Walt Disney Co. is about to face “perhaps its biggest decision yet” as it charts a future for ESPN, and the path forward initially may be a rocky one, according to an analyst. Macquarie’s Tim Nollen downgraded Disney shares
DIS,
-2.57%
to neutral from outperform Friday, writing that Disney faces a tricky balance as it tries to set up ESPN for the new reality of media. The downgrade comes after The Wall Street Journal reported a day earlier that Disney was “actively preparing” for a future in which it would offer the flagship ESPN service as a stand-alone streaming service.
“Doing so is inevitable, and it’s hard to see how it will be smooth: steep losses assumed in the pay TV bundle will have to be offset by strong subscriber sign-ups at a presumed high price, and before Disney even gets there it has to negotiate terms with pay TV operators on content, and with the leagues on costs for streaming rights,” Nollen wrote. Disney already offers the ESPN+ streaming service, but that doesn’t include access to the flagship programming that airs through the traditional cable channel. Nollen expects that Disney ultimately succeeds with the transition of core ESPN to streaming, though it might require at least a year or two of pain in the interim. He has concerns about other factors that could weigh on Disney shares as well. For one, the company is making progress in stemming operating los …
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