TIME Media

Why Disney Is Poised to Absolutely Dominate

Measles California
Jae C. Hong—AP Sleeping Beauty's Castle is seen at Disneyland on Jan. 22, 2015, in Anaheim, Calif.

The Mouse House is on a epic winning streak

Luke Skywalker. Tony Stark. Elsa and Anna of Arendelle. Captain America. Woody and Buzz. The fictional heroes of family entertainment have never dominated popular culture as much as they have in recent years. And there is one company that is largely responsible for that: Disney.

Founded nearly a century ago, Disney has long-held a firm place in America’s popular imagination, but even within that long history the past decade has been an impressive ride. Since Bob Iger took over as CEO in 2005, Disney’s stock has more than quadrupled while the S&P 500 is up 77%. Most of the gains have come since 2011 as Iger’s early moves began to bear fruit.

And so some Disney shareholders have come to regard Iger with the kind of awe children have for Disney’s franchised superheroes. But in recent months a debate has broken out between bulls and bears over how long the rally can continue.

While no one is doubting Disney’s immediate future, some analysts are concerned about the stock’s heady valuation. Disney is trading at 26 times last fiscal year’s earnings and 22 times its estimated earnings this year. The Dow, by contrast, is trading at 16 times its recent earnings.

Of the 31 analysts covering Disney, 12 of them have a hold rating on the stock – often a rating given when an otherwise healthy stock has grown pricey. It’s not just analysts who are cautious. Goldman Sachs recently calculated that hedge funds have an aggregate $4.5 billion in short interest in Disney, second only to AT&T among US stocks.

The thing is, Disney isn’t just growing, it’s performing so well that it’s surprising even the bulls. In March, one analyst downgraded Disney purely on its valuation,arguing further gains would be limited. But this month, Disney beat Wall Street’s consensus estimate for the fifth time in the last six quarters. Following its last earnings report, seven analysts raised price targets to between $120 and $125 a share. Disney closed Friday at $110 a share.

So while the bears argue that Disney is priced for perfection, bulls counter that the company has enough kindling to keep the bonfire burning for some time, largely because of two things Iger has built over the years: a steady lineup of content that appeals to the masses and an interlacing of Disney divisions that can feed business to each other.

This is especially clear in the film business. In 2006, Disney bought Pixar, an impressive deal given the bad blood that has existed between Steve Jobs and Iger’s predecessor Michael Eisner. Three years later, Disney bought Marvel Entertainment just as it superhero franchises were entering a renaissance. And in 2012, the company bought Lucasfilm just as a new Star Wars trilogy was being planned.

So far in 2015, Disney’s Cinderella has brought in $521 million worldwide and Avengers: Age of Ultron has pulled in $1.2 billion. The company’s Tomorrowland topped the weekend box-office in the U.S., but the movie fell short of expectations in what was the film industry’s lowest-grossing Memorial Day weekend since 2001. But Disney is only getting warmed up: Two Pixar movies, Inside Out and The Good Dinosaur, are coming this year, along with Star Wars: Episode VII – The Force Awakens. The anticipation of Star Wars is especially high–the latest trailer alone has already had more than 200 million views.

Beyond this year, Disney has a Jungle Book remake coming in 2016, along with Captain America 3, Finding Dory and a sequel to 2010’s Alice in Wonderland, which topped $1 billion in receipts. Frozen 2 and Toy Story 4 are in the works. And the Marvel lineup will remain busy, with new Thor and Guardians of the Galaxy films and two Avengers movies expected through 2019.

The relentless parade of blockbuster fare may feel manufactured but, for Disney, they are paying off through multiple revenue streams. Sales of Frozen merchandise in the past six months rose tenfold over the year-ago period, even though the movie was released in 2013. EA is timing a Star Wars: Battlefront game to coincide with the film’s release, and the Playdom gaming studio Disney bought in 2010 is working on Star Wars- and Marvel-themed games as well.

There are also tie-ins for theme parks, like Tomorrowland. Theme parks have become a growth area with operating profit in the unit growing 22% over the past six months. Disney is planning to open a new theme park in Shanghai in 2016, which could add to revenue in coming years.

The one area of potential weakness is in Disney’s largest unit, the media networks business including ESPN and ABC, which saw operating income flat in the last six months while revenue rose 12% in the period. In a call with investors, Disney cited higher programming costs for NFL and college football games as reasons for the flat profit in the division.

While it’s easy to imagine Disney’s growth continuing, it’s also easy to see areas of vulnerability. Audiences moving from broadcast TV and cable subscriptions in an era of on-demand Internet TV could slowly bleed Disney’s media-networks business. Disney has made moves to adapt to a world of over-the-top television, but the transition has started to accelerate this year.

The blockbusters could also become a vulnerability. Critics often chide the lack of originality in Hollywood’s blockbuster machine, and at some point audiences might lose their appetite for a glut of blockbusters. Tomorrowland, for example, drew only $40 million over the weekend, a disappointing take for a film with a $190-million budget. It doesn’t even rank in the top 20 grosses for Memorial Day openers.

For now, investors seem confident in Disney as long as Iger remains at the helm. Last fall, Disney extended Iger’s contract for the second time, pushing his retirement date back until 2018. More than any movie Disney’s studios may have in the works, the sequel investors are most interested in seeing is the success story Iger has brought to Disney shares.

TIME Football

Projected NFL 1st-Round Draft Pick Shane Ray Cited For Marijuana Possession

Missouri defensive lineman Shane Ray (56) walks off the field after being ejected from the game for a late hit against Alabama quarterback Blake Sims during the first half of the Southeastern Conference championship NCAA college football game, Saturday, Dec. 6, 2014, in Atlanta
Brynn Anderson—AP Missouri defensive lineman Shane Ray (56) walks off the field after being ejected from the game for a late hit against Alabama quarterback Blake Sims during the first half of the Southeastern Conference championship NCAA college football game, Saturday, Dec. 6, 2014, in Atlanta

The standout defensive player will appear in court on June 30

Former Missouri Tiger football player Shane Ray, projected to be drafted in the early-mid first round of the 2015 NFL draft, was cited on Monday for possession of marijuana and a traffic violation.

According to ESPN, the pass rushing linebacker was pulled over for speeding on a Missouri highway and when the officer smelled fresh (unsmoked) marijuana he searched the vehicle — finding a “personal amount” in the car.

The officer said Ray was cooperative and did not appear impaired during the procedure. He was given a misdemeanor for having 35 grams or less of pot in his possession and was not detained. The maximum sentence for misdemeanor marijuana possession in Missouri is one year in prison and a $1,000 fine.

He will appear in court on June 30.

Ray is also dealing with a toe injury and there is speculation that he may need to undergo surgery, but he told ESPN that he will “take it easy through rookie camp and continue to focus on rehab and healing.”

He started every game for Missouri last season and recorded 61 tackles and 14 sacks. The NFL draft starts on Thursday.

[ESPN]

TIME Media

ESPN Suing Verizon Over More Flexible Cable Package

Time Warner Cable, Disney Talks Said To Focus On ESPN3.Com
Getty Images The ESPN logo is displayed outside L.A. Live, which houses the ESPNZone, in Los Angeles, California, U.S., on Tuesday, Aug. 31, 2010.

Verizon put ESPN in a sports add-on package, which ESPN says is a breach of contract

ESPN is suing Verizon over the pay-TV operator’s flexible new cable bundles. The sports network is arguing that Verizon’s new cable packages, which don’t include ESPN in their primary offering, are a breach of contract.

Verizon unveiled earlier this month a new set of cable bundles called Custom TV that give subscribers more choice over what channels they pay for. Customers pay for a basic channel of packages that includes broadcast networks and a few cable channels. Bundles of genre-specific channels are offered as $10 add-ons, with ESPN available as part of the sports add-on package.

However, the Disney-owned ESPN, which is the most valuable cable network by a large margin, said last week that its contract with Verizon stipulated that it not be shuttled to an optional sports tier. When the Custom TV offering was unveiled, Verizon executives said they believed the new configurations were in line with existing contracts with networks. The operator is still marketing ESPN and ESPN2 as part of the sports bundle on its website.

ESPN is suing Verizon in the state of New York, seeking injunctive relief and damages. “ESPN is at the forefront of embracing innovative ways to deliver high-quality content and value to consumers on multiple platforms, but that must be done in compliance with our agreements,” the company said in an emailed statement. “We simply ask that Verizon abide by the terms of our contracts.”

A Verizon spokeswoman did not immediately respond to a request for comment.

TIME Media

ESPN Calls Foul on Verizon’s Play to Break Up Cable Bundles

Verizon's offering relegates ESPN to a sports add-on package

Verizon is finally offering customers a way to pay for cable without having to buy hundreds of channels they never watch. But the company’s plan to bust up the cable bundle may run afoul of its contracts with major cable networks, like ESPN.

Verizon’s new TV package, dubbed Custom TV, lets customers combine a base package of broadcast networks and a few cable channels like CNN with genre-specific additional packages related to sports, entertainment and other categories. Instead of being included in the primary offering, Verizon’s new service relegates ESPN to a sports add-on pack.

However, the Disney-owned ESPN said Friday that Verizon’s new slimmed down cable bundle “would not be authorized by our existing agreements,” claiming its deal with Verizon stipulates its flagship channels not be moved to an add-on sports tier. A Verizon spokeswoman did not respond to TIME’s request for comment, though a company executive earlier told the Wall Street Journal that the new bundles were expected to comply with contracts already struck with cable networks.

It’s no surprise that ESPN would be up in arms about being shuttled over to an optional tier of cable service. The sports network and other cable channels rake in huge profits because cable subscribers pay for many more channels than they actually watch. The average TV household pays for 189 channels about only watches about 17, according to Nielsen. That means popular channels like ESPN effectively subsidize less-viewed channels, like The Disney Channel. Initiatives like Verizon’s plan, as well as slimmed-down cable packages like Dish Network’s Sling TV streaming service, threaten this very lucrative model.

As of Monday morning, Verizon was still advertising ESPN as a channel available in the sports add-on pack for its Custom TV offering.

TIME Television

“I’m On Television”: Britt McHenry’s Classist, Classless Mistake

As more meltdowns go viral, will people's behavior change, or will our standards for it?

Why was it fair for ESPN to suspend reporter Britt McHenry after she went Dennis Quaid on a towing-company clerk on viral video? She gave the reason herself: “I’m on television.”

McHenry’s sole job, at its root, is to make people want to watch her on TV. To the extent that she followed “I’m on television” with “and you’re in a f*cking trailer” along with a string of other untelegenic, education- and body-shaming insults, she has herself to blame. As with Phil Robertson and many other instances of TV stars getting penalized for popping off, this isn’t a free speech issue. No one has a constitutional right to a TV job.

But also as in those other cases, it’s worth asking what exactly McHenry’s being punished for. For abusing a poorer, less famous employee? For doing it in such a way that we found out about it? Or for doing it on camera?

As someone raised by two hard-working parents, neither of whom went to college, McHenry’s “That’s why I have a degree and you don’t” classist attitude disgusts me. And I also know there’s plenty more of it in the world, not caught on camera. The more cameras are out there–in business, in our pockets, on elevators–the more bad celebrity behavior we’re eventually going to witness.

What less certain is whether the awareness that someone might be watching will make people behave better, or whether the frequency of meltdown videos will numb us to it. Let’s say you believe that anyone, like McHenry, who verbally lashes a service employee, or underling, or anyone in a lower power position, should be punished for it. Lets further assume that two or three–or a squintillion–powerful people have done the same thing, but off-camera.

If you could invent a magic device (like a video camera) that could reveal every such instance, would you want them all punished? Would you want the same to every nonfamous person who ever cursed out the cable-company operator? Or would the scale of it–there are a lot of jerks in the world–make it seem futile and ridiculous?

Maybe the knowledge that you never know when you might be caught on tape will lead some people to behave better. Occasionally, the power of example does some real good; Jonah Hill, for instance, was videotaped in 2014 yelling a homophobic slur, and it produced one of the few seemingly true, contrite and considered public celebrity apologies. He went through the now-familiar ritual of public shaming, came out of it with his career just fine, and hopefully he and maybe a few fans learned an actual lesson.

But the more meltdowns become public–not just celebrity ones, but increasing cable-TV fodder of amateur bad behavior–the more I wonder if they’ll become cautionary tales or just entertainment. It’s something we’ll have to work out, intentionally or gradually–will we define our standards of behavior up, or our ability to be shocked down? As McHenry reminded us, she’s on TV. But these days, who isn’t?

Read next: ESPN Suspends Reporter Britt McHenry Over Leaked Parking Lot Video

Listen to the most important stories of the day.

TIME viral

Watch an ESPN Reporter Freak Out at a Car Impound Attendant

"Lose some weight, baby girl"

ESPN’s Britt McHenry has been suspended after a video of her cursing at a worker at a car impound went viral.

“I’m in the news, sweetheart, I will f***ing sue this place,” McHenry says to the attendant at Advance Towing in Arlington, Virginia. She goes on to berate the attendant for her appearance and job, saying, “Maybe if I was missing some teeth they would hire me, huh? Cause they look so stunning … Cause I’m on television and you’re in a f***ing trailer, honey.”

ESPN suspend McHenry after the rant, and McHenry took to Twitter to apologize:

TIME Appreciation

Kid Who Won ESPN’s March Madness Bracket Donates Xbox Prize to Make-A-Wish

He got one Xbox for himself and another to donate

We told you earlier this week about Sam Holtz, the 12-year-old who tied for the best bracket in this year’s ESPN Tournament Challenge out of 11.57 million entries.

It turns out that even though he had his dad’s permission to enter the contest, he wasn’t eligible for the drawing for a $20,000 Best Buy gift card and a trip to Maui since he was not 18 or older.

Best Buy was gracious enough to award Holtz a $1,000 gift card anyway, and he did what many kids his age would do: purchase himself an Xbox One, according to the Chicago Tribune.

Holtz still had money on the gift card left over, and instead of using it on himself, he decided to buy another Xbox One and donate it to the Make-A-Wish Foundation, which grants wishes to children with life-threatening illnesses.

He explained his decision to the Tribune:

“I decided to donate one of the Xbox One systems to Make-A-Wish because of my cousin Alec,” Sam said. “When he was real little, he was in Make-A-Wish, and back then [23 years ago], people granted his wish of going to Disney World. I thought I’d kind of repay them for what they did for my cousin [who survived his illness and is now an adult].”

It’s a terrific gesture by Holtz, who’s got to still be riding high after pulling off the impressive bracket feat.

​[CollegeBasketballTalk]

This article originally appeared on SI.com.

 

TIME Football

49ers QB Colin Kaepernick Launches Searing Verbal Attack on Fan via Twitter

"Get better at life!"

Colin Kaepernick, the talented but often criticized quarterback for the San Francisco 49ers, lashed out at a fan on Twitter on Wednesday.

The outburst started after Kaepernick posted this on his timeline:

To which the fan, Stephen Batten, replied:

That was enough to prompt Kaepernick to let loose with a volley of tweets going after Batten.

It is unconfirmed if Batten indeed had eight followers when he sent out the first tweet, but as of publishing he now has over 1,500 followers — and that number is climbing fast.

Batten has yet to respond to Kaepernick’s broadside, while the quarterback retweeted the support he received from fans and media alike, including the famous sportscaster Erin Andrews.

This is the second time in two weeks that a controversial athlete has become embroiled with a fan on social media. Last Monday, embattled Washington Redskins quarterback Robert Griffin III got into a heated argument with a fan on Instagram.

TIME Baseball

Yankees Slugger A-Rod Apologizes for Misconduct

New York Yankees' Alex Rodriguez runs to third base in their MLB American League baseball game against the Boston Red Sox in Boston, Massachusetts, August 18, 2013
Dominick Reuter—Reuters New York Yankees' Alex Rodriguez runs to third base in their MLB baseball game against the Boston Red Sox in Boston on August 18, 2013

"As far as the Yankees are concerned, the next step is to play baseball in spring training"

Alex Rodriguez apologized to New York Yankees top executives on Tuesday, ahead of his return to professional baseball after a yearlong suspension for steroid use.

The strain was created when Rodriguez, widely considered one of the top talents to ever play the game, was suspended for the 2014 Major League Baseball (MLB) season as punishment for his role in the Biogenesis of America steroids scandal that ensnared the MLB in 2013.

In an effort to reverse the suspension, the three-time American League Most Valuable Player sued MLB, its players’ union and a Yankees team physician.

The Yankees and Rodriguez issued a joint statement on Tuesday.

“Alex initiated the meeting and apologized to the organization for his actions over the past several years,” the statement said. “There was an honest and frank discussion on all of the issues. As far as the Yankees are concerned, the next step is to play baseball in spring training.”

Rodriguez, who turns 40 in July, is set to make $61 million over the next three years, thanks to a 10-year $275 million contract he signed in 2007.

According to ESPN sources, Rodriguez will also apologize to the media prior to the start of spring training in late February.

TIME viral

Watch College Football Personalities Read Mean Tweets About Themselves

From famous coaches to Tim Tebow

Jimmy Kimmel is back with another installment of his show’s popular “Mean Tweets” segment. Usually he goes for celebrities like Lena Dunham and Matthew McConaughey, but this time Kimmel goes after a different demographic.

In honor of Ohio State and Oregon’s national title game, Kimmel decided to make college football stars and ESPN personalities read the horrible things people have to say about them online. Victims range from University of Oregon coach Mark Helfrich to Tim Tebow.

You would think that this bit would get old. It literally never does.

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