Last night's Disney (DIS) earnings call was required listening for anyone interested in the media sector. It ended up being really a non-event -- and that is why the stock is rallying this morning.
It was a beat on earnings and a slight miss on revenue, but the focus of investors was on ESPN, which is the core of Disney's media networks business, which in turn is the core of Disney.
Because of a full quarter of carrying the SEC Network, total subscribers for the media business was up. That's the headline number on which investors really focused. Its contraction in August, as well as Bob Iger's frankness in addressing the issue squarely, was really what scared Disney investors in August and sent the whole sector plummeting.
Because no news is good news, Disney stock is up 2% today.
But all is not well at Disney or in media land.
The vast majority of Disney's prepared remarks last night (unlike in August) was focused on the non-ESPN aspects of the Disney empire. Let's talk about Shanghai Disneyland. Let's talk about "The Force Awakens." Let's talk about the slate of movies coming next year.
All those businesses are great and strong businesses, but they mean very little to the stock. I expect that when the new Star Wars movie opens in December, Disney stock might experience a sell-the-news slump just as Lionsgate (LGF) saw in the wake of recent Hunger Games premieres. It was a heck of a bargain that Iger bought Lucasfilm for $4 billion, no doubt. But it doesn't move the stock anymore.
This is still an ESPN story and Disney did admit that, setting the SEC Network subs aside, it experienced "a certain loss" at other networks. It would be nice if the company could have provided more detail on which ones.
Rich Greenfield of BTIG was on CNBC this morning and made a good point: the question with Disney (or any other media company) is not if 100 million cable subs is going to 50 million, but if they're going to 90 million, 80 million or 70 million and over what time period.
We won't really have a better gauge of that for ESPN until we anniversary the SEC Network effect on its sub numbers.
But we know Time Warner (TWX) is experience sub losses greater than the 1% a year they modeled. It's what (along with earnings cuts and currency effects) took that stock down a lot this week after its report. Fox (FOXA) was also badly hit on sub losses this week.
For now, Disney lived to fight another day. But the storm clouds are still threatening.