Market Overview

Cramer Outlines Disney's Delta Dilemma


Jim Cramer thinks Walt Disney Co (NYSE: DIS) has a "delta" problem.

In a report published Wednesday on The Street, Cramer stated the delta term for change in any commodity was made "loud and clear" when Disney discussed the "negative rate of change of the fortunes of the honey pot ESPN."

Cramer added that Disney's newly acquired minority stake in BAMTech does give the company greater access to streaming online content and gives ESPN more monetization - something the company "so desperately needs to change the delta."

Why Bring Up Delta?

Cramer stated delta is usually something "spoken about in hushed terms" and certainly "never right to the face" of Disney CEO Bob Iger. But it was Alexia Quadrani, an analyst at JPMorgan who asked Iger during the post-earnings conference call if Disney's presence in DTV and Hulu "could become the delta that investors maybe are looking toward, or are worried about in terms of creating a more notable shift away from linear TV or the traditional bundle?"

Iger pointed out that companies which attempted to push a skinny bundle to consumers without ESPN haven't seen much success.

"As long as Disney is out there with ESPN in many venues, not compromising the deals it offers to major cable companies, venues including skinny Over the Top bundles, Iger believes it's good news for the company, because it is monetizing content that isn't being monetized enough," Cramer argued. " No cannibalization, just content you haven't seen on ESPN that could be additive to earnings on the key media networks line."

Bottom Line

Delta or no delta, Cramer's outlook on Disney's outlook is simple. He argued that if Disney can monetize ESPN more than it already does or if the consumer will pay more for ESPN on mobile devices, or if the many over-the-top entities can help boost Disney's media networks revenue higher by even a couple of percentage points, then "you will wish you bought" Disney's stock today.

"The delta will weigh on shares now, and can't be dismissed out of hand," Cramer concluded. "All of that amazing Disney content and intellectual property is no longer king; maybe a rook, or a bishop or even a knight, despite the offense Disney's running."

"And sadly, that is still all that matters. At least for now."

Posted-In: Alexia Quadrani disney Disney Delta Disney Earnings ESPN ESPN Subscribers Jim CramerMedia


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