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Disney Shares See Sharp Decline On Reports Of Subscriber Losses At ESPN

Shares of Disney "dropped the most in three months Friday" after the company reported that ESPN "lost 3 million subscribers in a year, reviving concerns about shrinking demand for traditional pay-TV packages and dragging down U.S. media stocks," according to Cecile Daurat of BLOOMBERG NEWS. A filing Wednesday showed that subscriptions to ESPN fell 3.2% "to 92 million at end of October." ESPN’s subscriber totals "had hovered around 100 million for years." The report put a "number on the extent of ESPN’s declines." That came after Disney Chair & CEO Bob Iger in August told investors the net had experienced "some modest" subscriber losses. The decline "equates to hundreds of millions of dollars in lost revenue and helps explain why ESPN has made cost-cutting personnel moves over the past year." Disney this month "argued that its properties remain on a solid footing." The company said that in the most recent quarter, its media networks had posted $1.8B in operating income -- up 27% over '14 -- "in part because of strengthening advertising revenue at ABC and ESPN" (BLOOMBERG NEWS, 11/27). In N.Y., Brooks Barnes notes the "takeaway" from Friday's drop is that investors "care about subscriber attrition at ESPN," part of a cable unit that provided about 45% of Disney's operating income in FY '15. However, investors appear to care more about Walt Disney Studios, "which will restart the 'Star Wars' movie series on Dec. 18." MoffettNathanson Senior Research Analyst Michael Nathanson said, "You would not believe the level of Wall Street fixation on 'Star Wars' right now." Bernstein analyst Todd Juenger earlier this month in a note wrote it is "amazing how Disney (or market psychology) has been able to divert the focus" from ESPN's subscription declines (N.Y. TIMES, 11/30).

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