Will Disney’s Layoffs at ESPN Affect Optimism for the Network?



Disney begins layoffs at ESPN

On April 26, 2017, CNNMoney reported that The Walt Disney Company’s (DIS) ESPN has started laying off around 100 of its television personalities and writers. The report also states that these layoffs are a result of a shift in media viewing habits as more viewers prefer watching content online, which is increasing cost pressures on ESPN.

However, Disney continues to remain optimistic about ESPN, even after the network’s declining subscriber base continues to worry investors. The company has also entered into a content licensing agreement with Hulu in which Disney’s content, including ESPN, would be available on Hulu’s online television service. It’s set to launch this year. Disney also stated at its fiscal 1Q17 earnings call that it has entered into a deal with another as-yet-unnamed company.

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Reasons for Disney’s optimism for ESPN

Disney said it has observed an uptick in subscribers for ESPN after its content licensing deal with certain over-the-top operators. According to Disney, the virtual online streaming services being launched or that have already been launched tend to have a strong user interface, are mobile-friendly, and are priced lower than a basic bundle of channels from MVPDs (multi-channel video programming distributors). As a result, Disney expects ESPN’s presence on these services to appeal to a wider user base.

As you can see in the above graph, the number of Disney’s ESPN subscribers continued to fall, from 99.0 million subscribers in 2013 to 90.0 million subscribers in 2016.


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