Entertainment Stocks Battered by Disney's Cable Woes
The catalyst for the sell-off was Disney's quarterly financial report on Tuesday.
A day after Walt Disney reined in expectations of revenue growth for ESPN and the rest of its cable TV business, its shares were tanking, and most of the other conglomerates were falling in sympathy to the leader in entertainment.
In midday trading Wednesday, Disney shares were off 9 percent to $110.63. Comcast, the second most valuable entertainment company, saw its shares shedding 5 percent. Meanwhile, Time Warner was off 9 percent; 21st Century Fox was down 7 percent; Viacom was off 8 percent; and CBS was down 5 percent.
The one entertainment conglomerate bucking the trend was Sony, which was up 1 percent, roughly in line with the broader markets.
The catalyst for the sell-off was Disney's quarterly financial report on Tuesday. The company set a profit record for the quarter, but its media networks business, made up of broadcast and cable TV assets, posted a lackluster gain of 4 percent in operating income and 5 percent in revenue.
Then the company lowered expectations going forward for ESPN and the rest of the segment, in part owing to competition from over-the-top services like Netflix and Hulu. Hence, companies in direct competition with Internet streamers were taking it on the chin Wednesday.
Beyond the conglomerates, Starz, AMC Networks, Scripps Networks Interactive and Discovery Networks were also down. A notable exception was Crown Media, which recently reported strong ad revenue courtesy of shows like The Heart of Mother's Day and June Weddings on the Hallmark Channel.