Worries about ESPN have "weighed on Walt Disney's stock price over the past two years," but soon Disney will "have a chance to do something about it," according to Miriam Gottfried of the WALL STREET JOURNAL. Disney is "set to begin talks over its contract with cable operator Altice USA, which expires this fall." The deal will be the "first of a series of new contracts Disney will negotiate with pay-TV providers that will allow it to offset subscriber declines at ESPN." ESPN has "struggled as expensive long-term contracts to broadcast sports kicked in just as subscribers were starting to flee." Now its challenge is to "recoup those costs by raising prices and tightening rules over how many subscribers can migrate to TV packages that exclude ESPN." Disney "can't stop U.S. consumers from dropping pay TV." But it can "offset the decline by boosting its annual price increases and by using 'minimum penetration guarantees' -- provisions in its contracts that stipulate which TV packages ESPN must appear on and what portion of pay-TV subscribers must receive it." The "ideal outcome might include a combination of both." MoffettNathanson estimated that assuming Disney already "increases the prices it charges cable and satellite companies for ESPN by 5% a year, bumping that up to 6% as it signs new deals would boost fee revenue by 4% a year" to $12.56B from '16-22 (WSJ.com, 7/17).
PENNY FOR YOUR THOUGHTS: CNBC.com's Eric Jackson noted Bill Simmons, author Jim Miller and The Ringer's Bryan Curtis recently went on Simmons' podcast to "analyze and critique the recent moves at ESPN." At one point in the podcast, Simmons said, "[ESPN management] had no idea that cord-cutting was coming." Jackson noted the implication is that they were "asleep at the switch." ESPN "may have been slow, but so was almost everybody else." Simmons "lambasted the ESPN website and app for being behind the competition." Simmons also said that Bleacher Report is "way better at social and driving traffic" and that they are "three to four years ahead" of ESPN in their thinking. Yet the February rankings from ComScore show that ESPN is the top digital sports media property, while Bleacher Report was eighth (CNBC.com, 7/17).
