Based on 2014 numbers, the revenue breakdown of $DIS (got the #'s from the motleyfool)
43% media - tv and cable (including but not limited to ESPN)
31% parks & resorts
15% studio - all films (Disney,lucas,pixar,marvel)
8% consumer products
3% interactive
To try to break everything down:
ESPN still brings a lot of cash in. As of now, there are still plenty that pay that $8 a month for their 2 main channels. And they pay for other $DIS owned channels like the Disney Channel, Freeform, etc. But the future presents risks. Management will always focus on the present when it is superior to the future.
Cord cutting obviously (to me) tops the list. If 56% won't pay $8, and only 6% are willing to pay $20, how much can they make up for that?
The spin will be 'well since they are paying for it you KNOW they are watching it'. But you'll also get a better idea of WHO is watching - and they might not be happy with what they find out. The prized 'millennials' may not be among them in the amount they'd prefer. Ads for ESPN may mirror what you see on CNBC much more than now (investments, old age health enhancements, etc).
Costs for content are very unlikely to go down
http://mmqb.si.com/mmqb/2016/01/19/los-angeles-rams-nfl-ownership-meeting
The most interesting part of Peter King's article:
Once upon a time in the NFL, the establishment told the new kids what was best for everyone, and the kids rebelled. This was in the early ’90s, when the league, in the midst of a multibillion-dollar network TV deal (four years, $3.6 billion), proposed to rebate its TV partners because they were taking a financial bath. Some new-guard owners, including Jerry Jones, nixed it. The new guard worked to get nine votes so they could block the give-back. And they found nine owners, and there was no give-back. Old-guard leader Art Modell, the Browns owner, chairman of the Broadcast Committee and the biggest advocate of relief for the networks, subsequently resigned his prestigious TV post.
Doesn't sound like the NFL is going to help out ESPN with it's inflated rights fees.
But it college where ESPN has it's leverage - they have what many would consider the best content. But I suspect their ability to 'enhance' their revenue over this product significantly will face a rather large roadblock - the fact that only 17 FBS Football schools are private - the rest play at taxpayer funded centers of higher learning. Legislators might not care for a 'delay' of State College games to all but those who pay the highest carrier fees.
But a lot of the $DIS media properties are not ESPN related, and they cost less. But in an environment where cord cutting accelerates and/or a la carte becomes the norm (if not the LAW), everything seems so laser focused on a specific group that it can be said that far more DON'T watch a particular channel than do, then you pay potentially see Media shrink in revenue across the board.
Parks & Resorts
What we talk a lot about here. The battle of $DIS increasing margins - from both ends. Charge more while spend less. But I suspect a turning point is here. They have been shown that P&R isn't mature, that there's growth to be had, and you have to SPEND to achieve that growth. But increased spending presents problems - can you get the guest to continue to pay for that increased spending?
Some guest's CAN'T pay more, and will cease to be guests. But for others, just because they CAN doesn't mean they WILL.
I recall seeing somewhere (whether an article or on TV) saying that $DIS is seeking out 'Wall Street Dads'. Personally I don't believe a person for a living who seeks to pay less for more in their line of work will pay more for less on their vacation. If 'Steak & Potato' costs the same at both Ruth's Chris in Manhattan and Le Cellier, then they are going to expect it to taste the same. People who pay high prices often have high expectations. And I suspect if they approach a restaurant with empty tables during hours of operation they expect to be seated.
Increasing value to the guest only makes it better for us park guests. And in the end is better for business. Aggressively expanding margins at the expense of the guest is not. There is a ceiling - both individually, and eventually - collectively.
Studios
Big hits. Valuable franchises that print money. Yet as of 2014 only 15% of revenue. And this has a ceiling, too. (See SW7 vs The Good Dinosaur). Eventually you cannibalize your own product - product that almost exclusively these days files under 'Expensive Tentpole Film'. And not everything works financially even with high priced named talent like Depp (The Lone Ranger) and Clooney (Tomorrowland) on board.
But one think I think - if you own $DIS as an investment - and the Studio division ever becomes the honest to goodness best division in the company revenue wise - then it's time to
sell with both hands.
No way it's going to double, never mind triple. If it becomes the lead division it means most likely
Media and P&R both dropped like a rock.
My takeaway:
Media will come down, whether fast or slow. The ceiling will actually get lower.
Studio has a ceiling as well.
Parks & Resorts will eventually become the most important revenue driver of the company. And for it to continue to succeed the Park & Resort guest will need to be treated as the most valued consumer of $DIS product - not as a parasitic conduit of short term margin expansion but something that serves both the long term needs of the guest with the continued health of the business.