How Cancelling Roseanne Affects Walt Disney Co Stock

Roseanne - How Cancelling Roseanne Affects Walt Disney Co Stock

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At a time when Walt Disney Co (NYSE:DIS) was already suffering in the markets, this latest controversy was exactly what was not needed. I’m speaking of course about Solo: A Star Wars Story. The much-hyped galactic saga failed to live up to expectations, drawing serious questions about DIS stock. The Roseanne cancellation? That wasn’t a controversy; that was plain stupidity.

Before any potential right-wing commentators troll me, let me just say this. Prior to Roseanne Barr’s incredibly racist and disgusting social-media post via Twitter Inc’s (NYSE:TWTR) platform, I respected her. Barr was an outsider, and a big part of me identified with the concept of not fitting in. And for better or for worse, her political views were refreshing amid Hollywood’s liberal leanings.

That’s why I was very disappointed with Barr. Her remarks were intractably racist, and now she’s reaping the consequences. But the worst part of it was that Roseanne catapulted Barr to a second chance that very few celebrities receive. Rather than taking advantage of it, she made a completely unforced error. On top of that, she took down an entire TV show.

While Roseanne obviously centers around Barr’s character, the show doesn’t click without the supporting cast. Moreover, the unheralded but hardworking individuals behind the scenes must now enter the unemployment line.

Those are the people for whom I really feel sorry. They didn’t ask for any of this, yet they are unceremoniously removed as if they started the controversy.

How Will the Roseanne Cancellation Impact DIS Stock?

It might be natural to think that to the Roseanne cancellation will cause DIS stock to incur some volatility, at least in the nearer term. To be sure, Disney CEO and chairman Bob Iger didn’t mete out punishment lightly. He very much knew how popular Roseanne was.

When I first heard about this show’s resurrection, I was very skeptical. I’m glad I kept my mouth shut because it became a ratings juggernaut. At the peak of its popularity, Roseanne beat out AMC Networks Inc’s (NASDAQ:AMCX) The Walking Dead. And we’re not just talking about any one episode, but rather, its season-eight finale.

Even when Roseanne finally experienced viewership declines, it was still a top-rated show. The sitcom routinely pulled in more than 10 million viewers. More importantly, it resonated strongly with the critical age 18 to 49 demographic.

This was a big, and significantly crucial victory for Disney, and by logical extension, DIS stock. Long before the Solo disappointment, the company’s traditional programming, particularly ESPN, was suffering. Roseanne solved several problems.

Now, the program is the problem. With seemingly few bright spots to distract investors, it’s no wonder that DIS stock is down 8%.

Investors are also worried because we’ve seen a similar situation last year. Popular journalist and political pundit Bill O’Reilly lost his program The O’Reilly Factor after allegations of sexual harassment surfaced. After his axing, Twenty-First Century Fox Inc (NASDAQ:FOX, NASDAQ:FOXA) shares went flat for a few sessions before tumbling.

Without the buyout proposals from Disney and Comcast Corporation (NASDAQ:CMCSA), it’s possible that Fox would continue to flounder.

But will DIS stock meet the same fate?

Roseanne Is a Distraction, Not a Disaster

This is not a popular opinion because people want to see blood. But from an investment perspective, I think the Roseanne debacle is a distraction, but not an unmitigated disaster. Over time, I anticipate DIS stock will recover.

Before you accuse me of losing my mind, consider that Disney owns some of the biggest brands in the world. Not only that, they have multiple revenue streams, including their parks and resorts. While their financial metrics aren’t stellar, they’re making significant progress in Asia.

Roseanne was a nice boost, and a much-needed one. However, the company wasn’t banking on the sitcom for a corporate-wide revival. If the show didn’t resonate, management would have pulled the plug. To be frank, I think Disney brass is more concerned about Solo.

Even there, audiences may have suffered from Star Wars fatigue. Solo isn’t part of the original, cinematic storyline, which helps to explain the apathy. Plus, it’s too early to write off the overall franchise.

I’ll reiterate that Barr’s words were inexcusable. They also cost a company a profitable show in Roseanne, and for many others, employment. But I stop at DIS stock. It’s a big issue, but not big enough to cripple Disney.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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