Disney Falls on ESPN Decline, Dragging Down Media Stocks

ESPN Subscription Growth Down 3%
  • ESPN lost 3 million subscribers in the fiscal year 2015
  • Comcast, Time Warner drop on renewed concerns about cable TV

Walt Disney Co. dropped the most in three months after reporting that ESPN lost 3 million subscribers in a year, reviving concerns about shrinking demand for traditional pay-TV packages and dragging down U.S. media stocks.

Subscribers at the ESPN sports network, Disney’s most profitable channel, fell 3.2 percent to 92 million at end of October, according to a filing Wednesday after the market closed.

The report put a number on the extent of ESPN’s declines, after Disney Chief Executive Officer Bob Iger told investors in August that the channel had experienced “some modest” subscriber losses. Those comments, and Disney’s darkened outlook about its cable TV businesses, sparked a selloff in media stocks at the time. They highlighted the impact of cord cutting -- Americans who drop traditional pay-TV packages for cheaper online alternatives like Netflix and Hulu -- on the entire television industry.

“The 10K filing simply confirmed media investors’ fears that the big cable bundle, which has been good to all in the media eco-system, may be under threat,” said Paul Sweeney, an analyst with Bloomberg Intelligence.

Disney fell 3 percent to $115.13 at the close in New York. Viacom Inc. the owner of MTV and Comedy Central, dropped 2.3 percent to $51.16, and Rupert Murdoch’s Twenty-First Century Fox Inc. was down 1.2 percent to $29.54. The S&P 500 Media index dropped 1.1 percent.

Friday’s declines show how nervous investors have been about the media industry since the August meltdown, which erased $60 billion in market capitalization in two days. While Disney reassured investors earlier this month by posting earnings that beat analysts’ estimates, media stocks tanked on Nov. 4 after Time Warner Inc. lowered its 2016 earnings outlook.

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