Disney Shareholders, Here's Why You Don't Need To Fret About ESPN

Although second-quarter numbers reported by Walt Disney Co DIS on Tuesday were not extremely bad, the shares took a big hit when they opened for trade on Wednesday on concerns that the company's most profitable arm ESPN maybe losing some of its sheen.

Disney CEO revealed in the conference call what some analysts were already expecting that there have been some subscriber losses at ESPN.

Chris Marangi, Gabelli Funds, was on CNBC recently to discuss if ESPN will continue to remain Disney's most valuable gem.

Undroppable, But Cordcutting A Threat

"ESPN is viewed as undroppable by the distributors and that's probably true," Marangi began. "The problem is people can still leave the traditional ecosystem which is happening and maybe happening at an accelerating rate and the sports network including ESPN are very levered to that because their affiliate fee is so high."

Can Make Up Through Additional Pricing

Marangi was asked if it would be fair to say that ESPN can make up the loss in revenue due to cordcutting through additional pricing. He replied, "Yeah that's fair to say and, I think, you have seen that with some of the other media companies today where they can make it up. They can lose some volume, they can make it up on the pricing that they charge their distributors."

The Bear Case

On the long-term contracts ESPN has signed with sporting leagues, Marangi highlighted, "To be fair, the bear case on that is Disney and Fox and other have committed to these very long-term contracts with the sports leagues and [to] those become an anchor around their neck at some point to the extent that the universe really changes in a way that we don't expect."