Shares of Netflix (NFLX - Free Report) have fallen 2% in midday trading on Wednesday after Disney (DIS - Free Report) announced plans to pull its movies from the streaming platform yesterday, and Disney itself is down 4% today thanks to its disappointing second-quarter earnings report.
In addition to the report, Disney explained its plans to launch an ESPN streaming service next year, with another direct-to-consumer option in 2019. Disney plans to make a “significant investment” in exclusive movies and shows for the platforms, in addition to offering Marvel and Disney films exclusively.
Disney is far from the only media company to enter the realm of streaming services. Let’s take a look at how other media stocks are reacting to this new development from Disney.
Multiple media stocks are down in midday trading today. Shares of Discovery Communications (DISCA - Free Report) tumbled 3.5%, while shares of Viacom (VIAB - Free Report) have plunged 3%. Twenty-First Century Fox (FOXA - Free Report) stock has fallen almost 2%, and shares of CBS Corporation (CBS - Free Report) are down about 1.5%. Scripps Networks stock fell 0.50% in the same time frame.
Additionally, the PowerShares Dynamic Media Portfolio ETF (PBS - Free Report) , which tracks U.S. media and publishing companies, fell 0.96%.
Shares of Viacom have been tumbling since its third-quarter fiscal 2017 report. Despite the fact it beat Wall Street estimates, investors have concerns over the lowering rate of cable subscriptions as consumers switch to online streaming services.
Discovery Communications recently DISCA - Free Report) -Acquires-Scripps-Network--in-11.9-Billion-Deal">announced plans to acquire Scripps Networks for $11.9 billion. Both companies are also concerned about the decreasing amount of cable subscriptions and how the merger will protect their networks.
While shares of FOXA and CBS have fallen, both companies currently invest in streaming services that could help them in the days ahead. Twenty-First Century Fox owns a piece of the popular streaming service Hulu alongside Disney and Comcast (CMCSA - Free Report) . Meanwhile, CBS offers its content on its streaming service CBS All Access, which is set to release the newest Star Trek series in September.
Time Warner (TWX - Free Report) stock remains positive today, rising 0.12% in midday trading. The media conglomerate seems to be unaffected by Disney’s news thanks to its ownership of HBO, a network that is offered both in cable package and as an online streaming service. It produces the extremely popular Game of Thrones series. The company also has a 10% stake in Hulu.
Time Warner is also currently in the process of being acquired by AT&T (T - Free Report) . While the merger needs to be approved by the Justice Department, the deal seems to be progressing positively.
The Future of Cable
For sports fans, cable packages have been a necessity in order to have the best access to live games. However, Disney’s ESPN streaming service could change that, which could negatively affect other media stocks moving forward.
At the moment, Disney sees its ESPN streaming service as building onto its current WatchESPN streaming app. It will include access to other streaming packages, as well as some content not aired on its ESPN networks. It could thus function as an add-on to traditional cable packages.
“Consumers who are Pay-TV subscribers will also be able to access the ESPN television networks in the same app on an authenticated basis,” said Disney Chief Executive Robert Iger.
But Disney could move away from this strategy. “If we see changes in the distribution model, if we see either greater erosion or bigger opportunity to migrate linear networks to a more direct-to-consumer proposition, we certainly have the technology to do it,” said Iger. “But we’re not currently anticipating that as we launch this new app.”
As a consequence, media companies that depend the most on cable packages, such as Discovery and Viacom, potentially have the most to lose from Disney’s move towards direct-to consumer streaming services.
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