Shares of Walt Disney Co. (NYSE:DIS) were down 1.41% shortly following the noon hour on October 12. The stock has declined 6.8% in 2017.
Disney stock has experienced a great deal of downward pressure because of declining subscribers at ESPN, a global sports television and satellite channel. ESPN has lost over 12 million subscribers over a 6 year period, in large part due to cable cutting from consumer moving to streaming and other services.
Cord cutting is not the only factor that is causing distress for ESPN these days. A political battle has engulfed the National Football League after controversial statements by President Trump in September ignited outrage among NFL players. Trump claimed that player protests had contributed to lower NFL ratings, and went further to call for a boycott of the NFL if players refused to stand.
In truth, it is difficult to pinpoint one central issue that has led to a drop in NFL ratings. The NFL has been the source of scrutiny with new discoveries being made regarding the severity of head trauma among former players. Youth football has seen a marked decline in participation, presenting an existential threat for NFL and the game at large.
NFL TV ad revenue accounted for about $3.5 billion last year in spite of the drop in ratings. ESPN pays $2 billion annually for Monday Night Football and is still on a $15 billion deal with the NFL lasting through 2021.
In response to these worrying trends, Disney has moved to decrease ESPN’s footprint to less than 20% as a portion of earnings. Disney stock is now hovering around 2017 lows, but there may be light on the horizon as it prepares to watch the next Star Wars installment release in December. Disney is a buy right now.
