Disney shares have come under pressure recently despite the huge success of Star Wars. Shares started the year around $94 and as of December 28th trade around $107. However, shares have traded as high as $122 in August, before falling after the 3Q’15 earnings report. This earning report showed a little chink in DIS armor. Shares recovered and trade as high as 120 in the middle of November but have recently stumbled. After all, anticipation for the release of Star Wars was building for quiet some time. One would think that with a billion dollars in sales in the first 12 days and box office records shattered, DIS would be surging higher.
It all started in August, Bob Iger mentioned that DIS was seeing a slow down in ESPN’s growth due to the start of cord cutting. Cord cutting? Yes, cord cutting. This is when TV viewers cut ties with their cable providers and go to watching media via steaming web services like Netflix. This was the moment that exposed chink in the armor. DIS gets nearly 45% of their revenue from their media segment and it had 10% growth in 2014. Certainly, this could be an area of concern, sort of. It is like looking at a glass full or half empty, is “cord cutting” good or bad?
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The concern? Did DIS over pay for NFL & NBA multi-year deals. It is most likely to early in the contract to know if the strategy will pay off or
Through channels of competitive balance, the leagues have put restrictions on free agency. The MLB does this by requiring players to be in the league for six years before declaring free agency, and the NFL puts a restriction on free agency for some players, done by allowing teams to match offers players have received from other teams. Determining a player’s MRP becomes an easier process than in the labor markets of other industries due to the availability of statistics of player’s and their contribution to their team’s success. The difficulty of this process lies in the determination of how revenues for a team are produced.
The stock price is currently 103.31, down from a recent high of 121.50. The P/E ratio is declining at 28 and beta at .67, which is expected to grow closer to 1.0. A recent earnings surprise last December yielded a 15% difference from the lower expectations and the latest earnings reports late last month also surprised investors. Estimates for the 2000 fiscal year are being raised by a large majority of analyst who believe that earnings per share will increase and the stock price will reach close to 150.
... has mirrored that in the MLB, another professional sports league without a salary cap. The continuation of a revenue sharing system makes the growth of the NFL’s market capitalization less than that of other salary cap free leagues like the MLB because it reduces the ability to capitalize on lucrative TV deals. Moreover, the reduction in product quality (a result of the shift in competitive balance) slows the growth of the league’s market capitalization compared to the rate at which it was growing before the court ruling. All in all, this court ruling has been bad for the NFL because its abolition of the salary cap—but not revenue—sharing, has generated a worse product then would be produced if there was no ruling, which pays players less than it would have if there was no ruling, and that makes teams less valuable than they would have been if there was no ruling.
The Walt Disney Company is a highly diversified media and entertainment company that has been growing by leaps and bounds since its inception in the late 1920’s. In the past few decades, The Walt Disney Company has expanded into numerous markets and diversified its business greatly. The company states that their corporate strategy is targeted at creating high-quality family content, exploiting technological innovations to make entertainment experiences more memorable, and expanding internationally. Upon studying the happenings of the company throughout the years, it is easy to see that the company is executing this strategy well through numerous strategic moves in the industry.
Star Wars is a science fiction universe, created by the minds of George Lucas and Steven Spielberg, which has been taking the world by loved since the 70’s. With its only main competitor being Star Trek, Star Wars has becoming ever more popular ever since its first red carpet premiere in 1977. There are six known movies, 2 different cartoon television series, countless merchandise sold, and much more. Recently Disney spent $4 billion for the ownership rights of the franchise. Was this a good idea to hand over such a great product that has tons of action and adventure that may be deemed too much for kids? Or can this just be opening up so many more doors towards unlocking the universe's full potential? Disney has already announced the seventh installment of the Star Wars series. There is a huge controversy in the Star Wars universe of what Disney intends to do that will change the universe forever. Really, Disney is hurting the Star Wars universe by creating a television series that is irrelevant in the timeline, producing new movies that may leave so many Star Wars fans disappointed, and monopolizing over something they know they will make the most profit from rather than making something that the people will love and enjoy.
The problem with this is the inflation of players' salaries. When players are drafted young, they demand to be paid what they want; teams pay them millions right out of college.
As financial consultants, we have been asked by Walt Disney’s management to provide an evaluation of this alternative to the company for this financing decision. For this estimate, we have reviewed the data of the Consolidated Income Statements from 1982 to 1983, the Consolidated Balance Sheets of 1984 and 1983, the Historical Summary of Average Yen/Dollar Exchange Rates and Price Indexes, ECU/Yen Swap flows in the following ten years, Yen Long-dated foreign exchange forward, Cash flow of 10-year ECU Euro bonds with sinking fund (Exhibit 6), and also the list of the French Utility’s outstanding publicly Traded Eurobonds.
What’s more, Disney also needs to recognize which businesses have long-term growth potential and which have not. Hence, Disney also has to divest in businesses which are unprofitable or have no long-term growth potential.
amounts of equity (Disney and Government) as well as with subordinated debt (Government), Disney had
Star Wars: The Force Awakens was a new beggining to the franchise, bringing a fresh start for old and new viewers. When Disney acquired rights, many fans were furious and many believed the series would be ruined. J.J. Abrams proved them otherwise.
This case provides a brief history of management conflict and change at Walt Disney Company. Former CEO Michael Eisner was considered to be controversial because of his abrasive style and tendencies toward micromanagement. It was this style that strained several important relationships to the Disney Company. Though his reign as CEO during the 80’s and 90’s helped advance Disney Company, it was his conflicting management style that led to his demise and the beginning of Robert Iger’s epoch at Disney. Since Iger has taken the helm as CEO Disney was ranked 67th in the Fortune 500 list for largest companies, it has become the largest media conglomerate in the world, and relationships and disputes stemming from Eisner have been reconciled.
It is being predicted that Disneyland will see a dip due Harry Potter. However, Disneyland too is in the process of adding more attractions. There is a 14 acre expansion plan which would resemble Star Wars. The spokesperson of Disneyland, Suzi Brown has said that, Disney would continue to raise the bars of theme parks and strive to provide an unique experience to tourists. This arms race, however, would do a lot of good for the industry and people as
The entertainment industry holds the immense potential for growth and development. The industry is constantly evolving and Walt Disney emerge as a global leader and recognized as the world’s second largest media conglomerate in the terms of revenue after Comcast. The Walt Disney Company is a multinational entertainment conglomerate headquartered at California, United States. The company integrated its products into five target segments are as follows: (1) Media Networks (2) Parks and Resorts (3) Walt Disney Studios (4) Disney Consumer Products (5) Disney Interactive. The company has strong diversified product portfolios and generate high returns and revenues from all the target segments but the media networks contributes
This channel has been doing well financially and this may make the reporting of statements of finance at Disney to be overstated so as to attract more investors than the competitor (Mertz, 1999).
Through the ratio analysis, we can conclude that Disney is a stable company, keeping up with industry trends and up to par with industry averages. Although at times it can seem that Disney is a risky and unstable company, those conclusions are false since the unstableness has come through decisions which will better establish Disney’s position on the market. Although Disney’s competition, namely CBS, is on a similar standing as Disney when comparing ratios, Disney will manage to remain the largest media conglomerate in the USA and one of the best corporations in the world.