America’s venerable entertainment conglomerate The Walt Disney Company (NYSE: DIS) has long had a reputation as a value investment. Investing legend has it that Warren Buffett, who once owned some Disney shares, coined the term “moat” while referring to Disney’s castles.

Yet times are changing drastically in the entertainment business as streaming video decimates traditional broadcast and cable television. Some of those changes are causing Disney’s moat to dry up and the float revenue from subscriptions to disappear. Naturally, many people will be wondering if Disney is still a value investment in today’s world as some of its traditional markets dry up.

Disney’s Float Is Disappearing

One of Disney’s biggest cash cows, the American sports cable channel ESPN, has lost seven million subscribers in the past two years and three million subscribers between third quarter 2014 and third quarter 2015, Forbes reported. That’s a real problem for Disney because ESPN is the company’s biggest moneymaker. ESPN’s subscription revenue for the past year was $5.1 billion (€4.81 billion).

Nor were the losses confined to ESPN. Two other American cable operations, the Disney Channel and the U.S. version of Disney XD, each lost four million subscribers in the past two years, according to The Hollywood Reporter. Another Disney cable channel, ABC Family, lost five million subscribers in the same period.

Subscriptions are down because more and more people are turning to streaming video, which allows them to buy only the programming they want to watch. Streaming video is a major threat to ESPN because it allows sports fans to buy only the events they want see. It also lets sports leagues bypass ESPN and sell programming directly to fans.

Streaming video is a double-edged sword for Disney. It opens up new markets for Disney programming but reduces the float from cable subscriptions. Disney participates in Hulu, a popular streaming service that is a joint venture with 21st Century Fox and Comcast’s NBC Universal.

Float is a steady stream of cash that a company like Disney can tap for a wide variety of purposes. Loss of float is potentially destructive because Disney’s current business model is based on using float from its cable subscriptions to finance its other operations, such as movie production and the theme parks.

Disney Is Still Making Money

Despite the loss of float, Disney still has some of the characteristics of a value investment. The company is well managed, and it makes a lot of money.

Disney reported a net income of $8.382 billion (€7.91 billion), a profit margin of 11.91% and a free cash flow of $2.124 billion (€2 billion) on September 30, 2015. The company also held cash and short-term investments of $4.269 billion (€4.03 billion) and reported generating $10.91 billion (€10.3 billion) in cash from operations in the third quarter of 2015. The loss of subscriptions is not hurting Disney’s bottom line or its cash flow.

Nor has the loss of subscriptions affected Disney’s revenues. Disney reported a TTM revenue of $52.47 billion (€49.52 billion) on September 30, 2015, a $3.66 billion (€3.45 billion) increase over the same date in 2014 when it reported revenues of $48.81 billion (€46.06 billion). The revenue figures show us that Disney has figured out how to adapt to the changing entertainment landscape.

Licensing, the Key to Disney’s Future

One reason why Disney is still making money is that it has aggressively expanded its programming and licensing operations in recent years. CEO Bob Iger’s decisions to buy comic book powerhouse Marvel Entertainment for $4 billion (€3.77 billion) in 2009 and George Lucas’s Star Wars empire for another $4 billion (€3.77 billion) look smart in retrospect.

Star Wars in particular gives Disney an opportunity to use its expertise in generating corporate synergy through marketing to expand its other ventures, such as theme parks. The upcoming release of the new Star Wars film has generated a vast amount of publicity and news coverage, which amounts to almost unlimited free advertising for Disney’s Star Wars products.

This helps attract the attention of fans and potential viewers, including cord cutters that might ignore traditional advertising. It also reaches potential consumers of other Disney products, such as parents shopping for toys and visitors to the theme parks.

Disney Is a Good Company with an Effective Business Model

At the end of the day, Disney is still a very good company with an effective business model. It has been able to use the float generated by subscriptions to expand its core entertainment business and its all-important programming and character libraries.

Equally important is the fact that Disney still reaches a vast audience and generates a lot of float from its subscriptions. ESPN alone still had 92 million subscribers in 2015, according to The Hollywood Reporter. Disney is in the unique position of being able to take advantage of both old and new media.

It can generate float from traditional subscriptions while selling programming through streaming video at the same time. More importantly, the company can use the revenue from subscriptions to build up a programming library to generate more revenue through streaming video in the future.

Disney is still a value investment because of all the cash that it generates. It is also an undervalued company with a market capitalization of $190.04 billion (€179.34 billion) and an enterprise value of $213.38 billion (€201.37 billion) on November 27, 2015. That and the cash make Disney a rare value investment in the entertainment arena.

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