As Disney (DIS) gears up to report its fiscal first quarter earnings after the bell on Wednesday, one analyst says the future of ESPN may be CEO Bob Iger’s most important issue to solve.
“[ESPN] may be the most important issue for Bob Iger to deal with in his tenure now,” Macquarie analyst Tim Nollen told Yahoo Finance Live on Monday.
“Goal number one is getting direct to consumer toward a more profitable, sustainable path. Goal number two, which is really an extension of that, [is] getting ESPN decided. What are they going to do with it?” he continued.
Media analysts have long questioned the murky future of ESPN and whether or not Disney should consider spinning off the popular sports network — a suggestion previously made by Third Point’s Dan Loeb.
Loeb argued ESPN would have greater flexibility to pursue business initiatives, such as sports betting, if it were not part of Disney.
Wall Street analysts remain split with some encouraging a spin-off to aid cost rationalization and balance sheet options, while others disapprove of the move given ESPN’s cash flow generation. In its most recent fiscal year, Disney’s operating income for its Linear Networks segment — which includes ESPN — totaled $8.52 billion.
‘Disney sees a future for ESPN in streaming’
“I think Disney sees a future for ESPN in streaming,” Nollen said, suggesting the next NBA rights deal, which will be up for renewal after the 2024-25 season, could include various streaming components that set up ESPN’s future.
“Within a couple of years, maybe we have more of a clear plan as to ESPN becoming a fully over-the-top streaming service. I think that is Bob Iger’s main legacy from this time around — even beyond.”
In its most recent fiscal year, losses for Disney’s direct-to-consumer unit, which includes Disney+, Hulu, and ESPN+, totaled $4 billion for the year. High content costs were largely to blame as the company upped its content budget by $8 billion in 2022 to a whopping $33 billion.
Management said it expects streaming losses to shrink by about $200 million in the first fiscal quarter of 2023 before reaching profitability in fiscal 2024.
Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at [email protected]
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Source: https://finance.yahoo.com/news/disney-espn-may-be-the-most-important-issue-for-bob-iger-analyst-says-221527617.html