Iger Breaks Down Disney's ESPN Issues

Walt Disney Co (NYSE: DIS)'s earnings report Tuesday made one thing clear: the company's ESPN and cable networks is a double-edged sword.

As noted by a CNBC report, Disney's cable network revenue for the quarter actually rose 3 percent to $4.1 billion. At the same time, the segment's operating income fell 3 percent to $1.8 billion.

ESPN was plagued by higher programming costs, including the higher cost of NBA programming and a shift in timing of college football playoff games. Also working against ESPN's favor is the ongoing trend of cord-cutting where consumers decide to part ways with their cable subscription service.

After all, sports fans don't even need a cable service and can catch many of their favorite sports teams games online. Most recently, Amazon.com, Inc. (NASDAQ: AMZN) won the rights to broadcast NFL's Thursday Night matches in the upcoming season while Facebook Inc (NASDAQ: FB) is looking to stream baseball games.

Sports broadcasting is being disrupted, but Disney investors could find some comfort in knowing that the company is well aware of the trends. The company is working hard to position itself for the future by offering light-pack options for all of its Disney channels and properties that are user friendly and mobile first.

But in the meantime, Disney CEO Bob Iger cautioned investors its ongoing initiatives won't make up for subscriber losses from traditional cable and satellite sources.

"We think what we are going to see for our business, specifically ESPN, is we are going to have a rise in over-the-top, lighter packages that include ESPN, and that will compensate for some of [the losses from cable]," Iger said. "We will eventually be in a direct consumer business for ESPN products, and hope to launch one of our brand technology platforms before the end of year. We are actually confident in ESPN's future."

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