As the streaming wars heat up, Macquarie US equity research senior media tech analyst Tim Nollen joins Market Domination to discuss why he remains Neutral on Disney (DIS).

Nollen explains that there are several areas that will "hit Disney's PNL (profit and loss) balance sheet and cash flows over the next couple of years." He elaborates, "This includes some incremental sports rights from the NBA, rights renewal, college football expansion, some of the India business coming off of the PNL, probably next quarter. But primarily, it's about the launch of the ESPN direct-to-consumer service (DTC)."

Disney plans to launch an ESPN DTC service in August 2025, where users can get ESPN within Disney+. Nollen calls this "the largest event in the streaming landscape" since the launch of Disney+. He argues, "If there's one thing that's keeping consumers on pay TV, it's sports. A lot of sports is now available on streaming services, and ESPN is the largest streaming service. So ESPN going completely over-the-top (OTT) direct-to-consumer, I think is a very, very meaningful event for the pay TV landscape."

He believes that offering ESPN direct-to-consumer will likely cause cord-cutting to accelerate: "By our calculations, cord-cutting means about 8.5% of consumers are dropping pay TV every year, and that includes some of the virtual addbacks like Hulu Live or YouTube TV. 8.5% is probably going to go to maybe like 15% or so once ESPN direct-to-consumer hits the market over the subsequent quarters."

Nollen adds, "So the big question is, can Disney offset that decline with new ESPN direct-to-consumer additions?" Thus, he remains Neutral on Disney until there are clearer projections about the success of ESPN direct-to-consumer.

Watch the video above to find out how companies like Disney grapple with streaming subscribers versus pay TV consumers.

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This post was written by Melanie Riehl