There's drama, intrigue, and suspense at Walt Disney's (DIS +1.32%) ABC this week, and it has more to do with the programming of its content than the content of its programming. Jimmy Kimmel Live! returns to the air on Tuesday night, six days after the late-night talk-show host was suspended.
If you're feeling uneasy about the topic -- wondering what side of this divisive issue I land on -- you can relax. I have no intention of dabbling into political rhetoric. This is a political story with investing implications, and as a longtime Disney shareholder I will be focusing strictly on the latter.
Kimmel is back, mostly. Let's focus on what it means for Disney investors. More to the point, will the emotional swings over the past week result in a resurgence in popularity for the show, like when Coca-Cola decided to tinker with its signature soft drink's formula in 1985? Crack open a can. There's a lot to discuss.
NYSE: DIS
Key Data Points
The pause that refreshes
You might not have been around 40 years ago, but a lot has been written about Coca-Cola's biggest gamble. Sensing that younger sippers were turning to its biggest rival's cola offerings, the Atlanta-based beverage stock replaced its iconic soft drink with a sweeter and less carbonated reformulation that folks now refer to as New Coke. There was a customer backlash, and less than three months later it brought back the original, branded as Coca-Cola Classic to sell alongside New Coke.
Whether it was marketing genius or the more likely case of a timely recovery from an honest stumble, Coca-Cola came out winning. After seeing its revenue plummet 11% in 1985, the business rebounded with a 19% top-line surge the following year. Disney can use the adrenaline boost. It has posted just one fiscal year of organic double-digit revenue growth over the past 28 years.
It wouldn't be a surprise to see a spike in ratings for tonight's Jimmy Kimmel Live! airing on most ABC affiliates. Will the audiences stick around beyond this week? Perhaps just as importantly, will the advertisers come back -- and will they be willing to pay more or looking to pay less to reach the same audience?
Image source: Walt Disney.
It's the reel thing
The New Coke story is aspirational, but it also wasn't politically divisive. It was easy to see why the masses wanted something that was taken away, even if blind taste tests showed that many customers couldn't tell the difference between the new and old soft drink. It was an easy decision for Coca-Cola to make, appeasing the traditionalists.
A more comparable story to the Coca-Cola win four decades ago could be the switcheroo at Cracker Barrel Old Country Store this summer. The casual dining chain with attached rustic gift shops went viral last month for updating its stores and replacing its logo. It wasn't political, at least not directly. It was nostalgia. It took Cracker Barrel just weeks to roll back the most controversial changes. It remains to be seen if the move will reverse the problematic comps trends that inspired the now failed makeover, but it has a shot. Headlines this week claiming that Cracker Barrel was closing 14 company-owned restaurants weren't as troublesome as they seem. The chain is actually closing more than a dozen of its smaller Maple Street Biscuit Company concept, supposedly to focus more on its namesake concept.
Disney just has to make sure that it doesn't fall into the Target trap. The cheap chic department store chain somehow upset both sides of the political fence in recent years, and it is currently trying to put an end to its slumping share price and hemorrhaging market share.
Will Jimmy Kimmel Live! see a sustainable boost to its ratings beyond this week? Will the viewers angry about last week's suspension -- boycotting the brand by posting cancellations of their Disney+ and Hulu subscriptions on social media -- come back? Will the streaming business boycott calls now bubble up from the other side? It won't take long to get the answers to all of these important questions. Until then, it will be more drama, intrigue, and suspense at Disney's ABC.
