Disney (NYSE:DIS) shares are on track for their largest single-day drop in more than a year on Wednesday, hours after the company said struggles at ESPN contributed to a major decline in operating income at its cable networks.
Operating income at Disney’s cable networks dropped to $1.5 billion in the third quarter, down 23% from the same period one year earlier. The company attributed the downturn to higher programming costs associated with ESPN’s new NBA contract and lower advertising revenue amid decreased viewership.
Disney’s stock fell more than 4% in early trading. If shares close below that threshold when trading ends on Wednesday, it will mark Disney’s first single-day drop of 4% since May 2016, according to Dow Jones.
The decline is unfolding despite Disney’s announcement of a plan to establish its own over-the-top streaming services to combat subscriber losses. ESPN laid off roughly 100 employees earlier this year amid the loss of millions of paid subscribers, as more and more consumers “cut the cord” in favor of streaming options like Netflix.
An ESPN-branded direct-to-consumer service is set to launch in 2018, while a Disney and Pixar OTT product will debut in 2019. Company officials have yet to determine how much the ESPN and Disney streaming services will cost.
Disney also said it will pay $1.58 billion to acquire a majority stake in BAMTech, Major League Baseball’s digital technology company.