ESPN: The major driver of growth for Cable Networks
In the previous part of the series, we looked at The Walt Disney Company’s (DIS) Media Networks segment. Now let’s look at ESPN, the key driver of Disney’s Cable Networks segment.
ESPN is a multimedia sports entertainment business that operates eight 24-hour domestic television sports networks. According to Disney, citing Nielsen, at the end of fiscal 2014, ESPN had 364 million subscribers in the United States. This didn’t include SEC Network and ESPN International subscribers.
According to a Wall Street Journal report citing Nielsen, and as you can see in the above graph, ESPN’s cable-TV subscribers have gone down 7.2% since 2011, to ~93 million in July 2015. Other major channels, including Time Warner’s (TWX) TNT and TBS and Viacom’s (VIAB) Nickelodeon, have lost 6%–7% of subscribers since 2011.
Cutting the cord
There’s a reason for this drop in cable network subscribers. More and more consumers are resorting to the so-called cord-cutting or cord-shaving phenomenon. Cord cutting is when subscribers give up their cable TV subscriptions and move to video online streaming companies. Cord shaving means consumers remove individual channels from their packages rather than completely cut the cord. For example, ESPN is an expensive channel, and only sports enthusiasts tend to include it in their packages.
With these trends, it becomes imperative that media companies start taking the online route. And Disney thus made a deal with Dish Network (DISH) in which Dish includes ESPN in its basic “skinny bundle” that costs $20 per month. This is part of Dish’s over-the-top (or OTT) service called Sling TV.
You can have a diversified exposure to Disney by investing in the SPDR S&P 500 ETF (SPY), which holds 1.02% of the stock.