Whenever I read about a sell-off along the lines of what happened to Disney yesterday, I like to ask one question: Are the assets still good?
Times may be changing all around a firm, but it’s all just details if the foundation of that company still solid.
Back when Disney’s bellcow, ESPN, started, it was sports news and related programming built around broadcasting sideline sports that no one else wanted: World’s Strongest Man, darts, Australian Rules Football. Eventually, however, the network revolutionized the television industry by opening up the cable frontier to live sporting events.
ESPN now has an interest in every major sport in existence, absent hockey. Not coincidentally, while the viewership stats of other major cable networks are plummeting, ESPN’s ratings are actually moving in the opposite direction.
As demonstrated by the wide declines yesterday in the share prices of media companies, the uncertainties of the shifting landscape in content delivery have investors spooked. Yet, consumers’ preferences for how they access ESPN’s products are changing. That doesn’t mean they don’t want what the Worldwide Leader is selling anymore.
In the short term, ESPN will see its revenues from subscription fees fall as more consumers cut and shave the cord. It will also tighten its belt. It will study how to alter its business model to cash in on selling directly to consumers. (Hint: You can cut a lot of fat when you’re not trying to populate 24/7 TV channels.)
But so long as ESPN can hold onto live sports properties, Mickey will keep making bank off it.