Analyst Says ESPN Contracts Could Hurt Disney Margins

ESPN “may produce smaller gains in coming years, crimping the stock price” of Walt Disney Co., according to Andy Fixmer of BLOOMBERG NEWS. UBS Securities analyst Michael Morris estimated NFL, MLB, NBA and auto racing contracts that take effect by October ‘09 will increase expenses by $1.02B a year, at a time when agreements with Comcast and Time Warner Cable limit subscriber-fee increases to 7% annually.  Morris estimated that Disney's cable networks, the source of 46% of the company's operating profit last year, will see that margin slow by 4 percentage points in FY ‘08. Morris: "Disney is entering a period of slower growth. ESPN is at the center of that equation." But ESPN/ABC Sports President George Bodenheimer said, "We are getting tremendous value for these investments. Our ability to maximize these agreements has never been greater." Recent SEC filings show ten of Disney's 12 biggest institutional shareholders have reduced their stakes (BLOOMBERG.com, 9/6).

PEACOCK ON THE LOOSE? With NBC Universal Integrated Media President Beth Comstock reportedly moving back to a position with parent company GE, BUSINESSWEEK.com's Diane Brady wrote, "One bet is that the company will look to sell [NBC Universal] after the Beijing Olympics next year."  Brady: "It's too valuable an asset to offload before then, because of the advertising revenue and the window it gives GE to get more business in China" (BUSINESSWEEK.com, 9/5).