As Disney (DIS) prepares to report its first quarter results after the market closes on Wednesday, an analyst said ESPN’s future may be the most important issue for CEO Bob Iger to address.

“[ESPN] probably the biggest problem Bob Iger will have to solve in his current tenure,” Macquarie analyst Tim Nollen told Yahoo Finance Live on Monday.

“Goal number one is to put the consumer directly on a more profitable and sustainable path. Goal number two, which is actually an extension of [is] always ESPN decided. What are you going to do with that?” he continued.

Media analysts have long questioned ESPN’s bleak future and whether or not Disney should consider parting ways with the popular sports network – a suggestion previously made by Third Point’s Dan Loeb.

Loeb argued that 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 advocating a range to support cost rationalization and balance sheet options, while others disagree with the move given ESPN’s cash flow generation. In the prior fiscal year, Disney’s operating profit for its linear networks segment — which includes ESPN — was $8.52 billion.

“Disney sees a future for ESPN in streaming”

“I think Disney sees a future for ESPN streaming,” Nollen said, suggesting the NBA’s next rights deal, which is set to be renewed after the 2024-25 season, could include various streaming components that shape the game. future of ESPN.

“In a few years, we may have a clearer plan for ESPN to become a totally over-the-top streaming service. I think that’s Bob Iger’s most important legacy in this era – even beyond that.

Last fiscal year, losses from 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 increased its content budget by $8 billion to $33 billion in 2022.

Management expects flow losses to decline by approximately $200 million in the first quarter of fiscal 2023 before reaching profitability in fiscal 2024.

Chief Executive Officer and Chairman of The Walt Disney Company Bob Iger and Mickey Mouse look on before ringing the New York Stock Exchange (NYSE) opening bell on November 27, 2017 in New York City. Disney is celebrating the company’s 60th anniversary as a NYSE-listed company. (Drew Angerer/Getty Images)

Alexandra is a senior entertainment and media reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and send him an e-mail at [email protected]

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