Market Overview

Citi On TV: 'Sports Networks Face Most Acute Risks'

Share:
Citi On TV: 'Sports Networks Face Most Acute Risks'
Related DISCA
Jon Najarian Sees Unusual Options Activity In Discovery Communications And American Airlines
The Synergies DisneyNature, Disney Studios Could Enjoy With Nat Geo, 20th Century Fox Acquisitions
Daily Insider Ratings Round Up 12/14/17: DISCA, PRGX, JOE, PSEC, LC, VTL, FENC (Seeking Alpha)
Related SNI
3 Other M&A Deals The DoJ's AT&T-Time Warner Lawsuit Could Impact
The Week Ahead For November 13: Conferences, Earnings and IPO Events To Watch
Dividend Challengers (And Near-Challengers): 69 Increases Expected By February 28 (Seeking Alpha)

Hulu is likely to launch a sports-centric consumer offering in the first half of 2017, Citi’s Jason Bazinet said in a report. He added that the new offering could exclude certain channels, which would pose a long-term strategic risk for the respective firms.

Although the Pay TV ecosystem was intended for media firms to maximizing profits, over the past six years, there have been “new entrants, thinner video packages and new a la carte services,” Bazinet noted. He commented that this means the “monolithic linear video bundle is fraying.”

Related Link: Which Companies Are Winning The Internet/TV Advertising Wars?

Sports Nets Face Most Risk, Most Upside

With the fraying of this bundle, sports networks face the greatest risks because they mostly work with long-term, fixed price contracts with the sports leagues, Bazinet mentioned. On the other hand, these sports networks also face the most upside.

NewLu Poses Long-Term Risk To Some Firms

Largest purchasers of sports rights, namely Walt Disney Co (NYSE: DIS), Fox and Comcast Corporation (NASDAQ: CMSA), are joint stakeholders in Hulu. The analyst expects Hulu to launch a sports centric consumer offering in 1H17, which he calls “NewLu” for now.

NewLu is expected to include all channels from the Hulu stakeholders, while excluding channels belonging to Scripps Networks Interactive, Inc. (NASDAQ: SNI), Discovery Communications Inc. (NASDAQ: DISCA) and Viacom, Inc. (NASDAQ: VIAB), in a bid to keep retail ARPUs down.

The companies that will get left behind would face a long-term strategic risk. In view of this risk, Bazinet downgraded the ratings for Scripps and Discovery from Neutral to Sell. The price target for Scripps has been reduced from $69 to $62, while that for Discovery has been lowered from $30 to $27.

The analyst retained a Neutral rating for Viacom, saying its multiples were already depressed, while reducing the price target from $44 to $41.

Latest Ratings for DISCA

DateFirmActionFromTo
Nov 2017B. RileyMaintainsNeutral
Nov 2017Credit SuisseMaintainsNeutral
Nov 2017JefferiesMaintainsHold

View More Analyst Ratings for DISCA
View the Latest Analyst Ratings

Posted-In: CitiAnalyst Color Short Ideas Downgrades Price Target Reiteration Analyst Ratings Trading Ideas Best of Benzinga

 

Related Articles (DIS + CMSA)

View Comments and Join the Discussion!