The Walt Disney Company (DIS) has stretched its broadcast rights deal with the National Football League for eight more years, the Wall Street Journal reported. According to the pact, the company will pay $15.2 billion over the tenure of the deal.
Deal Dissection
The newly announced deal will extend ESPN’s existing deal to 2021. The current deal was scheduled to end in 2014. Moreover, it includes digital rights of NFL-branded programs, 3D distribution and the right to air games on web enabled mobile devices. Further, it also includes bigger international broadcasting rights.
The contract, commencing in 2014, marks a substantial increase in the cost of broadcasting-rights when compared with the current deal. Disney will shell out approximately $1.9 billion per season over the tenure of the deal, up approximately 73% from the current $1.1 billion per season.
We believe that Disney might hike fees for pay-TV distributors with affiliate fees and advertising providing an opportunity to hedge against the rising cost.
Disney is in talks for cash retransmission payments of owned television stations and license fees from affiliated stations. The company notified that its owned stations have entered into agreements with quite a few multi-channel distributors and has completed license agreements with non-owned affiliates.
ESPN was the key driver of revenues at the Media Networks division in recent times. Thus, Disney gained a 12-year deal for multi-platform rights for a wide range of Pac-12 conference sports. Further, it also entered into a 12-year deal for becoming the exclusive U.S.broadcaster of Wimbledon.
Let’s Wrap Up
Walt Disney is one of the world’s leading diversified entertainment companies. Moreover, the company commands a formidable portfolio of globally recognized brands, primarily its namesake brand Walt Disney, followed by ABC, ESPN and Marvel Entertainment.
These renowned brands offer a strong competitive edge to the company and bolster its well-established position in the market against major players like News Corporation (NWSA) and Time Warner Inc. (TWX).
Such moves not only fortify its position but also expand its coverage area while creating long-term opportunities.
Currently, we maintain a long-term Neutral recommendationon the stock. Moreover, Disney’s shares hold a Zacks #3 Rank, which translates into a short-term Hold rating.
