When you lost "some" subscribers it can be overlooked. But when your subscribers go to 92 million from 99 million in two years, as have ESPN's for Disney (DIS), then you've got a front and center problem.
That's a nasty trajectory.
I have long held that Disney's one of the greatest companies and therefore one of the greatest stocks of all time. But I don't know how I would reverse that ESPN trend. We have so many different ways of getting sports, including my Watch ESPN app and we have so many other ways of getting scores and we have so little time to watch all of that admittedly spectacular programming, it's hard to see a reverse.
Within that last sentence, I think, is the most damning part of the situation.
The programming is SPECTACULAR. I don't know how you would make it more relevant, more exciting, more beautifully produced and more intelligent. It is nothing short of fantastic.
But we aren't watching as much TV as before, so we don't watch as much ESPN.
We watch our cellphones. They aren't just the enemy of the mall or the desktop, but the television itself.
Disney's problem is a reminder of why, when we think of entertainment, we think of Facebook (FB), not television and not movies. If you go over the Facebook conference calls they are fabulously descriptive of the hours of time spent on Facebook. You would think after listening to one of these calls that, when you subtract Facebook time and gaming time (the people who watch ESPN are likely to be gamers) you just don't need all of that ESPN.
Plus, if you want to get that cable bill down you can take a hard look at a Verizon (VZ) Fios deal that cuts out some of the extra ESPN's in order to save some bucks, something that in an era where your other regular bills -- your tax and healthcare bills -- just don't come in, makes a ton of sense as a place to save.
What does it mean for Disney's stock? I think the company has many irons like the theme parks and the movies, but we have already had to deal with the decline of the value of ABC and now with that trajectory you have to think of ESPN as a bit of a wasting asset where the programming costs have to come down quickly in order to make it so if that sub number falls into the 80 millions the profitability goes up, not down. It can be done. It will be done. But not before Disney becomes exactly the kind of battleground stock that Facebook isn't. Because a secularly-declining revenue stream is one that the market finds hard to value and when the market finds something hard to value, it tends to value it at a lot less than it is really worth.
