Can Walt Disney Co Stop the TV Rot (DIS)?

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Disney stock - Can Walt Disney Co Stop the TV Rot (DIS)?

Source: Richard Stephenson via Flickr (Modified)

Walt Disney Co (NYSE:DIS) stock is down 10% over the past year. The S&P 500 is up 10%.

Walt Disney Co DIS stock rot

Something is wrong.

Disney stock isn’t suffering because of the company’s results, that’s for sure. Revenue for the quarter ending in July was up from a year earlier, by more than $1 billion, to $14.277 billion. Net income was up $100 million to $2.597 billion. Bringing over $1 in every $5 of revenue down to the net income line still is an impressive feat.

The problem with DIS can be summed up in one word: TV.

Disney remains primarily a TV company, and investors fear that TV as we knew it is dead, killed by streaming over the internet. Most of the headlines on this issue concern the ESPN sports networks, which are continuing to lose subscribers and viewers.

However, DIS’ other broadcast and cable properties may be in deeper trouble.

A New Revenue Hand

On the eve of the Emmy Awards telecast, Disney brought in the head of the TV Academy, Bruce Rosenblum, as president, business operations for the Disney-ABC Television Group.

The former head of the Warner Brothers TV Group takes over half the direct reports of the group’s president, Ben Sherwood, although he’s described as Sherwood’s right-hand man.

Sherwood and Rosenblum gave the Hollywood Reporter some word salad concerning their plans and the phrase “create more direct to consumer digital platforms” leaped off the screen. It probably means Rosenblum will be slicing and dicing what ABC and Disney’s cable networks create into new streaming services.

No One Watches ABC

ABC became the cornerstone of the Disney empire when the network was acquired for $19 billion in 1995, along with a host of local stations organized as Capital Cities. But consumers are turning from conventional TV in droves, and last week, the ABC broadcast network was averaging fewer than 3 million viewers for its scripted shows.

ABC is now in fourth place among the networks in the 18-49 age group and is hoping Channing Dungey, the first black woman to head a major network, can change that with shows like Designated Survivor, which debuts this week.

While ABC broadcast the 2016 Emmy Awards, it was shut out in the major categories. Time Warner Inc’s (NYSE:TWX) HBO and Twenty-First Century Fox Inc’s (NASDAQ:FOXA) FX took most of the prizes.

The Challenge for Disney Stock

Rosenblum’s job is to find a 21st century audience for this 20th century content, and to make it pay off. He will be doing this in an increasingly crowded market.

While executives bemoan the rise of such “over the top” networks as Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) Prime, creatives are celebrating. The number of scripted shows has doubled over the last five years and is expected to top 450 this year.

If Rosemblum can create new revenue streams for ABC and Disney network shows, then DIS becomes a buy. But how is an old TV hand supposed to get Disney past TV?

That’s the mystery of this TV season, and until it is solved, you might want to avoid Disney stock.

Dana Blankenhorn is a financial journalist who dabbles in fiction, his latest being The Reluctant Detective Travels in Time. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he was long AMZN and DIS.

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Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.


Article printed from InvestorPlace Media, https://investorplace.com/2016/09/walt-disney-co-dis-stock-stop-rot/.

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