Analyst Says ESPN Contracts Could Hurt DISNEY Margins

(From Sports Business Daily)

ESPN "may produce smaller gains in coming years, crimping the stock price" of THE WALT DISNEY COMPANY, according to ANDY FIXMER of BLOOMBERG NEWS.

UBS SECURITIES Analyst MICHAEL MORRIS estimated NFL, MLB, NBA and auto racing contracts that take effect by October 2009 will increase expenses by $1.02 BILLION a year, at a time when agreements with COMCAST and TIME WARNER CABLE limit subscriber-fee increases to 7% annually.

Morris estimated that DISNEY's cable networks, the source of 46% of the company's operating profit last year, will see that margin slow by 4 percentage points in fiscal year 2008.

Morris -- "DISNEY is entering a period of slower growth. ESPN is at the center of that equation."

But ESPN/ABC Sports President GEORGE BODENHEIMER said, "We are getting tremendous value for these investments. Our ability to maximize these agreements has never been greater."

Recent SEC filings show ten of DISNEY's 12 biggest institutional shareholders have reduced their stakes.