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Why Disney Is Still Bullish about ESPN

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Nov. 28 2016, Published 1:19 p.m. ET

Disney’s optimism regarding ESPN

In the previous part of this series, we discussed how falling subscriber numbers for The Walt Disney Company’s (DIS) ESPN and falling viewership for NFL games could be a concern for Disney’s investors. In this part of the series, we’ll look at why Disney remains bullish about ESPN.

Disney stated during its fiscal 2016 earnings call that it remains bullish about ESPN because it believes ESPN’s content will continue to meet strong demand from distributors in a changing media industry. ESPN is part of Disney’s Media Networks segment, which made up 43% of the company’s revenues of $55.6 billion in fiscal 2016, as the chart below shows. As viewing content online becomes more popular, many media companies are launching online television services or introducing skinny bundles.

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Disney’s investment in BAMTech

Disney also referred to its investment in BAMTech as another reason for its bullishness on ESPN. In August, Disney acquired a minority stake of 33% in BAMTech, a video streaming company formed by the MLB. Disney plans to launch a direct-to-consumer service for ESPN through its investment in BAMTech.

The company stated on its fiscal 2016 earnings call that ESPN’s direct-to-consumer service could result in a user-friendly product that could drive ESPN viewership up. The company also explained that it could use this viewership data from ESPN’s direct-to-consumer service to improve its advertising revenues for ESPN and customize the service to users’ preferences.

According to Disney, ESPN’s direct-to-consumer service would include content from BAMTech, including MLB and college sports, football, and basketball.

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