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Disney/ESPN Annual Financials
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orangefan Offline
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Disney/ESPN Annual Financials
On Thursday, Disney released its financial results for FY17 (which ran from 10/1/16-9/30/17). https://ditm-twdc-us.storage.googleapis....rnings.pdf

Disney's Cable Networks division, of which ESPN is a part, reported revenues of $16.527 billion as compared to $16.632 billion in FY16, a decrease 1%. The division reported operating income of $5.353 billion as compared to $5.965 in FY16, a decrease of approximately 10%. Disney offered the following brief analysis of the division results, which appear to relate only to the fourth quarter:

Quote:Cable Networks
Operating income at Cable Networks decreased $15 million to $1.2 billion for the quarter due to a decrease at Freeform, partially offset by growth at the Disney Channels due to higher program sales.

The decrease at Freeform was driven by lower advertising revenue primarily due to a decrease in average viewership.

Results at ESPN were comparable to the prior-year quarter as higher programming costs and lower advertising revenue were offset by higher affiliate revenue. The programming cost increase was driven by contractual rate increases for NFL, college sports and MLB, partially offset by the absence of costs for Olympics programming internationally and the World Cup of Hockey. Lower advertising revenue was due to a decrease in average viewership and lower units delivered, partially offset by higher rates. Affiliate revenue growth resulted from contractual rate increases, partially offset by a decline in subscribers.

My quick take, ESPN's revenues remain stable despite a loss of subscribers because of increasing subscriber fees. However, profits are down due to increases in rights fees. Despite all of this, ESPN remains extremely profitable, with a gross margin of over 32% for FY17. It's biggest immediate challenge is getting its costs under control.
(This post was last modified: 11-11-2017 01:27 PM by orangefan.)
11-11-2017 01:24 PM
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Tom in Lazybrook Offline
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RE: Disney/ESPN Annual Financials
(11-11-2017 01:24 PM)orangefan Wrote:  On Thursday, Disney released its financial results for FY17 (which ran from 10/1/16-9/30/17). https://ditm-twdc-us.storage.googleapis....rnings.pdf

Disney's Cable Networks division, of which ESPN is a part, reported revenues of $16.527 billion as compared to $16.632 billion in FY16, a decrease 1%. The division reported operating income of $5.353 billion as compared to $5.965 in FY16, a decrease of approximately 10%. Disney offered the following brief analysis of the division results, which appear to relate only to the fourth quarter:

Quote:Cable Networks
Operating income at Cable Networks decreased $15 million to $1.2 billion for the quarter due to a decrease at Freeform, partially offset by growth at the Disney Channels due to higher program sales.

The decrease at Freeform was driven by lower advertising revenue primarily due to a decrease in average viewership.

Results at ESPN were comparable to the prior-year quarter as higher programming costs and lower advertising revenue were offset by higher affiliate revenue. The programming cost increase was driven by contractual rate increases for NFL, college sports and MLB, partially offset by the absence of costs for Olympics programming internationally and the World Cup of Hockey. Lower advertising revenue was due to a decrease in average viewership and lower units delivered, partially offset by higher rates. Affiliate revenue growth resulted from contractual rate increases, partially offset by a decline in subscribers.

My quick take, ESPN's revenues remain stable despite a loss of subscribers because of increasing subscriber fees. However, profits are down due to increases in rights fees. Despite all of this, ESPN remains extremely profitable, with a gross margin of over 32% for FY17. It's biggest immediate challenge is getting its costs under control.

Ok, the bottom hasn't fallen out - yet. But lets look at the wording in the press release.

'increasing revenue per payor, but with lower numbers of payors'. I think what that means is this. Its just a contractual raise in the must take.

I think that if they're really profitable, they probably are okay with current expenses and revenues. But the long term problem is the declining subscribers.
11-11-2017 01:45 PM
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billybobby777 Offline
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RE: Disney/ESPN Annual Financials
(11-11-2017 01:24 PM)orangefan Wrote:  On Thursday, Disney released its financial results for FY17 (which ran from 10/1/16-9/30/17). https://ditm-twdc-us.storage.googleapis....rnings.pdf

Disney's Cable Networks division, of which ESPN is a part, reported revenues of $16.527 billion as compared to $16.632 billion in FY16, a decrease 1%. The division reported operating income of $5.353 billion as compared to $5.965 in FY16, a decrease of approximately 10%. Disney offered the following brief analysis of the division results, which appear to relate only to the fourth quarter:

Quote:Cable Networks
Operating income at Cable Networks decreased $15 million to $1.2 billion for the quarter due to a decrease at Freeform, partially offset by growth at the Disney Channels due to higher program sales.

The decrease at Freeform was driven by lower advertising revenue primarily due to a decrease in average viewership.

Results at ESPN were comparable to the prior-year quarter as higher programming costs and lower advertising revenue were offset by higher affiliate revenue. The programming cost increase was driven by contractual rate increases for NFL, college sports and MLB, partially offset by the absence of costs for Olympics programming internationally and the World Cup of Hockey. Lower advertising revenue was due to a decrease in average viewership and lower units delivered, partially offset by higher rates. Affiliate revenue growth resulted from contractual rate increases, partially offset by a decline in subscribers.

My quick take, ESPN's revenues remain stable despite a loss of subscribers because of increasing subscriber fees. However, profits are down due to increases in rights fees. Despite all of this, ESPN remains extremely profitable, with a gross margin of over 32% for FY17. It's biggest immediate challenge is getting its costs under control.

Congratulations?
11-11-2017 03:22 PM
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billybobby777 Offline
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RE: Disney/ESPN Annual Financials
The irony of us poor or lower middle class college football fans....rooting for big evil empire monopolies to get richer because the school we went to has a football team that occasionally plays on their tv channel.
Happy Veterans Day Disney.
11-11-2017 03:28 PM
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MWC Tex Online
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RE: Disney/ESPN Annual Financials
There are many channels that are profitable and I don't think any reasonable person is saying they will not but the bigger issue is that they are still losing subscribers by tens of thousands per day and will soon be under 80 million housholds very soon if not already.
Its like ESPN is a Bentley. Very valuable but like all vehicles, they depreciate in value and time is making it less valuable as subscribers are dropping like flies.
11-11-2017 04:20 PM
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orangefan Offline
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RE: Disney/ESPN Annual Financials
(11-11-2017 04:20 PM)MWC Tex Wrote:  There are many channels that are profitable and I don't think any reasonable person is saying they will not but the bigger issue is that they are still losing subscribers by tens of thousands per day and will soon be under 80 million housholds very soon if not already.
Its like ESPN is a Bentley. Very valuable but like all vehicles, they depreciate in value and time is making it less valuable as subscribers are dropping like flies.

It is difficult to say how many subscribers ESPN is actually losing. The most recent round of earnings announcements from the cable and satellite industry was pretty alarming, but it is pretty clear that a good percentage of those dropping traditional video packages are switching to internet based bundles such as Sling and Playstation Vue. Customers switching to these services continue to subscribe to ESPN at full price, so the impact on ESPN is smaller. SNL Kagan publishes subscriber counts by network, but usually does so only once a year, when the information is already old. It would be useful for investors if Disney would include subscriber counts in their financials in the same manner as cable and satellite companies do.

I am certainly not suggesting that everything is rosy at ESPN. They are going to have some tough negotiations with the NFL and MLB when those deals come up in 2021. ESPN is going to be far more guarded against overpaying, as it was in recent Big Ten negotiations.

For the SEC and ACC, this is largely irrelevant, as their primary deals with ESPN are in place through the mid 2030's. The future revenues from the SECN and ACCN may be affected, but industry evolution should affect them equally with the BTN.

More significantly, the next round of negotiations with the CFP and NY6 will likely be tougher than the last one. ESPN will likely be reluctant to offer a significant increase in rights fees. If so, we could see pressure to expand the CFP to eight schools as a means of finding additional money.
(This post was last modified: 11-13-2017 08:06 AM by orangefan.)
11-13-2017 07:52 AM
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quo vadis Offline
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RE: Disney/ESPN Annual Financials
(11-11-2017 03:28 PM)billybobby777 Wrote:  The irony of us poor or lower middle class college football fans....rooting for big evil empire monopolies to get richer because the school we went to has a football team that occasionally plays on their tv channel.
Happy Veterans Day Disney.

Er, how is Disney either "evil" or a "monopoly"? If you haven't checked, they have heavyweight competition in all of their lines of business.

I "root" for ESPN because of what they do for me, namely show about 18 college football games every Saturday from 11 AM to 11 PM across four different channels, plus a few more during the week. Love being able to see all those games.
(This post was last modified: 11-13-2017 08:12 AM by quo vadis.)
11-13-2017 08:08 AM
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Attackcoog Offline
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RE: Disney/ESPN Annual Financials
(11-11-2017 01:24 PM)orangefan Wrote:  On Thursday, Disney released its financial results for FY17 (which ran from 10/1/16-9/30/17). https://ditm-twdc-us.storage.googleapis....rnings.pdf

Disney's Cable Networks division, of which ESPN is a part, reported revenues of $16.527 billion as compared to $16.632 billion in FY16, a decrease 1%. The division reported operating income of $5.353 billion as compared to $5.965 in FY16, a decrease of approximately 10%. Disney offered the following brief analysis of the division results, which appear to relate only to the fourth quarter:

Quote:Cable Networks
Operating income at Cable Networks decreased $15 million to $1.2 billion for the quarter due to a decrease at Freeform, partially offset by growth at the Disney Channels due to higher program sales.

The decrease at Freeform was driven by lower advertising revenue primarily due to a decrease in average viewership.

Results at ESPN were comparable to the prior-year quarter as higher programming costs and lower advertising revenue were offset by higher affiliate revenue. The programming cost increase was driven by contractual rate increases for NFL, college sports and MLB, partially offset by the absence of costs for Olympics programming internationally and the World Cup of Hockey. Lower advertising revenue was due to a decrease in average viewership and lower units delivered, partially offset by higher rates. Affiliate revenue growth resulted from contractual rate increases, partially offset by a decline in subscribers.

My quick take, ESPN's revenues remain stable despite a loss of subscribers because of increasing subscriber fees. However, profits are down due to increases in rights fees. Despite all of this, ESPN remains extremely profitable, with a gross margin of over 32% for FY17. It's biggest immediate challenge is getting its costs under control.

This is a fact I’ve mentioned before that most doom and gloomers don’t reaalize. Most carriage agreements ESPN signs have automatic escalators that raise the rate over the course of the agreement. So, if you lose subscribers at a 2% rate, but the rate increases by 4% or 5% of the 98% of the subscriber base that remains, the revenue doesn’t fall much at all. It may be stable or even increase slightly.

Long term cable will have to address the cord cutting if it does not slow down, but the idea tha ESPN is nearing the end of its rope because they are now experiencing a leveling off of profits is hugely overstated. The layoffs are about getting the division to be less bloated and more profitable. The truth is, while ESPN remains incredibly profitable, it has completed the rapid growth phase of its corporate life cycle. It’s now a mature company and is experiencing competition from new companies attempting to horn in on its outsized profits. That means there will be more competition for sports rights in the future—not fewer. The idea that sports rights are going to decline so ESPN can grow it’s profits at a faster rate is a pretty unlikely outcome.
(This post was last modified: 11-13-2017 10:46 AM by Attackcoog.)
11-13-2017 10:34 AM
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RE: Disney/ESPN Annual Financials
Until the online services providing bundles that include ESPN are counted properly (same as cable/satellite) we simply won't have any clue what the subscriber loss is for the industry. We keep getting cable/sat lost X or Y moved to cut the cord but buying cable sans paying for the delivery infrastructure is still cable for all intents and purposes.
11-13-2017 05:26 PM
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MWC Tex Online
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RE: Disney/ESPN Annual Financials
(11-13-2017 05:26 PM)arkstfan Wrote:  Until the online services providing bundles that include ESPN are counted properly (same as cable/satellite) we simply won't have any clue what the subscriber loss is for the industry. We keep getting cable/sat lost X or Y moved to cut the cord but buying cable sans paying for the delivery infrastructure is still cable for all intents and purposes.

We have some of those stats. AT&T lossed 80k net. 330k drop from Direct TV and Uverse but added 250k to their DirecTV Now.

Dish loss 145k net and that includes Sling numbers.

All have ESPN on the base package.
(This post was last modified: 11-13-2017 07:15 PM by MWC Tex.)
11-13-2017 07:12 PM
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