Disney shares tumble on worries over cable business

GMT 21:00 2015 Wednesday ,05 August

Arab Today, arab today Disney shares tumble on worries over cable business

Members of the media take pictured of a model of the Shanghai Disney Resort
New York - AFP

Wall Street pummeled Disney shares Wednesday as it trimmed its outlook for its cable television business and faced questions on the threat to cash-cow ESPN from emerging technologies.

Near 1645 GMT, shares of the media and entertainment giant were off 9.0 percent at $110.68 after closing at a 52-week high Tuesday.

The decline came after Disney reported an 11 percent rise in earnings for its fiscal third quarter of $2.5 billion, translating into a better-than-expected $1.45 per share. However sales rose by just 5.1 percent to $13.1 billion, missing analyst forecasts for $13.2 billion.

BMO Capital Markets described the results as "slightly negative" and said it was put off by the company's "cautious tone" on key issues.   

Disney trimmed its forecast for both domestic cable revenues and cable operating income over the 2013-2016 period, citing lower subscribers in the US and the impact of the strong dollar on overseas revenues.

Disney chief executive Bob Iger said he was a "realist" in recognizing that viewing through smartphones and other emerging technologies is challenging the conventional cable business. However, he said Disney believes conventional cable will remain dominant for at least a few more years.

"We don't really see dramatic declines over say the next five years or so," Iger said. "And therefore we aren't taking what I will call radical steps to move our product into over-the-top businesses to disrupt that business because we don't think right now it's necessarily the greatest opportunity."

Iger said he continues to have "enormous confidence" in sports-focused ESPN, which remains a "must-have" component of conventional cable packages and will also be in demand as consumers shift to other viewing systems.

Analysts also cited Disney executives' reticence to discuss financial expectations for the eagerly anticipated launch of the next "Star Wars" movie on December 18, which is expected to be a box-office blockbuster and a boon in sales of toys, games and other related merchandise.

Executives said they did not expect the Shanghai Disney theme park to be profitable until after 2016, adding that about half pre-opening expenses for the project will be booked in 2016.

Barclays said the earnings report is "likely to be perceived as a disappointment" as Disney "reduced guidance for fiscal 2016, seemed to talk down Star Wars expectations, and guided to the new park in Shanghai not contributing anything to (the) bottom line next year."


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