) competes with other media conglomerates like News Corp (
), Time Warner (
), CBS (
) and Viacom (
) in a variety of businesses. These businesses include cable
networks, broadcasting networks, movie studio and consumer
Our price estimate for Disney is $39.72
, roughly 6% ahead of market price.
So where does a $70+ billion market cap company like Disney
spend its cash? And how do its business lines stack up against one
another in generating Disney's total value?
Estimated Spend per Product Line for Fiscal 2010 ($
Operating Costs & Capital Expenditures ($ Bn) - These
The majority of Disney's annual spending is allocated towards
its media networks. These include, among others, ESPN, the Disney
Channel, and ABC. Here, the cost is primarily associated with
programming and production. Costs directed towards Disney's parks
& resorts comes in a close second, with spend on Disney studios
in a distant third.
The chart above illustrates the relative cost spent exclusively
on ESPN vs. Disney's overall product lines. Roughly a quarter of
the media networks spend is attributable to ESPN. This large share
of Disney's media networks spend is justifiable given ESPN's
relative contribution to the company's value (as illustrated
below). Dissecting Disney's spend on ESPN further, the chart
above shows that a substantial portion of this amount is solely
dedicated to NFL production licensing.
Below we assess the value contribution of these business lines,
in light of their share of Disney's expenditures.
Contribution to Disney's Total Stock Value ($
- Estimated Business Value by Trefis
It is interesting to note that Disney's second highest spend
area, parks & resorts, contributes relatively minor value to
the company's total stock value. Due to high capital spending,
expected to increase further over the coming years, the cash
profits from this division are very low. Does it make sense for
Disney to continue to direct a significant portion of its spending
to its parks & resorts business? Rather than being a pure
profit generator, this business helps Disney to engage its customer
base, developing brand loyalty and enhancing its brand name.
While media networks constitutes nearly $50 billion (est.) to
Disney's total value, we can see that about 50% of this is
contributed by its ESPN network. ESPN generates about half of
Disney's media networks value, justifying the roughly one quarter
of the division's costs dedicated to ESPN.
See our full company breakdown and estimates for key drivers
to Disney's stock value in the display below.
You can see
the complete $39.72 Trefis price estimate for
Disney's stock here.