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Will Disney's ESPN Continue To Be The Worldwide Leader In Sports?

April 26, 2016 2:31 pm
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Apparently, Mike Tirico doesn't think so. He's leaving the flagship network for NBC, Sports Business Daily reported on Monday.

Tirico, a 25-year ESPN veteran, covers the entire spectrum of sports from the fast-paced NBA to stagnant golf events. He will reportedly be easing into the role formerly held by two iconic sports broadcasters: Bob Costas and Al Michaels.

In the short term, the move for the two companies involved — Comcast Corporation (NASDAQ: CMCSA) and Walt Disney Co (NYSE: DIS) — may not have any major ramifications on  share price, but it certainly may in the long term.

Related Link: Why ESPN Fears Are Hurting Disney

For Comcast, it's a win-win scenario. As the company attempts to ramp up its sports programming, it now has arguably the best play-by-play announcer in the business to handle those events. Tirico's talent will not only be a boon to its television programming, but to its radio presence, which is far from reaching its full potential.

For Disney, it's a lose-lose situation. Not only does the company have to combat rapidly declining subscriber numbers, it has to replace a host that many considered to be a lifer at ESPN.

Along these lines, ESPN is losing the face of "Monday Night Football" that is in the midst of a $15.2 billion contract. What is more concerning is how long it took for ESPN to find the right combination for the broadcast (Tirico and Jon Gruden) after several failed attempts.

What should more concerning to Disney shareholders is the negative way Wall Street reacts to unsavory news with respect to ESPN.

Related Link: Disney Investors: Stop Worrying About ESPN

On November 27, 2015, when the company revealed it had lost 3 million subscribers in a one-year period, the issue plunged from its previous close of $118.67 to $115.13. Disney continued lower and was under $100 by early January. The stock didn't bottom until February 10 at $86.25. Keep in mind, the decline in the broad market was a contributing factor to the decline.

Of course, a downtick in revenues from ESPN is not necessarily a death sentence for Disney. It's a well-diversified company that profits from theme parks and film studios, as well as merchandising. However, profits from the cable industry represent 32 percent of its overall profits and it's reasonable to assume ESPN is a large portion of it and cannot be easily replaced.

Whereas Disney is about $17 from its all-time high made in August at $122.08, Comcast is only few dollars away. Its all-time high was made last July at $64.

Editor's note: Skip Bayless, one of ESPN's most valuable on air talents, is leaving the network after his contract expire this summer, according to a statement from the company, thus continuing the talent exodus from ESPN. 

Image credit: Keith Allison, Flickr

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