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The World Cup + Frozen = Profitable Summer for Disney

10 July, 2014 by Ben O'Brien in Commentary

We added Disney (DIS) to the consumer discretionary portion of most of our portfolios last year. It is a venerable American company and a member of the Dow index with a market cap now over $150 billion.  Despite its heft, though,  the stock has had impressive growth. It is up almost 14% this year, more than twice the S&P 500, and is currently flirting with its all-time high around $87 per share.

DIS

The one-two punch of ESPN’s coverage of the World Cup and Disney’s computer animated blockbuster Frozen have been driving the rally

A recent article in Motley Fool wrote about the World Cup:

As Americans are more and more interested in soccer during this World Cup — which is proven by record viewership numbers — ESPN continues to gain from this influx of viewers. Each of the three U.S. games have set an ESPN soccer record, starting with the game with Ghana, then Portugal, and finally, the 10.8 million record set by the U.S./Germany game.

Disney, through ESPN, paid $100 million for the broadcasting rights for the 2010 and 2014 World Cup tournament. Once again, Disney made a good bet, as these broadcasting rights continue to bring record viewers to the channel. With soccer viewership on the rise, having increased 22% from the 2006 to 2010 World Cup, this was a smart move for Disney, which has seen the trend continuing to grow. The company is looking to use this World Cup to gain long-term market share for its ESPN network.

Another article from Seeking Alpha highlights the success of Frozen:

It is fair to attribute a good part of this success to the ongoing “Frozen” mania. After generating over $1 billion at the box office and becoming the best-grossing animated movie in history, “Frozen” is continuing to bring in a lot of revenue.

Every day, people eagerly purchase all kinds of merchandise related to “Frozen.” Toy licensing alone accounts for much of the profit this film is producing. Of course, the popularity of Elsa dolls only partly accounts for Disney’s domination of the licensed toy market.

Can the momentum continue? One big catalyst in coming years could be Disney’s new Star Wars trilogy which is currently in development.

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