The magic fades at Disney as political and pandemic problems mount – CBS Tampa

ORLANDO, Fla. (CW44 News At 10 | CNN) — Disney investors are moving elsewhere as pandemic and political problems pile up, though Disney hasn’t seen as much of a decline as Netflix has yet.

Shares of Netflix are down more than 40% this year ahead of the release of its first-quarter results after Tuesday’s closing bell. Meanwhile, Disney shares are down nearly 15% so far in 2022. That makes Disney one of the worst performers in the Dow, which is down just 4% this year.

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Both companies are plagued by concerns about streaming competition and the fierce battle for subscribers.

Inflation is also a problem. A recent report from the UK showed consumers are cutting back on streaming services amid concerns over rising prices, and UK customers were dropping Disney+ faster than Netflix and Amazon’s Prime Video. (Disney also owns Hulu and the sports streaming service ESPN+.)

Stream dreams have turned into nightmares about profit

Despite Disney’s vast library of movies and shows thanks to its own studio, as well as Marvel, Pixar and Star Wars creator Lucasfilm, investors worry that this abundance of content won’t spur streaming subscription growth enough to offset delays in traditional broadcasts. and cable television companies.

“Disney+, Hulu and ESPN+ have the scale and management conviction to become a massive global streamer over time,” JPMorgan analyst Philip Cusick said in a report on Tuesday. But he added that “this isn’t necessarily as good a thing as Disney used to have on TV.”

Traditional media companies like Disney used to rely much more on lucrative ad sales and affiliate fees from cable companies to carry their channels, but the shift to streaming has turned that model on its head. Investors are now more interested in streaming margins and not just bragging about the number of subscribers a company has.

“The market seems to be failing to reward media companies, as it did in 2020 and 2021, simply because of their prediction of future streaming subscriber growth,” analyst Michael Nathanson said in a report last month.

“Now it appears that investors are looking further into the income statement — and finally digging through the cash flow statement as well — to try to determine the underlying stable profitability of the pivot to Direct-to-Consumer content delivery,” Nathanson added. †

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Nathanson lowered his Disney price target from $165 a share to $150 in March, partly amid concerns about lower profit margins.

Florida controversy still a problem for Disney

Disney has also come under fire after CEO Bob Chapek initially refused to speak out against Florida’s “Don’t Say Gay” law, which prohibits schools from teaching kindergarten through third grade about gender identity and sexual orientation. .

After criticism from Disney employees, Chapek ultimately condemned the law. But some Republicans are now threatening Disney with boycotts, while many Democrats feel Chapek’s response came too late and yearns for the days of former Disney CEO Bob Iger, who was a more outspoken advocate for progressive causes.

Whether the Florida controversy has an actual impact on Disney+ subscriptions, movie and theme park visits, and ratings for Disney-owned ABC and ESPN is up for debate.

However, one analyst noted that the “Don’t Say Gay” problem could also hurt the company in other ways, if more liberal Hollywood celebrities decide not to partner with the House of Mouse.

“The most important” [Disney] trump card is his brand, the next is his talent. If the controversy leads to the loss of key creative talent, it would clearly be negative,” Loop Capital’s Alan Gould said in a report earlier this month.

Whatever happens, it’s clear Wall Street isn’t happy with how Disney has performed since Chapek took over from Iger in February 2020.

Disney shares are now hovering around their lowest level since November 2020. Sure, Chapek took a bad hand since the start of his tenure coincided with the start of the Covid-19 pandemic in the United States, an event that led to a dramatic delay in tourism and leisure activities such as going to watch movies.

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