Shares of the Walt Disney Company edged higher in morning trading Tuesday after 14 million of its viewers were left without opening-weekend college football games, the result of a carriage contract dispute that prompted the House of Mouse to pull its channels, including ESPN, from Charter’s Spectrum.
Also blacked out on Spectrum are all ABC stations, FX and the Disney Channel.
Disney gained 56 cents to $82.20 in morning trading, while the broader market slipped into the red. The stock is down about 4% since the start of the year.
Spectrum over the weekend offered its customers 30% off the live streaming service Fubo for two months as an alternative, CordCutterNews reported. The deal includes access to NFL Red Zone, which would enable viewers to watch professional football. The NFL season kicks off Thursday night. Disney, meanwhile, was telling customers to sign up for a Hulu + Live TV subscription, which includes ESPN.
Charter Communications-0wned Spectrum said it offered Disney a fair deal for renewal, but the company was demanding “an excessive increase.”
Reports suggest the dispute appears to center around Disney’s plans to launch a direct-to-consumer streaming service for ESPN.
Analysts see little upside to the fight for Disney, though few saw it as a game-changer for investors.
JPMorgan said the dispute “adds to Disney’s near-term issues,” but kept an “Overweight,” or “Buy” rating on the stock, according to TheFly.com.
The analyst noted that Charter is asking for wider flexibility on bundled services, and said while there is some validity to the company’s complaints, “it isn’t surprising that Disney is not willing to engage on Charter’s ideas for a new business model.”
JPMorgan estimated that roughly to 50% of Charter video customers were unhappy with losing football through the fall, potentially setting them up for quickly dropping charter and signing up for streaming products.
The analyst pointed out that that those services actually pay Disney more in fees per customer than Charter, “which could cushion the blow to Disney somewhat.”
Wells Fargo analyst Steven Cahall also kept an “Overweight” rating on the stock, according to TheFly.com, but lowered the firm’s price target to $110 from $146, implying that he now sees the shares rising just 25% over the next year, rather than 44%.
Cahall said Disney remains the most interesting stock in media because of its huge trove of intellectual property, but it’s still trading at a “COVID price.”
The Charter dispute, and the effort required to seal a deal on Hulu with Comcast and concerns about park attendance are all short-term drags on the stock, but the analyst said that as 2024 approaches, the longer-term opportunities from DTC will begin to emerge as a key reason to own Disney for the long term.
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