Q4 revenue of $3.24B was well ahead of both our $3.16B and Consensus’ $3.15B. The revenue beat was driven by subscriber-related revenue as ARPU growth was above our estimates 257bps (+1.8% vs. our -0.8%) – we believe the ARPU beat was primarily a result of a mix-shift that skewed more to Satellite/DBS (vs. Sling) than we were expecting.
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The NFL’s TV rights negotiations are about to HEAT UP. Standing in the way is the collective bargaining agreement (CBA) between the league and the players, which the NFL reportedly hopes to wrap in the next few weeks (despite the CBA running through the 2020 season, or another 18 months). According to today’s WSJ, the NFL wants to lock down a new deal ASAP, as ratings were strong this year on the back of young new stars – plus the league wants to get in front of any potential economic downturn or the 2020 Presidential election, which could dampen ratings and hurt its negotiating leverage (i.e. ratings fell 8% in 2016). From the studios’ perspective, we think getting a deal done sooner rather than later would remove an overhang for the stocks – as some investors still question if a meaningful portion of the rights will go to digital players (we strongly disagree).
The hottest names this week were ETM (866 bps better than the S&P), MDP (652 bps), NFLX (375 bps), SSP (299 bps), and GTN (199 bps).
DIS had a tough setup into this print. Disney+ expectations were extremely high, and no one knew the financial impact of the Coronavirus on Parks. In the grand scheme, we think the positives outweigh the negatives. We got a FQ1 beat (see p. 2 for details), we think Disney+ subs were good enough, ESPN+ & Hulu trends were encouraging, and domestic Parks are pacing up nicely. On the flip side, the China parks are taking a temporary hit, the Studio has tough comps after a record year, and legacy Media Nets had a soft FQ1. Net net, we still like this one long-term on the strength of Disney+ and the domestic parks. We reiterate our Outperform.
We had a chance to tour ETM’s Studio down in TriBeca with a group of investors, followed by meetings with management (CEO CEO David Field, CFO Rich Schmaeling, Chief Digital Officer J.D. Crowley and NY Regional President, Susan Larkin). Our biggest takeaway is how the narrative for the company has finally taken a turn. We didn’t get a single question about USTN or legacy CBS Radio stations. Rather, investors were most interested in ETM’s multi-platform audio strategy – i.e. how ETM plans on integrating its newly acquired podcast platform with its core business, radio.com and its analytics group – along with capital allocation (some thought ETM should be buying back more stock) and the 2020 political opportunity.
The hottest names this week were BBGI (893 bps better than the S&P), CABO (628 bps), OUT (521 bps), NFLX (455 bps), and LAMR (272 bps).
The hottest names this week were GTN (797 bps better than the S&P), SSP (753 bps), TGNA (695 bps), SBGI (623 bps), and NXST (140 bps).
We conducted a 14-question follow-up survey to assess how consumers view Netflix and Disney+ now that Disney+ has been around a couple of months. Our motivation was to: 1) see how consumers’ views have changed since our last survey now that Disney+ launched; 2) get some hard data to better refine our Disney+ subscriber and ARPU estimates; & 3) quantify the potential ST & LT impact on NFLX’s domestic churn & ARPU.
As many of you have already heard, Marci has taken the plunge and left Wall Street after an exemplary 17 years to join Comcast as Senior Vice President, Investor Relations. We wish her the absolute best of luck in this new chapter of her career.
As we have done in every even-numbered year since 2002 (which is exactly when Marci entered the sell-side at the young age of 17), we are digging into the upcoming political cycle to determine which geographies are likely to have the most hotly contested races; and which of our broadcast/O&O companies have the highest exposure to such hotly contested races.
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