The Walt Disney Company

Capital market research

TABLE OF CONTENTS
Table of Contents.............................................................................................................................2
Introduction......................................................................................................................................3
News Article....................................................................................................................................3
Impact on Share Prices....................................................................................................................5
Respond of company towards the news...........................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

INTRODUCTION
The Walt Disney Company was established in Los Angeles in the year 1923, and it’s headquarter
is situated in Burbank, California, United States. It is the American based diversified
international company related with the mass media and family entertainment. The company
conducts its operations in several segments, which are Parks and Resorts, Media Networks,
Studio entertainment and consumer products and interactive media (Fleming, 2016). The media
network segment of the company consists of television production and distribution operations,
domestic television station, cable and broadcast television network. The park and resort segment
operates the Walt Disney World resort in Florida, adventure by Disney, Disney resort and spa
and the studio entertainment segment engages in the production and acquisition of live films and
animated motion pictures. The consumer product and interactive media segment engages in
developing the game, particularly for mobile phones, comic book and magazine. It is one of the
largest leading sectors in the American animation industry (Sandlin, and Garlen, 2016). From
the year 1980, the company for creating the mature market had acquired and created many
corporate divisions. The present study is related to the issues faced by Disney due to ESPN and
its impact on share prices. In the study how the share price of the company impacted after the
related article published in the news, is also elaborated.
NEWS ARTICLE
The present article is related with the ESPN (Entertainment and sports programming
networking). In the financial report of the year 2016, the operating income of the company
reduced from $207million to $1.4billion for the fourth quarter due to their cable network. ESPN
is the main reason behind the reduction of such income, which is actually compensated by
growth achieved by other channels (Darren,2016).
The report further states that, because of the less advertising activities and the increased
programming and production cost, the revenue of the ESPN segmeny reduced. Less impact and
lower rates lead to lower advertising revenue.
Disney must accept the significant number of the cord cutters who have implemented in contrast
to subscribing for ESPN through a cable bundle. ESPN charged the increase rate from the cable

distributor, but this could not make good for the reduction in the subscriber, which leads to the
decrease in the operating profit during the fourth quarter of the year (Darren,2016).
Along with this, the company also placed some fault on the rising cost of manufacturing and
programming, compelled by cost connected with World cup of hockey right, Rio Olympics, and
significant contractual rate for the sport of college (Martin, & et al. 2018).
The company became aware in some time that ESPN was in the process of continuously losing a
subscriber. On the basis of the data from Nielsen in July specified that around 4% rates from the
last year, the subscriber of the ESPN were declining. The company at the end of the third quarter
expressed an optimistic way for in improving from these losses by making the various strategies.
With this regards, the company through an uptick in existence on running bundles like sling and
Vue, which Disney says permits the company to get paid the same as it would be for cable
subscriber. However, this idea will get success or not, is still very confusing. In other words, it
can be said that streaming services of the company whether recovering the regular losses
generated from the cable (Darren,2016).
The slow and continuous loss of subscriber is the main issue that Disney must take extremely,
notwithstanding on the facts of the report that company regarded as the success in the fourth
quarter by making $ 1.77 billion in profit. Proceed from the cable division, which comprises with
the ESPN was reduced by 7% to $ 3.96 billion.
Nevertheless, the chief executive officer of the company remained optimistic about the
recovering of losses from ESPN and stated that Disney could achieve more subscriber and trust
that the reason for the losses will mitigate soon (Voigt, Buliga, and Michl, 2017).
Indeed ESPN gives more attention towards on offering a distinctive type of the content outside
its flagship sports centre, by which the consumer of the product can be tempted towards it(do
Patrocínio & et al. 2018).
Executive vice president, programming and scheduling of ESPN contented that the company has
always established a readiness to take a new and latest approach with the latest network schedule
and it is the current example.

IMPACT ON SHARE PRICES
It is very clear that in the year 2016 the rate of revenue growth in the cable networking segment
practically leads to a cease. It is implied that the loss of the subscriber from the ESPN, started to
make an impact on the revenue of the company (Chavez, and Kiley, 2016).
Figure 1: Share price of Disney before news article
(Yahoo finance, 2019)

Figure 2: Share price of Disney after news article
(Yahoo finance, 2019)
By considering the relevant aspect of the study, it has been noticed that the after this news, the
share price of the company very impacted. The market price of the share of the company before
the news was 120.07 and after the news, it was 91.30. In the percentage terms, it was reduced
about 24% (Yahoo finance,2019). The company has suffered from significant losses from the
cable networking segment because the cost of programming was too high and ESPN not able to
tempt the consumer. In spite of this, the company was optimistic that it would enhance the
revenue in the coming years by making several strategies. At this point in time, the investor got
very confused whether they should sell the share of the company or hold the shares. The reason
behind the selling of shares is that if in the future the strategies not viable then it may be possible
that the price of the shares would fall below as compared with the existing price of the share. On
the other hand, many investors assume that holding the shares may be beneficial because the
company announced much planning such as streaming process, live internet TV streaming
process and many other, which will enhance the revenue of the company.

RESPOND OF COMPANY TOWARDS THE NEWS
The company has achieved the turning point when ESPN is considered. ESPN remains a major
issue for the company. The company was significantly impacted by the higher programming
expenses at ESPN, by which the growth in revenue from the affiliated revenue offset (Giroux,
and Pollock, 2018). Although, the subscriber of the ESPN continuously reduced the revenue
from the cable operations of the company increased 10% to $ 16.63 billion in the year 2016. This
clearly indicates that the company was able to make up the loss by making several strategies.
To face this adverse situation, the company made the announcement of the next service of the
ESPN, which is known as ESPN+. This new service will be launched in the early of 2018 and
with a completely redesigned application (Edwards, 2016). Further, it contains many features for
attracting the subscriber such as it will provide highlights and score along with the streaming of
channel for the subscriber of cable and by which the live events can be seen. With this regards,
its strategy drive to consumer plus advantageously connected restoration in media, regularly
investment for development in the parks and a superior account to drive studio and products of
the consumer's earnings (Lewis, 2015). In the year 2019, the company is planning to launch the
direct to consumer streaming services which will include the content from Marvel, Pixar,
Lucasfilm as well as Disney. It will also contain the 4-5 distinctive features film per year, along
with some original series. The company focuses on the type of content by which the consumer
can be attracted to it. Further, the company also started the streaming services by which the
company hopes that the losses suffered from the ESPN can be makeup. The superior renewals
and inclusion of the live internet TV steaming process, such as youtube TV, direct TV;
Stabilization of the ESPN can be achieved (Trefis Team,2017).
CONCLUSION
By considering the relevant aspect of the study, it has been evaluated that ESPN is the turning
point during the life span of the company. The subscriber of the ESPN gradually falls from the
year 2015. ESPN leads to falls in the operating income of the company from the cable
networking segment. The main reason behind the reduction of the profit is because of the higher
programming cost. Despite the loss, the overall company profit of the company not reduced
because the profit from other segment offset the loss from ESPN. To cope up with this situation

the company made various strategies and remains optimistic that in the future the company will
improve its performance.

REFERENCES
Books and Journals
Chavez, C. and Kiley, A., 2016. Starlets, Subscribers and Beneficiaries: Disney, Latino Children
and Television Labor. International Journal of Communication, 10, p.21.
do Patrocínio, R.F., de Almeida Souza, J.L., Santos, C.T.O. and Martins, K.S., 2018. The vision
of the Disney World: an experience marketing study at The Walt Disney Company. Archives of
Business Research, 6(9).
Edwards, M., 2016. Competitive Advantage: The Actions ESPN Must Take in Order to Maintain
a Leadership Position in the Wake of Cable Unbundling. Sports. Law Review, 46, p.197.
Fleming, P.C., 2016. Dickens, Disney, Oliver, and Company: Adaptation in a Corporate Media
Age. Children's Literature Association Quarterly, 41(2), pp.182-198.
Giroux, H.A. and Pollock, G., 2018. Is Disney good for your kids? How corporate media shape
youth identity in the Digital Age. In Kinderculture (pp. 73-92). Routledge.
Lewis, J., 2015. Disney's World Cup: ESPN and the Un-Americanisation of Global
Football. Film Studies, 13(1), pp.94-112.
Martin, T.G., McNary, E., Suh, Y.I. and Gregg, E.A., 2018. A content analysis of pictorial
content in entertainment and sports programming networks (ESPN): The magazine's body
issue. Journal of Physical Education and Sports Management, 9(1), pp.1-9.
Sandlin, J.A. and Garlen, J.C. eds., 2016. Disney, culture, and curriculum. Routledge.
Voigt, K.I., Buliga, O. and Michl, K., 2017. Making People Happy: The Case of the Walt Disney
Company. In Business Model Pioneers (pp. 113-126). Springer, Cham.
Online
Darren,H,2016. Disney's ESPN Subscriber Situation Is A Cause For Concern(online).Available
through<https://www.forbes.com/sites/darrenheitner/2016/11/11/disneys-espn-subscriber-
situation-is-a-cause-for-concern/#6f70832d6e64.> [Assessed on 22january 2019]
Trefis Team,2017. ESPN Remains A Drag On Disney (online).Available through
<https://www.forbes.com/sites/greatspeculations/2017/11/10/espn-remains-a-drag-on-disney/
#3d11b64862f7>[Assessed on 22january 2019]
Yahoo finance,2019.The share price of The Walt Disney Company (online). Available through
<https://finance.yahoo.com/quote/DIS/chart? > [Assessed on 22 January 2019]