Must-know guide to the Walt Disney Company’s competitors

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Competitors

Being a diversified entertainment company, Disney faces a number of competitors in its various segments. Some of the main media conglomerates with which Disney competes include Viacom Inc (VIAB), Time Warner Inc. (TWX), Twenty-First Century Fox (FOXA), CBS (CBS), and Comcast (CMCSA).

Disney comps

Media Networks

Disney’s Media Networks businesses compete for viewers primarily with other television and cable networks, independent television stations, and other media—such as DVD and Blu-ray formats—video games, and the Internet. With respect to the sale of advertising time, its broadcasting operations, some of its cable networks, and its television and radio stations compete with other television networks and radio stations, independent television stations, MVPDs, and other advertising media such as newspapers, magazines, billboards, and the Internet. Its television and radio stations primarily compete for audiences in individual market areas. A television or radio station in one market generally doesn’t compete directly with stations in other markets.

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The growth in the number of networks distributed by MVPDs has resulted in increased competitive pressures for advertising revenues for its broadcasting and cable networks. Its cable networks also face competition from other cable networks for carriage by MVPDs. The company’s contractual agreements with MVPDs are renewed or renegotiated from time to time in the ordinary course of business. Consolidation and other market conditions in the cable and satellite distribution industry and other factors may adversely affect the company’s ability to obtain and maintain contractual terms for the distribution of its various cable programming services that are as favorable as those currently in place.

Its Media Networks businesses also compete for the acquisition of sports and other programming. The market for programming is very competitive, particularly for sports programming. It currently has sports rights agreements with the NFL, college football (including college football bowl games) and basketball conferences, the NBA, NASCAR, the MLB, the World Cup and various soccer leagues, and golf and tennis associations.

Disney’s websites and digital products compete with other websites and entertainment products in their respective categories.

To learn more about Disney’s network competition, see Must-know: Can ESPN defend its turf from its popular competitors?

Why high content costs might affect profits

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In the media networks segment, Disney’s powerhouse ESPN faces increasing competition from the sports channels of Twenty-First Century Fox (FOXA), CBS (CBS), and Comcast’s (CMCSA) NBCUniversal segment. Analysts expect content costs to continue to rise in the coming years due to the increase in the number of bidders, but it might take time for competitors to overthrow ESPN from the current reigning position. Plus, sports programming attracts advertisers’ interests because viewers prefer watching live rather than in a time-shifted format like DVR or on-demand. ESPN is expected to continue contributing to Disney’s increasing revenue, but competition might intensify going forward. Higher programming costs, rising competition, and changing market conditions might make it tougher for ESPN to sustain its leading position going forward. ABC is also expected to benefit from Marvel’s Agents of S.H.I.E.L.D. show, which premiered in the fall of 2013. Although the show started with strong ratings, recent news reports have been claiming that ratings have dropped.

Theme Parks and Resorts

The company’s theme parks and resorts, as well as Disney Cruise Line and Disney Vacation Club, compete with other forms of entertainment, lodging, tourism, and recreational activities. The profitability of the leisure-time industry may be influenced by various factors that aren’t directly controllable, such as economic conditions (including business cycle and exchange rate fluctuations), travel industry trends, the amount of available leisure time, oil and transportation prices, and weather patterns and natural disasters.

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All of the theme parks and the associated resort facilities are operated on a year-round basis. The theme parks and resorts business usually experiences fluctuations in attendance and resort occupancy resulting from the seasonal nature of vacation travel and local entertainment excursions. Peak attendance and resort occupancy generally occur during the summer months, when school vacations occur, and during early-winter and spring-holiday periods.

Theme Parks and Resorts peers

The company’s theme park segment competes with Six Flags Entertainment (SIX), Cedar Fair (FUN), and Universal Studios, the theme park chain controlled by Comcast (CMCSA). In recent years, competition in this segment has intensified due to Universal’s Harry Potter–themed addition that has boosted attendance to its parks. Universal has also included attractions such as a 3-D ride themed to Michael Bay’s Transformers movies, The Amazing Adventures of Spider-Man attraction, a ride based on Despicable Me, and the ongoing construction of The Wizarding World of Harry Potter—Diagon Alley that are expected to drive attendance. According to industry experts, theme park stocks tend to perform well even in a sluggish economy because consumers prefer driving to a local theme park rather than paying for an expensive vacation. Meanwhile, an improving U.S. economy and low gas prices are driving profits for the companies in this space.

Studio Entertainment

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The Studio Entertainment businesses compete with all forms of entertainment. A significant number of companies produce or distribute theatrical and television films, exploit products in the home entertainment market, provide pay television programming services, and sponsor live theater. It also competes to obtain creative and performing talents, story properties, advertiser support, and broadcast rights that are essential for its Studio Entertainment businesses.

The success of Studio Entertainment operations heavily depends on public taste and preferences. Plus, Studio Entertainment operating results fluctuate due to the timing and performance of releases in the theatrical, home entertainment, and television markets. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods.

The studio entertainment segment competes with the studios owned by Time Warner (TWX), Sony (SNY), Twenty-First Century Fox (FOXA), and Viacom (VIA).

Consumer Products

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Disney’s merchandise licensing, publishing, and retail businesses compete with other licensors, publishers, and retailers of character, brand, and celebrity names. Based on independent surveys, it believes it’s the largest worldwide licensor of character-based merchandise based on retail sales. Operating results for the licensing and retail businesses are influenced by seasonal consumer purchasing behavior, consumer preferences, levels of marketing and promotion, and the timing and performance of theatrical releases and cable programming broadcasts.

Interactive

Its online sites and products compete with a wide variety of other online sites and products. Its video game business competes primarily with other publishers of video game software and other types of home entertainment. Operating results for the video game business fluctuate due to the timing and performance of video game releases, which are determined by several factors, including theatrical releases and cable programming broadcasts, competition, and the timing of holiday periods. Revenues from some of its online and mobile operations are subject to similar seasonal trends.

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