Walt Disney Co , being a media firm like Time Warner, is likely to get bogged down by the challenges that are affecting the TV industry as a whole. As the former heads toward releasing its Q2 2016 earnings report after the market closes on Tuesday, it appears that the business performance will be quite unlike box office success. The current year so far has seen many releases becoming big hits at the box office, thus likely making it another record year for Hollywood.
Walt Disney Co Compared to its Peer Movie Studios
In general, broadcast and cable channels are going through stormy waters. In comparison, Hollywood is seeing plenty of hits since the last few months. It seems that each week there is some blockbuster which breaks some record either in the domestic market or abroad. In Q1 of CY2016, the US box office was up by more than 17% on a Y-o-y basis.
However, the largest movie studios are run by those firms who have TV as their main business. That leads to the music of box office success falling on deaf ears as far as the financials of firms like Walt Disney Co , Time Warner Inc and 21st Century Fox is concerned. That is not to say that there are no expectations at all. Each of them is expected to make more money on a Y-o-y basis. The success at the box office might just give a much-needed shot in the arm because the fate of TV currently looks very uncertain.
Warner Bros minted money from ‘Batman v Superman: Dawn of Justice’ even though it was given the thumbs down by many reviewers. ‘Deadpool’ from Fox too was a huge hit. As for Walt Disney Co, it has recently tasted the success of 3 blockbusters. We have already read a lot about ‘Star Wars: The Force Awakens’, which hit the theaters in Q4 of CY2015. It not only had the best opening weekend of all time but also became the no. 1 film in the history of the US box office. Next is ‘Zootopia’, which became not only the best-selling Disney movie but also the best-selling animated movie of all time in China. More recently, ‘The Jungle Book’ hit Indian theaters and soon after that became the most successful US movie there.
This success is not reflected in terms of the stock’s performance, especially in case of Walt Disney Co . This is true even as Disney, Fox and Warner are respectively the top 3 studios in terms of market share. They were present in the top 4 last year as well. The sad truth is, the movie divisions bring in very little to the accounts of the parent firms compared to other businesses. It is the cable and broadcast divisions that have the lion’s share in the kitty. Many of them are wandering through uncharted territory after hitting many roadblocks.
TV Problems: Same Cause, Different Effects
As per a report given by the Leichtman Research Group, the leading 13 providers of pay TV between themselves saw nearly half a million viewers abandoning ship in 2015. The reason is that traditional cable players are fighting an almost existential threat from streaming services such as Amazon Prime Video and Netflix. Different players are seeing their own result of the battle.
The presidential race this year, which has been in the news for both the right and the wrong reasons, has caused a 30% rise in the daily viewership of Fox News on a Y-o-y basis. Likewise, Fox’s main cable network and sports channels too are maintaining their positions in the ratings. The poll season has given a boost to Time Warner too, because it owns CNN. However, Walt Disney Co ‘s case is a lot different. ESPN still bleeds losses of millions of subscribers.