It’s been a large part of the bull thesis for quite some time. Despite increasing competition, ESPN remains the gold standard of sports broadcasting, but the lead is eroding…fast.
Management has held a firm line with staff salaries which have caused mass defections over the past 5 years. The list is too long to list here, but we know the big names. Some have come back “home” (Michelle Beadle to name one) but NBCSN and FOXSports1 are legitimate competition. ESPN is aware of this, why do you think they’re trying to revive Keith Olbermann and convinced Kenny Mayne to host the occasional SportsCenter. Which brings me to my next point.
I find SportsCenter unwatchable. That’s coming from a guy that probably watched two hours of SportsCenter daily for the better part of the 90’s. I find the quality of writing and presentation to range from embarrassing to adequate mixed with some unnecessary special effects. I never watch it at home anymore, merely catching glimpse at the gym.
Additionally, we know the World Cup provided a nice “kick” to ESPN’s numbers this quarter. That goes over to Fox in four years. ESPN also has the worst NFL package among the networks that offer football and that contract comes up for renewal soon. They’ll have to pay thru the nose for the rights to Chiefs vs. Cardinals on Monday. Not exactly a recipe for expanding margins.
ESPN”s web presence will likely continue to dominate, but let’s be honest, it’s the ad revenue from live sports that matters and it could be peaking.
Star Wars could flop. It has happened before. Let’s not forget that the three “prequels” weren’t universally loved. (Jar Jar Binks anyone/) Now George Lucas is out of the picture. Will Disney put as much passion into Star Wars as Lucas did? Who knows? People will flock to the first one, no doubt, but it better deliver and not disappoint the lifelong fan.
As far as Marvel, they might be getting a little, let’s say cute, with that moneymaker. This last thing that came out “Guardians of the Galaxy” hasn’t been panned by critics, but i haven’t heard a lot of people say they loved it either. Now there’s going to be a black Captain America or something and woman Thor character? The guy who currently plays Captain America seems fairly popular, same with Thor. Is this a different Captain America? Talk about squeezing blood from a stone. Every Batman hasn’t been the quality of Keaton or Bale, at some point Disney could fall into this trap.
Let’s not forget that Disney doesn’t even own the entire Marvel catalog and they can’t build any attractions at the parks (at least in Florida) around these franchises. (Which is a shame, an Iron Man roller coaster would be sort of awesome).
Disney will certainly be allowed one dud along the way, but families will stop shelling out 50 bucks to go see these movies in the theater if they don’t continue to constantly deliver.
Most of the innovation at Walt Disney World and other Disney Parks across the world have come in ticketing recently, think Magic Bands, increased pricing. Imagineers just rehabbed Fantasyland at the Magic Kingdom in Florida and Avatar Land, or something like that, is coming, but there hasn’t really been a big attraction added since Expedition Everest nearly 10 years ago. Cars Land in California was a nice addition, plans for that in Florida are supposedly in the works but that’s another franchise they’re sort of running ingot he ground. I guess soon we’ll see Trains or possibly even Boats….from the world of Cars or something like that.
We know Universal Orlando has upped the anti with Disney answering with tricks and discounts to try to keep you on property as much as possible. One of Iger’s first changes as CEO was to offer shuttle service from the airport to the park in Orlando, guests can’t go very far without their own form of transportation. Strategies like that will only work for so long. The folks above 8 might enjoy a thrill ride Bob, just something to think about.
A common thread thru all of this is complacency. Disney is doing so well right now, there’s a risk that it might be good enough. The stock is not cheap, and rightfully so, but at this level the risk reward doesn’t appear compelling as nearly everyone loves the name.
Personally, I wouldn’t short the stock. You might be able to shave a few dollars here or there but shorting companies with great management and franchises doesn’t really work out longer term. I’d be a buyer around 79…and it may never get there. For now, just think about what COULD go wrong while everyone else is focusing on what’s going right.