Fears over the future of ESPN drag down Disney stocks

The Mouse House has missed earning targets for the first time in five years, and investors are spooked

Fears over the future of ESPN drag down Disney stocks

Nick Ansell / PA Archive

Walt Disney shares tumbled overnight after the entertainment and media group missed earning expectations for the first time in five years.

Shares fell by 6% in after-hours trading even though Disney's movie studios enjoyed a 60% bounce in profits meaning that the last six months - which included the release of Star Wars: The Force Awakens, its first title from the highly lucrative series - was the most profitable in the history of the studios.

Film performance is expected to remain strong, it has already scored hits with The Jungle Book and Captain America: Civil War in this quarter.

Investors have focused on the performance of ESPN, Disney's sports property. It is the most valuable property in its cable television network which is the main contributor to the media empire's profits. The market has been wary since the company revealed last summer that ESPN subscriber rates had slowed significantly.

Last night's report showed that subscriber numbers fell during the three-month period and that advertising revenue decreased as the stations aired less college football playoffs. Overall cable sales fell by 0.3%.

Bob Iger, the company's chief executive for the past decade is also due to resign, chief operating officer Tom Staggs had been tipped to take over but he left the company during the quarter, creating uncertainty and a possible succession crisis. He left after he was refused assurances that the top-job would be offered to him.

The company has wound up its video game firm Disney Infinity which it founded in 2013, with the loss of 300 jobs. Disney will no longer self-publish video game spin-offs from its film properties - they will be released by other developers.

"We’re very pleased with our overall results in Q2, which marks our 11th consecutive quarter of double-digit growth in adjusted earnings per share.

"Our studio’s unprecedented winning streak at the box office underscores the incredible appeal of our branded content, which we continue to leverage across the entire company to drive significant value," Mr Iger said in a statement.