Business

ESPN’s decline in subscribers sends Disney stock tumbling

Disney served shareholders a big turkey going into Thanksgiving with the disclosure that its biggest growth driver, ESPN, shed 3 million subscribers in its most recent fiscal year.

That news — buried in a late Wednesday regulatory filing — did not escape the notice of investors, who sent Disney’s stock down 3 percent, to $115.13, during Friday’s shortened trading session.

Fresh evidence that increasing numbers of cable subscribers are cord-cutting also dragged down other media stocks, including Viacom (off 2.2 percent) and Time Warner (down 0.8 percent).

ESPN’s subscriber loss in fiscal 2015 brought the two-year total to 7 million, leaving the sports network with 92 million subscribers — and investors with doubts about Disney’s ability to reverse the trend.

Wells Fargo analyst Marci Ryvicker estimated Friday that ESPN’s declining subs shaved Disney’s fiscal 2015 revenue by $700 million and pre-tax earnings, or Ebitda, by $200 million.

ESPN, the self-described “Worldwide Leader in Sports,” not only dominates Disney’s cable-networks division, but accounts for 46 percent of the company’s operating profit and 32 percent of revenue.

But its high sports-rights costs make it especially vulnerable to subscription downturns. ESPN is pay-TV’s most expensive network by far, with monthly fees of about $6.10 per subscriber. That is paid by cable and satellite companies, which in turn pass the cost along to consumers.

Disney Chief Executive Bob Iger sparked a broad media selloff in August, when he said during an earnings call that ESPN had suffered “some modest sub losses.”