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Disney has a tremendous opportunity to expand overseas by launching more channels in new markets and expanding its stake in joint ventures formed with local media networks. In addition, there is room to license more TV shows to media networks internationally. One such recent example is the Turkish version of ABC’s famous show Desperate Housewives.
It’s not just Disney that is tailoring the popular American shows to local tastes for international markets – other media companies are doing the same as well. Time Warner’s Chinese adaption of Gossip Girl and NBC’s Russian adaptation of Law and Order are a few such examples.
See our complete analysis for Disney
Low Revenue Contribution Of Developing Countries
Only 25% of Disney’s revenues and profits come from international markets. If we exclude Europe, which is a developed market similar to the U.S. and thus has lower growth opportunities, we find that international markets account for only 10% of Disney’s profits. These markets primarily include Asia Pacific and Latin America regions. However, these are also the markets that are growing the fastest. According to Informa Telecoms & Media, the developing countries are growing rapidly in terms of total ad revenues, which bodes well for the pay-TV market as television remains the primary mode of advertising. Some of the high growth regions in developing markets include Brazil, Turkey, Colombia and Vietnam.
The Time Is Now
Given that only a very small portion of Disney’s profits comes from developing markets, the company has a big opportunity to expand. In fact, this is the right time to be aggressive as the pay-TV market is expanding rapidly in these regions. Brazil is a prime example, which has seen rapid growth in pay-TV subscribers as evident from DirecTV’s results. The growth in middle class and stimulating offers provided by DirecTV have led to more customers subscribing to pay-TV services in the country.
Disney is already doing well but could do better. The company has managed to grow its profits on account of continued growth in ESPN, improved attendance in parks & resorts as well as better performance (ratings) from its other channels such as The Disney Channel. International markets provide an opportunity to distribute the content extensively, thereby boosting revenues from ABC Studios and ABC Media Productions. This will be incremental to Disney’s total value and a good diversification tool from a long-term perspective.
Our price estimate for Disney stands at $55.50, implying a premium of about 5% to the current market price.
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