016 at 3:43 pm

      whatever

      Reply
  • who buys cable anymore? May 11, 2016 at 1:04 pm

    Internet w/HBO: $75/month
    Netflix / Hulu: $20/month
    MLB.tv: $110/year – round up to $10/month
    VPN: $3/month

    Total: $118/month. I have more content (actually good content, not 6 hour blocks of Dog The Bounty Hunter) than I know what to do with. No rental fees, shitty hardware or slowly raising prices.

    Anyone who says they pay less than that for TV and Internet is on a promo of some kind. Before you know it you’re paying $180/month to watch 6 hour blocks of Dog the Bounty Hunter. And I like being billed separately for things – means I can cancel and start things back up with the click of a mouse.

    Reply
  • I threw a bracelet at game 3 May 11, 2016 at 1:16 pm

    Ya’ll some cheap people. I love sports, so I get Comcast to be able to walk into my living room, hit one button and bam Flyeers, Phillies, Sixers Eagles, and Temple sports in 2 seconds. Man up

    Reply
    • Dave May 11, 2016 at 6:04 pm

      Exactly. Everyone loves to hate TV. Streaming has its place just not all the time. These same people who HATE TV Hate it because there choices are so slim when you have to stream or search for something to watch. Time is money to me and I value it. Also I love the X1 platform!

      Reply
  • Big Al May 11, 2016 at 1:16 pm

    Anything on b dawk sucking off a dude at Clemson?

    Reply
  • sinisalo May 11, 2016 at 1:27 pm

    No adult will ever defer to you.

    Reply
  • Clemson twink May 11, 2016 at 2:31 pm

    I came in B Dawk’s mouth.

    Reply
  • mikey misses boring and stupid sam bradford contract opinion May 11, 2016 at 2:35 pm

    kyle may be getting paid by comcast to say cord cutting is not worth it….obviously if your are dumb enough want to order MLB then don’t cut the cord.

    people are sick of Brian Roberts paying himself $250 million and his 90 year old mommy $300 million dollars all the while raising the friggin bill constantly.
    thats why cutting the cord is fun….I may do it just to fuck Comcast…since they lobby congress to eliminate satellite internet options and other technologies that would be cheaper for consumers.

    fuck. you. Brian. Roberts.

    Reply
    • Dave May 11, 2016 at 6:05 pm

      Wow a petty man. That mad at a cable bill?

      Reply
  • Innes' Failed Diet May 11, 2016 at 2:44 pm

    If you are getting your business news from Jim Cremer then you might not want to tell anyone. It just shows how little you know about the subject if that’s who you are relying on. It’s even worse if you went to school for something business related and you still watch him.

    Reply
    • Innes' Failed Diet May 11, 2016 at 2:50 pm

      *Cramer

      Reply
  • Crossing cuck May 11, 2016 at 2:46 pm

    KODI + Tv addons =end of discussion..oops already said to much

    Reply
  • Hank Scorpio May 11, 2016 at 3:03 pm

    The wife just got all bent out of shape because our year 1 promotional rate ended and our Xfinity double play jumped to 150. She has it in her head that direcTV is the answer but because we don’t have FIOS in our area, it’s either Comcast or DSL for internet… and i’m not going back to 1.1 megabits.
    I’m also just not giving up CSN Philly and she is going to have to live with that… but even if we switched to direcTV and DSL for internet, we would be paying 117/month for the first year and then as high as 150 after that.
    So, i called old Xfinity up and said that we were going to leave and even eat the ETF… they took 20 bucks off my monthly bill and took us back down to the year 1 promotional rate. X1 DVR, 25megabits and 3 additional HD boxes.
    There are options: always negotiate/threaten Comcast… they will allow you to pay less. I have done this move 4 years in a row with comcast and i’ve always had my rate reduced. Never once did they say there was nothing they could do.

    Reply
  • Philly10 May 11, 2016 at 3:22 pm

    Sure people are getting their news and sports differently now. But it’s also used as an excuse and a crutch by the media companies who don’t want to acknowledge their content sucks. I didn’t stop buying the Daily News when the internet became a thing. I stopped buying the Daily news when they stopped trying, turned into a pamphlet, and became even more of a liberal rag.

    Reply
  • Tom Selleck May 11, 2016 at 4:07 pm

    Verizon 2 year initial for internet $59.99 then 69.99
    PS Vue – $45.00
    Netflix – $10 and i trade with somebody for their HBO GO.

    in summation, definitely cheaper and worth snaking services off of your friends for

    Reply
  • Stick to singing commercials for ray&glen sludge May 11, 2016 at 4:40 pm

    YouTube and Hulu are rolling out live TV soon

    Reply
  • Weintraub May 11, 2016 at 6:12 pm

    People turn to deadspin etc over traditional media but without traditional media there are no blogs.

    Reply
  • Bille Joe May 12, 2016 at 12:41 pm

    Your parents Comcast ID goes a long way to getting this content for free. And a good HD antenna. I pay less than $100 a month and don’t miss any sports. More content than I can watch.

    Reply
  • rt Westmorland July 7, 2016 at 5:36 pm

    Garbage racist network – the ONLY focus since 2015 is bashing white people every day, all the time. Hey espn – you rotten race baiting network – it’s NOT the white guys fault that coppers are blasting criminal afro’s across the country. And we DON’T want to hear about it all day long on every one of your shows – we DO NOT care and we don’t want to hear how bad the afro has it. What about how bad the Latino or Asian’s have it? Never even hear about them – and they are not the one’s killing each other in Chicago every weekend like the afros. Pffft See ya espn. You are one LOST network!

    Reply
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