A Spirited Valentine ...

[ford91exploder]

Just keep in mind that costs are relatively fixed in a lot of industries (e.g. hotels). It's that last 10% or so that represent the majority of operating income.

ESPN's costs don't fluctuate based on the number of subscribers, so that last 10% or so represent a good chunk of the profit.

With the number of subscribers declining and ESPN already committed to some very expensive sports contracts, it's difficult to see how ESPN's business improves until those contracts expire.

The layoffs are largely symbolic and don't address the root cause of ESPN's financial difficulties.

Indeed - The layoffs will not pay for even a single night of 'Monday Night Football', But they will have a large negative effect on ratings and advertising rates, This was a desperation move to keep the stock price afloat by showing ESPN management can make the 'tough decisions'. Bzzt Fail, A 'tough decision' would have been to renegotiate the overpriced contracts ESPN is stuck with.

 

[MisterPenguin]

When a segment does poorly, leadership says "The other segments need to do better so we can return more to shareholders."

Isn't the film division doing that? Multiple billion dollar films. Top 7 out 12 films in 2016. No signs of slowing down (pretty much guaranteed 3 billion-dollar films this year).

 

[ford91exploder]

The most important shareholders being themselves. Self-enrichment - by executives compensated mostly in stock - being the primary motivator.

That too - without getting overly political that needs to be fixed a good start would be executive stock issues at PAR value and takes 7 years to vest. That would fix the 'next quarter' mentality real fast.

 

[ford91exploder]

Isn't the film division doing that? Multiple billion dollar films. Top 7 out 12 films in 2016. No signs of slowing down (pretty much guaranteed 3 billion-dollar films this year).

Film division is doing great, The problem is Disney only sees 1/4-1/3 of the box office gross as cash paid to TWDC, The remainder goes to the theaters and film distributors (who do the advertising as well).

So that 3 billion in box office actually only gives Disney itself $750M-1B in cash which is not pocket change but it's NOT 3 Billion Dollars either. That's why the big names in Hollywood demand a percentage of the GROSS rather than the NET.

 

[ford91exploder]

No it doesn't, it's from different money pools. That's why Disney World had all those new attractions when Hong Kong, DCA 2.0 and Shanghai were being built.

You forgot your sarcasm font... In the end it's ONE pool of money and Burbank decides where it goes for Iger's entire tenure the majority of money after expenses has gone into Stock repurchases.

Last year DIS spent 9.6 Billion on repurchasing stock and a piddling 0.8 Billion on US park enhancement.

 

[flynnibus]

So... how is it that the rewards of a non-Park division doesn't help the Parks, but, the woes of a non-Park division does indeed hurt the Parks?

Because a parent company doesn't react to excess gains and losses the same. Gains are gravy... they can be selective in what they do with it, and siblings can make arguments with the parents about who should get what. Losses, the parent forces all the siblings to contribute to ensure the parents still look good. So with losses, everyone's hands are forced because keeping the parent looking good is the top priority.. even if you weren't responsible for the loss.

 

[ford91exploder]

Because a parent company doesn't react to excess gains and losses the same. Gains are gravy... they can be selective in what they do with it, and siblings can make arguments with the parents about who should get what. Losses, the parent forces all the siblings to contribute to ensure the parents still look good. So with losses, everyone's hands are forced because keeping the parent looking good is the top priority.. even if you weren't responsible for the loss.

^^^^ THIS ^^^^ - How can I like this a million times, Anyone who manages a budget in corporate America understands this as the most basic rule of corporate finance.

 

[MisterPenguin]

So that 3 billion in box office actually only gives Disney itself $750M-1B in cash which is not pocket change but it's NOT 3 Billion Dollars either.

Oops, forgot to add: ... and all the merchandising money.

 

[LuvtheGoof]

Hmm, the annual report lists $7.5 billion for stock repurchases and $2.18 billion for U.S. park enhancements. I will, however, absolutely agree that the stock repurchases need to stop.

ETA: The 1st qtr saw stock buybacks of $1.465 billion and $609 million of U.S. park expenditures. $900 million if you add in overseas parks.

 

[Phil12]

Yeah, not exactly true as a lot of us use ad blockers on the internet, and never see any of that crap. The only ad blocker on regular TV is my DVR and a FF button.

Actually, regular TV now has ad skip using the TIVO Roamio OTA. In addition using a program called KMTTG, you can automatically detect and remove all ads and then automatically save the edited (ad free) program to your TIVO or your NAS for later viewing.

 

[ford91exploder]

Oops, forgot to add: ... and all the merchandising money.

True,

But even there if a Billon dollars of Star Wars toys sell, Disney probably gets $150 million from that total because they license all their merchandising, It limits risk when the factory uses lead paint on childs toys or creates poison pet treats but it limits the upside potential as well.

EDIT: - 3-15% percent is standard for merchandise licensing but only Disney and the licensee know the actual figure. 1E9 * .15 = 15E6 I used the figure most beneficial in this case.

 

[jakeman]

True,

But even there if a Billon dollars of Star Wars toys sell, Disney probably gets $150 million from that total because they license all their merchandising, It limits risk when the factory uses lead paint on childs toys or creates poison pet treats but it limits the upside potential as well.

lol

Translation:

That's a good point. Here's something I completely made up to negate it though.

 

[ford91exploder]

Hmm, the annual report lists $7.5 billion for stock repurchases and $2.18 billion for U.S. park enhancements. I will, however, absolutely agree that the stock repurchases need to stop.

Interesting perhaps during the earnings call they misspoke, In any case I will take the annual report figures as the final and authoritative figures. Either way the buybacks need to STOP as last years buybacks would have financed SDL with 2 billion left over.

 

[Bocabear]

Wow Jakeman the personal attacks are petty.

 

[jakeman]

Wow Jakeman the personal attacks are petty.

How is what I've said a personal attack? It's been the same point being made for the last 48 hours by @ford91exploder. In fact, it's the same point being made by him for the last several years.

I've not called him names other than ribbed him for his obvious glee with the current issues at ESPN and referenced his known willingness to falsify facts to make his point, some of which were presented on this very page.

EDIT: The case could be made that my last post was petty, but it's also accurate. If @ford91exploder would like to post some fact to back up his opinion I will be more than willing to retract/delete it.

 

[LuvtheGoof]

Wow Jakeman the personal attacks are petty.

So you believe the drivel that exploder puts out?

 

[the.dreamfinder]

Isn't the film division doing that? Multiple billion dollar films. Top 7 out 12 films in 2016. No signs of slowing down (pretty much guaranteed 3 billion-dollar films this year).

Film is a cyclical business. All the "content engines" are hitting on all cylinders, for now. Crucially, only the animation studios have the sort of talent development pipeline that will be needed for the future. TWDS isn't cultivating those long term relationships on the live-action side like it did during the Eisner years (see Wes Anderson, M. Night Shyamalan, JJ Abrams, Michael Bay, Weinsteins/Scott Rudin).

 

[rael ramone]

Indeed - The layoffs will not pay for even a single night of 'Monday Night Football', But they will have a large negative effect on ratings and advertising rates, This was a desperation move to keep the stock price afloat by showing ESPN management can make the 'tough decisions'. Bzzt Fail, A 'tough decision' would have been to renegotiate the overpriced contracts ESPN is stuck with.

I suspect if the Weatherman went to Goodell to try to get the NFL contract reduced, Goodell would respond with a 'Ted DiBiase' laugh....

 

[Phil12]

How is what I've said a personal attack? It's been the same point being made for the last 48 hours by @ford91exploder. In fact, it's the same point being made by him for the last several years.

I've not called him names other than ribbed him for his obvious glee with the current issues at ESPN and referenced his known willingness to falsify facts to make his point, some of which were presented on this very page.

EDIT: The case could be made that my last post was petty, but it's also accurate. If @ford91exploder would like to post some fact to back up his opinion I will be more than willing to retract/delete it.

I think your observations are correct. And what better place for such ruminations considering that WDW1974 is the Tautological Drivel Expert.

 

[rael ramone]

But you're ignoring in this the other part of the equation: Disney's movie divisions (all five of them) are doing gangbusters. So, why aren't you (or others) saying, "It's the Disney Movies Heydey! The parks are a mature investment!"?

Right now, they *finally* realize that the parks AREN'T a mature investment, thanks to UNI & HP.

And TV/Cable, even though down, still delivers a much bigger (for now) slice of Revenue Pie then Films (even though up).

And beyond the percentages, there's the fact that for years TV/Cable delivered 'consistent' revenue that you could count on.

The cyclical portions of $DIS (Films, P&R) were more like stocks, while TV & Cable were like the bonds in their portfolio. P&R is *very much* tied to the economy as a whole, and film (especially with the current model of just about everything being expensive tentpoles) was swinging for the fences at every at bat Dave Kingman style. But all that risk *was* balanced out because no matter what, people paid $7+ for ESPN (plus more for all the other $DIS owned channels) whether they watched them or not, and on top of that you had the ad revenue.

Basically the largest AND most dependable and conservative holding in the $DIS portfolio is staring in the face of Deteriorating Fundamentals. Which adds risk to $DIS as an investment.