Disney: Still Magic To Wall Street?

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What's going on?

Disney reported its third quarter earnings on Tuesday and, despite beating their estimates, investors werent feeling the magic. The stock was down 1.7% in after-hours trading.

What does this mean?

Disney is a media giant that operates 4 main divisions: media networks (TV channels), theme parks (Disneyland), studio entertainment (Disney movies), and consumer products (your nieces Frozen lunch box). Disney had a huge studio quarter, with a 62% jump in profits from Finding Dory, Captain America, The Jungle Book and Star Wars. However, that success was partly offset by its TV business, where advertising sales were down by 6% and major channels like ESPN lost subscribers. Such strong studio performance is a bit of a double-edged sword: what happens to Disney next quarter if they have flops instead of hits at the box office?

Why should I care?

For the stock: Its all about ESPN.

In the age of Netflix and Video On Demand, fewer and fewer people are watching live TV. From an advertisers view, pretty much the only thing people still watch live is sports – hence ESPN is often where investors look to for an indication of how Disneys ad sales will do in the future. While ESPN sold more ads this quarter, the decrease in actual subscribers is what has investors concerned.



For you personally: Disney showed where it thinks media is moving to.

During their earnings call, Disneys CEO revealed that the company was going to include its TV content in skinny bundles and announced that ESPN is going to launch a brand new live streaming service (think: Netflix for sports). The company has also bought a 33% stake in BAMTech, the leading provider of streaming technology (created by Major League Baseball), to help build out its new digital offerings.

Originally posted as part of the Finimize daily email.

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