NEW YORK (BP)–The Disney Company is struggling on Wall Street, according to key news reports.
A number of Wall Street analysts have cut their profit forecasts for Disney, Bloomberg Financial Markets News reported June 19.
Among them: Merrill Lynch and Goldman Sachs & Co, whose analysts are among “the most respected media analysts on Wall Street,” Bloomberg reported. Another report noted Paine Webber and NationsBanc Montgomery SEC, Inc., also had cut their Disney profit forecasts.
TIME magazine reported June 15: “After a long run as one of the brightest stars in the Dow (Jones) firmament, the company’s stock has slipped 10 percent in the past month.”
A variety of causes were cited in reports by TIME, Bloomberg and Reuters, but none cited any effect of the Disney boycott by the Southern Baptist Convention, Assemblies of God, American Family Association and other religious groups. The boycott was launched by the AFA in 1995 and bolted into national prominence when the SBC joined it in 1997.
“This proves the boycott is working,” said Donald Wildmon, AFA’s founder and president. “Disney is seeing some erosion in its theme park attendance and in the numbers of people going to see the company’s movies.
“But remember, this is a protracted battle with Disney,” Wildmon said. “This boycott will continue for years to come, until the world’s most influential entertainment company stops poisoning our culture.”
Among Southern Baptists, a poll by the Atlanta Journal and Constitution in March found 30 percent affirmed the Disney boycott. Soon after the SBC vote to boycott Disney in June 1997, a USA Weekend open-to-the-public telephone/Internet vote found the boycott endorsed by 49.5 percent of the 107,000 respondents.
As cited by various analysts in the Bloomberg and Reuters news reports, the factors dogging Disney include:
— “disappointing,” “weaker-than-expected” box office performances by recent Disney-subsidiary films, including “The Horse Whisperer” starring Robert Redford.
— “softer-than-expected” or only “modest gains” in Disney World attendance in Florida.
— Disney’s ABC television network, which as Bloomberg described it, “continues to struggle with a sharp decline in its ratings.”
— “softness in sales of consumer products,” as Bloomberg put it.
— “a difficult international marketplace,” as one analyst put it, with another citing Disney’s “softness” overseas, especially in Japan and Europe.
Additional factors were a “brain drain” of departing Disney executives under company chairman Michael Eisner, according to the TIME article June 15; higher costs of ABC’s NFL broadcasts; increased write-offs from live-action movies; start-up costs for Disney’s newest Florida attraction, Animal Kingdom, which otherwise was described by one analyst as “doing quite well.”
Opening weekend box office receipts for Disney’s traditional animated features also may be instructive: Before the boycott, “Lion King” tallied $40.7 million in its opening weekend; “Pocahontas,” $29.5 million; and “Toy Story,” $29.1 million. Since June 1996, when the SBC voted to warn of a Disney boycott, opening-weekend receipts have fallen to $21 million for “Hunchback of Notre Dame;” $21.5 million for “Hercules;” and most recently, $22.7 million for “Mulan.”
Richard Land, president of the SBC’s Ethics & Religious Liberty Commission, noted, “…where Disney is being impacted is precisely in the area where a boycott by evangelical Christians — the former family oriented base of Disney’s empire — would make the most impact, namely soft revenue in consumer products, the theme parks, movies and ABC.”
Land added, “Southern Baptists and other Christians who have joined the boycott by denying their discretionary entertainment income to the Disney empire should be encouraged.”
Bill Merrell, vice president for convention relations with the SBC Executive Committee, said he believes “the losses are just beginning to be seen” at Disney.
Merrell recounted, “A Barron’s magazine article recently described how Disney set aside $2.5 billion in an undisclosed reserve when it purchased the ABC network, and Barron’s stated that the set-aside would have the effect of making Disney’s earnings appear higher than they actually were — but only for a while. With that fund spent down, the real financial picture of Disney will be available to investors and the American public.”
Among the recent Wall Street shifts concerning Disney: a NationsBanc recommendation of “hold,” instead of the previous “buy,” and a long-term rating of “neutral” instead of the previous “buy” by Brown Brothers Harriman analyst Marry Ann Winter, according to a report in Reuters. Analyst Richard Simon of Goldman Sachs & Co., lowered his 1998 Disney profit forecast to $3 per share from $3.10 but has kept Disney stock on his “Recommended List,” Bloomberg reported.
“Disney can’t afford to have more than one division underperforming at the same time,” Bloomberg quoted analyst Barry Hyman of Ehrenkrantz King Nussbaum as saying. “ABC continues to have problems and film just adds to the woes of the company for the short term,” Hyman said.
Another analyst, however, Marvin Roffman of Roffman Miller Associates, who remains a Disney proponent, told Bloomberg: “We don’t think the fundamentals for wanting to own the stock has changed. These are just blips.”
Said Merrell, “Millions of Americans whose values are informed by biblical faith have lost confidence in Disney and have determined not to do business with them. That cannot help but affect the bottom line.
“Instead of concerns over the moral drift at Disney being treated as worthy of serious reflection, they have been dismissed and ridiculed by Disney management,” Merrell lamented. “In a world of costs and benefits, of profits and losses, Disney is receiving what it has earned.
“People are catching on to Disney’s game,” Merrell continued. “While it holds itself out as a producer and distributor of family friendly entertainment, in 1997, 65 percent of the movies produced by Disney-controlled film companies were R-rated. If Disney were in fact as family oriented as its carefully crafted reputation implies, it would not be losing the natural constituents it had won in the family centered audience.
“We hope the principals and stockholders of Disney will re-evaluate whether they want its reputation as a trustworthy wholesome family entertainer to be permanently impaired among American families,” Merrell said. “It is still our hope that Disney will begin to practice real truth in advertising, and return to its position as a trusted family entertainer.”
“If we weren’t hurting Disney,” Land noted, “Mr. Eisner wouldn’t still be attacking us as he did when he compared us to Nazis on the ‘Today’ show. This should encourage us to stay the course and keep doing the right thing. At the very least, this decline in Disney’s profitability will limit their ability to produce as much of the highly offensive material as they have been producing.”
