Cracks in the cable business send media stocks tumbling

[J187Money]

Generally I respect your posts - but on this subject - what's wrong with someone not liking a corporate establishment and therefor electing to minimize their business with said establishment? Of course ABC/ESPN/Disney will do just fine w/o us, but that isn't so much the point as the point being they (the consumer) have decided that they don't want their $ going that firm. Frankly, we do this every day as consumers - sometimes with conscientious objections to a brand and sometimes with deep seated bias that many probably don't give much thought too. The classic example would be coffee, many loathe either Dunkin or Starbucks for what they perceive the other brand stands for - whether its really true or not.

Admittedly I have mixed feelings. As I said earlier, as a CT resident & tax payer, I want ESPN to succeed very much...but as a consumer - I purposefully avoid the channel as much as possible and if I could, I would probably cut out of my sports package. Yes - I do feel - given the anecdotal evidence collected over the past 5 years of CRA that ESPN has had an active hand in forcing realignment. They have been an enabler. Partly this is the force of Adam Smith (straight economics) and partly - in my own opinion - due to bias at worst or indifference at best by ESPN beancounters & decision makers. That all said, I hope someone at ESPN pens a tell all book at CRA 30 years from now that gets the truth out there - what ever it is.

One other thought about ESPN....the channel is chock full itself and its brand. Its especially good at ignoring all other media outlets, particularly national media outlets it perceives as competition.

Bottomline - yes I am bitter about CRA and that bitterness drives me to minimize my ESPN watching (I don't watch their news/non live sports broadcasting). Silly, perhaps. Unproductive, perhaps. Do I feel a little better about myself...yes.

These days - for tv sports news coverage, I mostly watch SNY Geico Sports Night. 'Get your NY sports here.'

I don't disagree with you at all. And you hit the nail on head in the bolded part above. That's exactly what I'm trying to say. It is silly. It is unproductive. And btw if it makes you happy so be it. Just be honest about it. I just didn't buy the "I don't watch ESPiN because 100% of their content is inferior to all other content" line of reasoning, which is how this got started. Being bitter and angry is a good enough reason not to watch.

 

[Mr. Wonderful]

I know. Like ESPN's goal is to make UCONN irrelevant. They want to make money.

BTW - the boycott must be working. Disney only made $6.7 Billion over the first 9 months of the year (up 13% y/y).

I knew you wouldn't get it.

This is the point: it is irrelevant whether ESPN does it deliberately. They're not. But it doesn't have to be deliberate to deserve my scorn and motivate me to severe my support.

 

[J187Money]

I knew you wouldn't get it.

This is the point: it is irrelevant whether ESPN does it deliberately. They're not. But it doesn't have to be deliberate to deserve my scorn and motivate me to severe my support.

Read my other posts. I do get it. I understand why people are angry. I understand why people want to boycott.

Here is my point of view (in bullet form because apparently people don't want to actually read what I've written):

• *I* don't blame ESPN. They are a corporation that is trying to make money.
• I don't care if you do blame ESPN. I might disagree with you, but who cares.
• I don't care if you watch ESPN. You should do whatever makes you happy.
• Your individual choices don't matter to ESPN because there aren't enough of you to matter. Which again, doesn't mean you shouldn't do what you want to do. And I suppose if you want to pretend that it matters, fine. Just doesn't make it true.
• It feels to me that people here say they don't like ESPN content BECAUSE they are mad at ESPN. Which is odd. If you don't like ESPN, fine. If you like ESPN and don't want to watch because you are mad, also fine.

 

[itgoeslike]

Fair point. But if I'm ESPN I act in my own self interest. That's my job. It sucks that UCONN lost. But they were way late to the table. I've said it before - I grew up in Wisconsin and moved out here as a teenager. When I went to UCONN it was mostly based on price and it killed me that we were playing 1-AA football and I never went to any games. The reputation of UCONN football across the country is not weak. It is non-existent. Nobody cares. It is not a brand. If people think that ESPN should have acted differently they don't work in the real world.

CR has ruined things for lots of people. Even the winners. They have more cash but that's it.

If ESPN can act in their own self-interest (as they should [on many levels]), why can't pissed off UConn fans be afforded the same consideration? Personally, I wouldn't avoid watching ESPN at the expense of not watching UConn, but if someone felt that strongly, so be it. It's his or her choice.

As college football becomes more "contrived" it loses some of the allure it once had over professional sports. Apathy is the biggest threat to media properties.

 

[J187Money]

If ESPN can act in their own self-interest (as they should [on many levels]), why can't pissed off UConn fans be afforded the same consideration? Personally, I wouldn't avoid watching ESPN at the expense of not watching UConn, but if someone felt that strongly, so be it. It's his or her choice.

As college football becomes more "contrived" it loses some of the allure it once had over professional sports. Apathy is the biggest threat to media properties.

I've never said otherwise.

 

[itgoeslike]

Yes. But apples and oranges. Cord cutting is real. A boycott by UCONN fans is like standing in Bristol and throwing racquetballs at ESPN and expecting the building to come down.

Although not mutually exclusive, I don't believe that I ever stated that Cord Cutting and a boycott by UConn fans were the same thing.

 

[J187Money]

Although not mutually exclusive, I don't believe that I ever stated that Cord Cutting and a boycott by UConn fans were the same thing.

No you didn't. But you used Sea World as an example as to how it could matter. I was just stating that it wouldn't matter, given the relative size of the UCONN fan population that cares, and the fact that most other fan bases are happy. It worked at Sea World because pretty much EVERYONE hates mistreatment of animals.

 

[SAMCRO]

As college football becomes more "contrived" it loses some of the allure it once had over professional sports. Apathy is the biggest threat to media properties.

You just summed up exactly how I feel about CFB, and college sports in general. Apathetic... Passionate about UConn, indifferent o apathetic about games not involving UConn. I went from being a die-hard college sports fan who loved UConn, to solely a UConn fan who predominantly watches games they were involved in, and very little else in college sports. I want from having ESPN on my TV around the clock (and this was before UConn even upgraded), to just watching it when there is live content, predominantly UConn games. For me, it isn't about "boycotting" ESPN or even cord cutting, it has just become less interesting. Sports TV is jumping the shark a bit (for me at least). Maybe it is the over-exposure of players, the biased narrative that networks seem to push to advance their initiatives.... I dunno.

Season can't start soon enough.

 

[itgoeslike]

I've never said otherwise.

You haven't called anyone/anything "odd" and/or "silly" for refusing to partake in advancing CR and its related interests?

 

[itgoeslike]

No you didn't. But you used Sea World as an example as to how it could matter. I was just stating that it wouldn't matter, given the relative size of the UCONN fan population that cares, and the fact that most other fan bases are happy. It worked at Sea World because pretty much EVERYONE hates mistreatment of animals.

I don't think anyone suggested that the number of fans avoiding ESPN would bring it to its knees. I was responding specifically to your comment "I don't care about the random ESPN employee or the bar back. Just calling B/S on the thought that by boycotting anything you hurt your intended target." Then you gave an example of how a Domino's pizza boycott was not effective. Whether driven by animosity or apathy, when people vote with their pocketbooks it can affect businesses, large and small.

 

[J187Money]

You haven't called anyone/anything "odd" and/or "silly" for refusing to partake in advancing CR and its related interests?

Yes I have. Just because a UCONN fan has the right to boycott a network doesn't mean that I don't think it is silly. And I think it is silly because it won't accomplish anything.

From a personal perspective, I don't watch a lot of TV live (I travel and work a ton). I listen to ESPN Radio a lot on XM. I thought about how to avoid it given the context of everyone's comments and came to the following conclusion:

• Most of the other sports programming on XM is worse (some channels have decent programs in some dayparts, but by and large ESPN is much better across the board)
• I don't care about local NY sports (so I don't really listen to the FAN)
• Therefore, avoiding ESPN Radio makes my life worse.

As to TV - I watch live events that I want to watch, regardless of what network they are on. When I want scores, I go to ESPN or ESPN news because to be honest I don't know what other sports channels exist and have never tried to figure that out. I get what I need. I like programming like Sports Reporters and Outside the Lines. I'm not going to not watch them because I'm mad at ESPN. I don't believe there is equivalent programming on other networks. Maybe I'm wrong. But I'm not going to stop watching things I like because the network made a rational decision to improve their bottom line.

Again, if it improves your life to behave differently, great. We all are driven by different wants/needs.

 

[itgoeslike]

You just summed up exactly how I feel about CFB, and college sports in general. Apathetic... Passionate about UConn, indifferent o apathetic about games not involving UConn. I went from being a die-hard college sports fan who loved UConn, to solely a UConn fan who predominantly watches games they were involved in, and very little else in college sports. I want from having ESPN on my TV around the clock (and this was before UConn even upgraded), to just watching it when there is live content, predominantly UConn games. For me, it isn't about "boycotting" ESPN or even cord cutting, it has just become less interesting. Sports TV is jumping the shark a bit (for me at least). Maybe it is the over-exposure of players, the biased narrative that networks seem to push to advance their initiatives.... I dunno.

Season can't start soon enough.

The biased narrative was a huge turnoff. The AAC blog was a slap in the face to most its fans. All they did was post game photos or articles about other conferences in the blog. ESPN lost an opportunity to captivate, engage and own incoming fans of ECU, UCF, Houston, etc. Maybe things have changed over there. I wouldn't know.

 

[J187Money]

I don't think anyone suggested that the number of fans avoiding ESPN would bring it to its knees. I was responding specifically to your comment "I don't care about the random ESPN employee or the bar back. Just calling B/S on the thought that by boycotting anything you hurt your intended target." Then you gave an example of how a Domino's pizza boycott was not effective. Whether driven by animosity or apathy, when people vote with their pocketbooks it can affect businesses, large and small.

Right. When enough of a customer base votes, it matters. Sea World is a unique example. But it is still open. And mostly who took it on the chin were the shareholders, who were not the intended target, and of course the CEO, who made millions by being fired and is still a consultant. The goal would be the humane treatment of animals in captivity. Did that happen? Great. But now Sea World is less profitable. And they will probably counter that by reducing costs. So some employee at a random Busch Gardens will be fired because people were upset about how Sea World treats its animals? Yay? Was that guy the target?

 

[UConnJim]

Can't everyone agree? There are cracks in the cable business model as cable penetration appears saturated and cord cutting has begun. This doesn't mean the cable business model is going to change over night, but it will change sometime in the next 10 years.

ESPN used to grow through 3 main drivers: subscriber additions, channel additions, and price increases. The first 2 growth drivers are pretty much over for ESPN (subscribers are starting to be a drag on growth) and we will see if ESPN can continue to increase prices for the foreseeable future.

Even small losses of subscribers really impacts a cable networks economics. Why? The profit margin of adding a new subscriber once the fixed costs are covered is close to 100%. The math works the opposite way for subscriber losses. Thus, if ESPN lost 1% of its subscriber base, this would probably hit ESPN income by ~2.5%.

And don't forget ala carte cable channel pricing. Canada is switching from forced bundles to ala carte cable pricing this year. It is coming to the US and the estimate is that ESPN will cost $36/month in the US if only 16% of households subscribe to ESPN. (And that's just for ESPN as ESPN2, ESPNU,... would add to the cost.)

If you don't think ESPN is scared about changes in the cable network business model, think about this: ESPN has locked up some sports rights for the next 7 to 10 years, but their customers subscribe to cable on a month to month basis. If cord cutting accelerates or ala carte pricing comes to the US in the next few years, ESPN has some huge legacy sports rights contracts that they wish they didn't have.

 

[WestHartHusk]

Right. When enough of a customer base votes, it matters. Sea World is a unique example. But it is still open. And mostly who took it on the chin were the shareholders, who were not the intended target, and of course the CEO, who made millions by being fired and is still a consultant. The goal would be the humane treatment of animals in captivity. Did that happen? Great. But now Sea World is less profitable. And they will probably counter that by reducing costs. So some employee at a random Busch Gardens will be fired because people were upset about how Sea World treats its animals? Yay? Was that guy the target?

J187, I have read through this thread and I follow you on everything but this post, which implies a complete hopelessness for consumers. In short, your point is that even in the rare instances where consumers can impact a company it is still pointless. I can only gather that you are an investor, or otherwise work in financial services, because you have completely divorced the concept of owning stock in a company from having any responsibility for its actions. Owning stock does not entitle you to profits without also generating culpability for the company's actions. To carry forward your failed Sea World example, of course the shareholders should have been the target. They chose the board who hired the management that rounds up wild orcas, houses them in solitary tanks, and has them do flips in a stadium. And for the random worker, there are other entertainment options in Florida where the tourism money will move - I am sure they will find a job (not that your primary concern was the worker at Busch Gardens anyway).

 

[J187Money]

J187, I have read through this thread and I follow you on everything but this post, which implies a complete hopelessness for consumers. In short, your point is that even in the rare instances where consumers can impact a company it is still pointless. I can only gather that you are an investor, or otherwise work in financial services, because you have completely divorced the concept of owning stock in a company from having any responsibility for its actions. Owning stock does not entitle you to profits without also generating culpability for the company's actions. To carry forward your failed Sea World example, of course the shareholders should have been the target. They chose the board who hired the management that rounds up wild orcas, houses them in solitary tanks, and has them do flips in a stadium. And for the random worker, there are other entertainment options in Florida where the tourism money will move - I am sure they will find a job (not that your primary concern was the worker at Busch Gardens anyway).

Not pointless. Just that if you want to hurt X, it is often Y that gets hurt. The way the world actually operates there is very little to do in the way of firing directly at your target. That's all I'm saying.

For example, if you are a Nielsen house and a UCONN fan and you had your TV on 100pct to ESPN until we got stuck in the AAC and then changed over to the Disney Channel or ABC you might feel better but you haven't accomplished anything. Or the fact that one trip to Disneyworld probably outweighs a lifetime of cable fees to ESPN.

And nobody worries about the random worker. Until it is them.

 

[J187Money]

As an example, I was in the music industry for a long time. You know who got hurt by piracy?

- artists who were no longer being paid for their work
- artists who couldn't get signed because A&R money dried up
- tons of low and mid level record company folks that got fired / outsourced / etc

If record companies were evil, you would assume that you would want to hurt those at the top. They all prospered. The people that were hurt the most were working stiffs and the people that actually created the music.

But people felt justified stealing music because record companies were evil.

 

[WestHartHusk]

Not pointless. Just that if you want to hurt X, it is often Y that gets hurt. The way the world actually operates there is very little to do in the way of firing directly at your target. That's all I'm saying.

For example, if you are a Nielsen house and a UCONN fan and you had your TV on 100pct to ESPN until we got stuck in the AAC and then changed over to the Disney Channel or ABC you might feel better but you haven't accomplished anything. Or the fact that one trip to Disneyworld probably outweighs a lifetime of cable fees to ESPN.

And nobody worries about the random worker. Until it is them.

You missed my point entirely...you used the SeaWorld analogy to say that the 'wrong' people (shareholders) got hurt. My point is that they are the right target, they own the company and dictate that companies strategic decision. With regard to the second paragraph, I have no idea what you are talking about - who on here was saying that they switched from ESPN to ABC. I think they were saying they switched from ESPN to nothing, which, if they were a Nielsen household, is accomplishing something.

As an example, I was in the music industry for a long time. You know who got hurt by piracy?

- artists who were no longer being paid for their work
- artists who couldn't get signed because A&R money dried up
- tons of low and mid level record company folks that got fired / outsourced / etc

If record companies were evil, you would assume that you would want to hurt those at the top. They all prospered. The people that were hurt the most were working stiffs and the people that actually created the music.

But people felt justified stealing music because record companies were evil.

Piracy is theft, so I am not sure what point you are making here. I don't think anyone was advocating stealing from ESPN.

 

[J187Money]

You missed my point entirely...you used the SeaWorld analogy to say that the 'wrong' people (shareholders) got hurt. My point is that they are the right target, they own the company and dictate that companies strategic decision. With regard to the second paragraph, I have no idea what you are talking about - who on here was saying that they switched from ESPN to ABC. I think they were saying they switched from ESPN to nothing, which, if they were a Nielsen household, is accomplishing something. Piracy is theft, so I am not sure what point you are making here. I don't think anyone was advocating stealing from ESPN.

You missed my point. PETA wants the humane treatment of animals. That's it. That is their goal. Encouraging people not to go to the parks in their mind will the Sea World to change their ways. Sure the shareholders get hurt if profits decrease. But that isn't their aim. If management did what PETA wanted and the shareholders made money PETA wouldn't care. What happens to them is tangential. Not to say that they might deserve what they get. But go read PETA's objectives on Sea World and tells me where it says they are out to punish shareholders.

My second point was that in order to hurt ESPN you need to hurt Disney. Not watching ESPN if you spend money on other Disney products results in ESPN not being hurt at all. That's a straw man argument that I was making, but I wonder if an ESPN hater would not take his family to Disneyworld, when the amount of money that is spent there will benefit the empire far more than ESPN loses in one subscriber.

My point on music is that consumers felt they were aiming at something and someone else got hurt. Which is my overall point. Sometimes the collateral damage deserves it. Sometimes they don't. But yes, the way corporate America is set up there is very little you (as an individual or a small group) can do to affect change on a major scale.

 

[pj]

Boycotting ESPN will end up hurting ESPN in its future cable negotiations. The cable companies know what channels are being watched and how many people would complain if they dropped a channel.

And a boycott is a perfectly rational and appropriate response to misbehavior. ESPN makes $120 mn per year in subscriber fees from the people of Connecticut. If they lost enough patronage in Connecticut that the cable companies could bargan down the fee $1 per month per household, it would pay for UConn to the ACC.

The squeaky wheel gets the grease. If ESPN is merely a profit-seeking machine, then it's the responsibility of the people of Connecticut to make it profitable for ESPN to help UConn. A boycott would do that.

 

[billybud]

By all means boycott in Connecticut....

It will only affect the numbers...Connecticut folks aren't much interested in live sports broadcasting (that's what the numbers will say if there was a decline)...not why.

Which makes UConn a less attractive target.

 

[J187Money]

Boycotting ESPN will end up hurting ESPN in its future cable negotiations. The cable companies know what channels are being watched and how many people would complain if they dropped a channel. And a boycott is a perfectly rational and appropriate response to misbehavior. ESPN makes $120 mn per year in subscriber fees from the people of Connecticut. If they lost enough patronage in Connecticut that the cable companies could bargan down the fee $1 per month per household, it would pay for UConn to the ACC. The squeaky wheel gets the grease. If ESPN is merely a profit-seeking machine, then it's the responsibility of the people of Connecticut to make it profitable for ESPN to help UConn. A boycott would do that.

If everyone did it. But since we can't fill the stadium we can get everyone to cut the cord? Doubtful. But agreed it would be meaningful if you could pull it off.

 

[WestHartHusk]

You missed my point. PETA wants the humane treatment of animals. That's it. That is their goal. Encouraging people not to go to the parks in their mind will the Sea World to change their ways. Sure the shareholders get hurt if profits decrease. But that isn't their aim. If management did what PETA wanted and the shareholders made money PETA wouldn't care. What happens to them is tangential. Not to say that they might deserve what they get. But go read PETA's objectives on Sea World and tells me where it says they are out to punish shareholders.

My second point was that in order to hurt ESPN you need to hurt Disney. Not watching ESPN if you spend money on other Disney products results in ESPN not being hurt at all. That's a straw man argument that I was making, but I wonder if an ESPN hater would not take his family to Disneyworld, when the amount of money that is spent there will benefit the empire far more than ESPN loses in one subscriber.

My point on music is that consumers felt they were aiming at something and someone else got hurt. Which is my overall point. Sometimes the collateral damage deserves it. Sometimes they don't. But yes, the way corporate America is set up there is very little you (as an individual or a small group) can do to affect change on a major scale.

J, I think we are coming from opposite ends but agree...it is possible, but difficult, to influence a corporation.

 

[Husky25]

The classic example would be coffee, many loathe either Dunkin or Starbucks for what they perceive the other brand stands for - whether its really true or not.

Good analogy about ESPN, but I feel it needs to be taken a step further. Some people avoid either Dunkin' Donuts or Starbucks (or both) because consumers just feel they serve an inferior product. This is the class I am in. I think Starbucks coffee is awful and the counter help needs to get over themselves. So I'll choose Dunks every single time over them. On the other hand, I'll chose a local mom & pop over Dunks as well.

I have a similar opinion about ESPN, at least about the SportsCenter and .com content. I'll always tune in for live UConn content, but for Sports news, I'll watch CSNNE, Fox or CBS.

 

[J187Money]

J, I think we are coming from opposite ends but agree...it is possible, but difficult, to influence a corporation.

Right. Circumstances matter. A lot. Way more than the quality of the argument.

I know I'm being a bit pedantic and making technical intellectual arguments, but that's what I do for a living so it is hard to turn it off.

 

[J187Money]

I also don't really think we disagree that much at all.

 

[UConn9604]

The reset started on August 4 after Disney reported second quarter earnings that were impressive in many respects, but included concerning news about its biggest profit engine, the sports network ESPN.

Subscriber revenue from ESPN isn't growing as fast as it used to, partly because a small number of households have stopped paying for a monthly bundle of cable channels.

http://money.cnn.com/2015/08/20/media/media-stock-drop-disney/index.html

 

[whaler11]

I didn't have time to look yet how it closed but Disney was getting destroyed at lunchtime.

 

[BarkingDog]

I didn't have time to look yet how it closed but Disney was getting destroyed at lunchtime.

Not that I own any, but I was curious to find the answer to your question. This from the LA Times. The last graph, a quote from an analyst, is telling.


Major media stocks took another hit Thursday on renewed concerns about the state of the television business and broader market declines, two weeks after comments from the Walt Disney Co. set off a widespread sell-off.

Disney's stock fell $6.43, or 6%, to $100.02 by the close of trading on Wall Street, its biggest drop since Aug. 5.

The Burbank-based entertainment giant's shares are still up about 11% during the last 12 months.

The dip followed a downgrade of the stock to "market-perform" from "outperform" by Bernstein Research analyst Todd Juenger, who cited declines in pay-TV subscriptions and TV advertising revenues.

Investors fear that traditional media companies will continue to grapple with changing viewer habits as the unraveling of the pay-TV bundle accelerates, and so-called cord-cutting and cord-shaving increases.

Juenger gave a similar downgrade to Time Warner Inc., which owns the Turner cable networks including CNN, TBS and TNT. Time Warner's shares were down $3.92, or 5%, to $73.90 at the closing bell.

"When an industry is undergoing a massive structural upheaval [...] investors won't wait for final conclusive evidence to reevaluate how much they are willing to pay for the existing status quo cash flow streams," Juenger wrote in a research report.

Financial markets generally took a beating Thursday.

The S&P 500, Dow Jones industrial average and Nasdaq indexes all fell more than 2%. Even Netflix, which is well positioned for the migration of viewers away from long-standing pay-TV providers, fell nearly 8% for the day.

Major media stocks, in particular, struggled on the down day.

Viacom Inc. ended the day down 6%, 21st Century Fox fell more than 4%, Lionsgate finished almost 4% lower and Comcast Corp. slipped 2.5%.

Long-simmering concerns about declining pay-TV subscriptions came to a boil earlier this month when Disney warned investors that profit from ESPN and other cable channels would not be as robust as initially thought.

The comments triggered a wider decline among top media stocks that wiped out more than $50 billion in market value in two days.

"We understand, and in fact agree, with the market's decision to fast-forward to the inevitable conclusion and start valuing these businesses as if they are declining assets," Juenger said. "In practice, this means increasing the risk applied to an increased cord-cutting scenario."

 

[Dooley]

As an example, I was in the music industry for a long time.

I've had my suspicions for a while but this confirms it for me...you are Eddie Money, aren't you?