The Walt Disney Company (NYSE: DIS) has been the iconic symbol for youth. Its biggest business segment, cable tv, has served children and teenagers with several hit TV shows and movies like Hannah Montana and High School Musical for the millennial generation. Coupled with the decline in subscriptions for its sports channel, ESPN, Disney's problems go well beyond sports.
Disney's Challenged Television Business
Cable TV is lucrative for Disney. According to Fox Business, Disney's cable TV accounts for 30% of its revenue and 43% of profits for fiscal year 2016. More importantly, 26% of cable revenue and its profits stemmed from its entertainment networks, which mainly include Disney Channel and Freeform (Morgan Stanley estimations). Thus, the decline in its children, teen, and young adult viewership is concerning to both the company and its investors.
In terms of subscription decline, Wall Street Journal reports that both Disney Channel and Freeform (formerly known as ABC Family prior January 2016) has "lost about 4 million subscribers in the past 3 years." Part of the ongoing struggle for Disney is inclusive of the cable business, in general. Nielsen, the premiere consumer insight reporting company, notes that there has been serious cord-cutting in the past couple of years, as more options to watch and access TV has increased competition from the likes of Hulu, Netflix (Nasdaq: NFLX), and Google's YouTube TV (Nasdaq: GOOG). But, on top of the addition of other viewing alternatives, Disney has had a lack of hits, a statement made by Disney Channel President, Gary Marsh. Refinery 29 reports that Marsh shared, "one of the challenges is trying to serve the viewership where they're going as opposed to trying to drive them where we want them to go."
Traditional Players Also Losing Out As Well
Similar to the situation Disney is facing, the other traditional players are also flailing. One of Disney's competitors, Viacom (Nasdaq: VIAB), has also faced a number of difficulties, trying to save their channel viewership as it owns well-known channels like MTV, Nickelodeon, VH1, Comedy Central, BET, etc. According to The Street, "Viacom is facing pressure as the cord-cutting trend continues to reduce the number of cable subscribers and threaten carriage and affiliate fees." On top of these channels, Viacom has struggled to keep its Paramount Pictures above water with significant operating losses as its movies stalled in box offices. Variety reports that other competitors of Disney like 21st Century Fox (NYSE: FOX) and Turner Broadcasting have made moves to streamline its content portfolio, by combining channels into one and eliminating channels, respectively. As Netflix, YouTube TV and other streaming/subscription video on demand services gain popularity, these media titans have to prove their content is just as engaging as their much smaller and versatile content competitors.