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Disney to Reduce Workforce at ESPN, Subscriber Woes Remain


There seems to be no end to the plight for The Walt Disney Company’s DIS ESPN, as the media behemoth is struggling to bring ESPN back on track. Per media reports, the company is preparing to lay off nearly 150 jobs at ESPN.

This will be the second such move after the company made significant cuts in April, which affected mostly on-air commentators. Disney’s ABC Television Group and Disney Channel had witnessed similar retrenchment previously. Notably, both have been witnessing rating decline and stiff competition of late.

For some time now, declining subscriber count and higher programming costs have been a cause of concern for Disney’s. The company’s primary cash cow, ESPN, has been under immense pressure as the Pay-TV landscape continues to change owing to migration of subscribers to online TV. Falling subscriptions will have a telling effect on the network’s ad revenues.

Disney is making full efforts to bring back ESPN’s golden days. In an effort to attract online viewers, the company has completed the acquisition of video streaming, data analytics as well as commerce management company BAMTech in September. The company stated that it will use BAMTech to create an ESPN-branded, over-the-top video streaming service that will cover a variety of sports.

The company is striving to make its content accessible to more customers. Earlier it had stated that AT&T’s DirecTV will feature channels like ESPN, ESPN2, ABC, Freeform, Disney Channel, Disney XD as well as Disney Junior in their subscription packages in the upcoming DirecTV Now OTT service. The company also stated that mobile apps are going to play an important role in the future of media and ESPN is rightly on the way of taking the advantage of the trend with wide range of apps.

Stock Performance

Despite investors’ concern about the future of ESPN, the stock has gained 6.5% in a month, outperforming the industry’s growth of 4.1%. The recent gain in share price can primarily be attributed to the company’s deal with deal with Rian Johnson, the director of The Last Jedi, to produce a brand new Star Wars trilogy. Meanwhile, shares of other media stocks like Comcast Corporation CMCSA, Twenty-First Century Fox, Inc. FOXA and CBS Corporation CBS have jumped 6.8%, 23.7% and 2.9%, respectively.

Disney currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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