U.S. cable TV companies' shares crushed after Disney disappoints

Wed Aug 5, 2015 5:34pm EDT
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By Lisa Richwine and Bill Rigby

(Reuters) - Nagging investor concerns over viewers cutting the cord on cable television and moving online turned into a rout in the sector's shares on Wednesday after Walt Disney Co (DIS.N: Quote) reported a dip in subscribers for its cornerstone sports channel ESPN and rivals produced a mixed batch of earnings.

ESPN, which is available only as part of broad cable TV packages, has been seen as a savior of the bundling business model with its line-up of live sports and highlight reels. But the latest figures suggest even that may not be enough to stop viewers demanding slimmer cable packages or moving online to watch standalone streaming services.

"I haven't seen this much red in a long time," said John Miller, a portfolio manager at Ariel Investments, watching the broad stock decline. "It seems like people's concerns regarding cord-cutting have accelerated."

Disney's shares fell 9 percent on Wednesday, wiping $18 billion off the company's market value, a day after it lowered the profit outlook for its cable networks and Chief Executive Bob Iger said ESPN saw "modest" subscriber losses.

"If Disney can get dinged, maybe nobody's safe," said Barton Crockett, an analyst at FBR Capital Markets.

Time Warner Inc (TWX.N: Quote), which has been quicker than Disney to unbundle its popular cable offerings and embrace the online model, also felt the wrath of investors, who sent its stock down 9 percent, even though it reported better-than-expected profit on Wednesday.

Shares of the media company, which launched its own standalone streaming service HBO Now and struck a deal with video-streaming service Hulu, hit their lowest since early February, closing at $79.80.

Discovery Communications Inc (DISCA.O: Quote) shares also got blitzed, falling 12 percent after the owner of the Discovery Channel and Animal Planet blamed lower advertising sales and a strong dollar for quarterly profit slipping below analysts' estimates. The company also said it was unlikely to buy back any more shares this year as it looks to save cash.   Continued...

The main gate of entertainment giant Walt Disney Co. is pictured in Burbank, California May 5, 2009. REUTERS/Fred Prouser