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Why Is Disney Pursuing a Multipronged Strategy for ESPN?

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May. 4 2016, Updated 1:24 p.m. ET

Disney’s ESPN teams up with Vice Media

The Walt Disney Company (DIS) is trying to broaden the reach of ESPN by distributing it across multiple platforms in the US and international markets. ESPN is already a part of skinny bundles such as Dish Network’s (DISH) Sling TV and Sony’s (SNE) PlayStation Vue. ESPN is now also partnering with Vice Media.

On May 3, 2016, the Wall Street Journal reported that Disney’s ESPN and Vice Media would partner with each other to produce content and “swap content onto each other’s TV channels and digital platforms.”

Films from ESPN’s documentary series 30 for 30 will be broadcast on Vice’s new television channel Viceland, and an edited version of Vice’s Vice World of Sports will be broadcast by ESPN.

After investing $400 million into Vice last year for a 9% stake, Disney has become Vice’s largest outside stakeholder, according to the Wall Street Journal.

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Disney’s ESPN

Disney has always priced ESPN robustly. As shown in the chart above, and according to a 2014 report in the Wall Street Journal citing SNL Kagan estimates, ESPN cost an average of $6.04 per month in 2014. This cost is expected to increase to $8.37 per month by 2018.

However, at a Deutsche Bank (DB) investor conference in March 2016, Disney stated that it expected its pricing to moderate. “We’d be able to take increases but not at the rate that we were getting them before.”

This is one of the reasons that Disney has decided to strengthen ESPN’s “competitive position in the marketplace” by investing in ESPN’s sports content, licensing major sports events for a long period and partnering with new age media platforms such as Vice.

Disney makes up 0.86% of the SPDR S&P 500 ETF (SPY). SPY has holdings of 3.4% in the computers sector.

In this series…

In this series, we’ll look at Disney’s key business segments and the factors that are expected to impact them in 2016. We’ll also look at key valuation metrics and analysts’ recommendations for Disney.

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