Why ESPN Fears Are Hurting Disney

Shares of Walt Disney Company DIS sold off in the  after-hours session on Tuesday, despite the company's strong earnings report. 

The House of Mouse reported a first quarter EPS of $1.63 and sales of $15.24 billion, both ahead of the street's estimate of $1.45 EPS and $14.74 billion respectively.

But that didn't stop investors from fleeing the issue, apparently over questions surrounding sports cable behemoth ESPN.  

Long considered one of Disney's greatest cash cows, ESPN has found itself on the precipice of what some have characterized as a TV rights bubble. 

In an effort to squash newfound competition, from the likes of Twenty-First Century Fox, Inc's FOX Fox Sports 1 and others, ESPN has splurged in recent years on expensive TV rights deals. This includes paying $15.2 billion for Monday Night Football, $5.6 billion for Major League Baseball, and a new $24 billion deal with the NBA that starts next season.  

Throw in the rapidly changing TV subscription model, and all of a sudden ESPN has found itself with growing costs and shrinking growth forecasts. 

But keeping things in perspective, Disney is still an incredibly diverse company. With properties that include Marvel Entertainment and Lucasfilm Ltd., Disney has the assets to weather a potential storm at one of its assets. 

After flirting briefly with the $96 level, Disney shares dipped all the way to $85.68, it's lowest since October 2014, before rebounding back to $90.