Disney Has Other Problems Besides Falling ESPN Subs

Walt Disney (DIS) ,whose earnings have been staggered in the last year by falling subscribers for its ESPN sports channel, has other problems in its pay-TV business.

Subscribers for its flagship Disney Channel also fell over the last two years, nearly matching ESPN's decline, according to Disney 10-K annual statement filed on Nov. 23.

The company also said it waived receipt of management fees and royalties through mid-2018 that it collects from its financially hobbled Disneyland Paris theme park and resort.

Last year, the company collected 83 million Euros, or about $87.4 million, in fees and royalties from Disneyland Paris, and was scheduled to receive about $22.1 million in the final quarter, according to the park's Disney-controlled Euro Disney S.C.A. holding company. It share of its 81%-owned Euro Disney's loss last year was $742 million. 

The numbers of subscribers getting the Disney Channel fell to 93 million by the end of Disney's fiscal year ended October 1, down from 97 million in 2014, the company also reported.      ESPN fell from 95 million to 90 million subscribers, its lowest number since 2005.

 Increasing numbers of subscribers have been "cutting the cord" and dropping their higher priced cable and satellite subscriptions in favor of streaming programs from services like Netflix  (NFLX)  and Amazon  (AMZN) Prime Video

Unlike ESPN, the Disney Channel doesn't sell advertising. It received approximately $1.21 monthly per subscriber as of last year, according to SNL Kagan, which tracks the fees, compared to the $7.21 that Disney collects each month from ESPN subscribers.

By 2019, however, Disney channel will receive $1.88 per month for each subscriber, Kagan projected in June, more than $1.87 a month per viewer that the average TV station will command by that time from cable and satellite operators for so-called "retransmission fees. ESPN is projected to receive $9.17 by 2019.

In October, after the end of Disney's quarter, TV measurement company Nielsen said ESPN had lost a record 621,000 subscribers over the most recent month. Nielsen confirmed the number after Disney protested.

Disney complained that "the Nielsen numbers represent a dramatic, unexplainable variation over prior months" that "does not track our internal analysis nor does it take into account new ( digital online streaming) entrants into the market."

A Disney spokesman had no comment..

The company acknowledged, however, that falling ESPN subscribers dragged down the company's earnings when it reported its fourth quarter, as revenues for its ESPN-heavy cable network unit fell by 7% and operating earnings b y 13%. It did not mention the Disney Channel's lost subscribers.

For the year, revenues for the cable unit were $16.6 billion, even with a year earlier, while operating earnings fell by 1% to $6.7 billion.

Disney  acknowledged in its filing that operating income at its international theme parks fell in part due to decreases in attendance at Disneyland Paris and occupied room nights at its hotels. Disney effectively owns 81% of the 5,500-acre resort located 20 miles to the east of Paris.

The Paris resort has lost 1.07 billion Euros, or about $1.1 billion over the last three years, including $903 million in the year ended Sept. 30, Euro Disney S.C.A. said in its most recent annual report.  About $742 million in the most recent fiscal year was attributed to Disney's ownership.

The company said attendance at the park fell from 14.8 million to 13.4 million, which it has blamed on falling tourism from other European countries in the wake of terrorist attacks in Paris and Nice.

The author owns shares of Disney and Netflix

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