May 12, 2016 09:46 AM EDT

ESPN Loses Subscribers; Are Analysts Concerned for Disney?

By Mikey. B

It seems that Disney is in a bit of trouble. Even with the massive influx of revenue from Star Wars, their quarterly earnings report has shown negative growth. This is mostly due to the fact that ESPN had lost subscribers and ad revenue had fallen.

There was a gain in operating income though due to lower costs. At the end of Tuesday, stocks fell 7%.

Another major factor for this loss is the fact that Disney had decided to discontinue its self-published video game business. Included here is the formerly popular Disney Infinity franchise. In doing so, Disney absorbed a $147 million charge. Disney now plans to license its properties to other game makers. In the process 300 people lost their jobs.

Disney posted $1.36 per share and revenue of $13 billion. This was below target since the conglomerate was expected to to post $1.39 per share in revenue with $13.2 billion.

Another cause for the dip was uncertainty over succession at Disney headquarters. CEO Bob Iger has expressed his intention of not renewing his contract after it expires on June 2018. Heir apparent COO Thomas Staggs had also announced last month that he plans on resigning, The Hollywood Reporter noted.

According to another report also from The Hollywood Reporter, analysts are unfazed by this news. FBR analyst Barton Crockett said, "Disney does less to steer Street estimates than any other media conglomerate, yet its business is in some ways lumpier. Therefore, if the fundamental story is intact, it should not really matter if quarterly earnings miss by cents."

He concluded by saying, "We continue to see durability in TV, rock-star momentum in movies and an encouraging Shanghai park launch next month as factor to support the stock."

Analyst for Drexel Hamilton Tony Wible also kept his "buy" rating but with a slightly lower price target of $117, $1 lower. He said, "Although the results will reignite fears around Disney's exposure to the challenges facing the TV ecosystem, we still believe it is well-positioned through its ownership of major brands, a strong studio, broadcaast hedges, and its ability to launch a premium digital network that would allow it to directly monetize its non-sports content."

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