A few years ago, ESPN or the sports channel was considered one of the crown jewels of Disney group. Sports is live and although many people watching can likely predict the outcome of the event, no one really knows how it will turn out until the athletes perform. In the last number of years, the cost of securing the big name events has steadily risen and advertising fees are not jumping as much. Although owning a franchise such as ESPN is still a good thing, the sports network has lost money for two years and just a few years ago was producing 70% of Disney’s profit. What should Disney do, if anything?

According to Christopher Palmeri of Bloomberg News Disney’s ESPN has 90 million subscribers paying $7.21 for the channel which is 4 times the leading competitor who is TNT their fees are $1.82. ESPN’s revenue is expected to be in the $12.5 billion category but growth has slowed. The reasons is partly demographic – the population is becoming older and not watching as much sports as they use to; in addition across all age groups people are not signing up to TV packages they way they use to, although the amount of content viewing on sports and entertainment remains high.

Linking to dividend paying stocks, every stock and industry goes through cycles and it takes time before trends change drastically. ESPN is still the leader in sports coverage but how people are accessing sports has changed. Going from 99 million to 90 million subscribers is still a big deal and ESPN commands high advertising fees, however one day something will change. ESPN will begin to think like a start up or the big packages for football, basketball, Olympics fees will have to taper off or actually decline. There is still plenty of value in ESPN and Disney and one way or another they will find a method to capture the value.

There are more questions than answers, till the next time – to raising questions.