Disney losing $30M a week as YouTube TV blackout drags on, analysts say

Disney is incurring an estimated $30 million weekly revenue loss, totaling $60 million over 14 days, due to its ongoing carriage dispute with YouTube TV, which has blacked out ABC and ESPN channels. Morgan Stanley projects each week of lost distribution will reduce Disney's adjusted EPS by $0.02, though the firm maintains an overweight rating and a $140 price target for DIS. The dispute, now in its 13th day, is anticipated to conclude later this week, with YouTube TV offering subscribers a $20 credit during the impasse.

Analysis

The ongoing carriage dispute between Disney and YouTube TV is generating a significant revenue headwind for Disney, estimated at $30 million per week, or $4.3 million daily. Morgan Stanley projects a $60 million revenue loss over a 14-day period due to the blackout of ABC and ESPN channels, which has now entered its 13th day. This dispute is also expected to reduce Disney's adjusted earnings per share by $0.02 for each week of lost distribution.

Despite the immediate financial impact, Morgan Stanley maintains an "overweight" rating on Disney stock with a price target of $140, significantly above its current trading price of approximately $116.73. The firm anticipates the dispute, which involves YouTube TV offering subscribers a $20 credit, will conclude later this week. Disney asserts YouTube TV is seeking "preferential terms below market," while YouTube TV claims it aims to pay "fairly for their content."

The dispute highlights the ongoing tension in media distribution, where content providers like Disney seek fair compensation for their valuable programming, including key sports content like ESPN, while distributors like YouTube TV manage subscriber costs. The failure to restore ABC for Election Day coverage underscores the contentious nature of the negotiations. The moderately negative sentiment surrounding DIS (-0.7) reflects the short-term financial pressure, despite the analyst's long-term positive outlook.

Key Decisions for Investors

• Investors should monitor the swift resolution of the YouTube TV dispute, as its duration directly impacts Disney's near-term financials, specifically the $0.02 EPS reduction per week.
• While the short-term revenue and EPS impact is notable, Morgan Stanley's maintained "overweight" rating and $140 price target suggest a belief in Disney's long-term value beyond this temporary disruption, warranting a focus on the company's broader strategic initiatives.
• Assess Disney's ability to secure favorable carriage terms for its premium content in future distribution negotiations, as this dispute highlights ongoing industry dynamics that could affect long-term revenue stability.