The Labaton Sucharow law firm, a firm that specializes in class action investment fraud cases, is looking into a potential law suit involving ESPN parent company Disney, according to Deadspin.
No lawsuit has been filed, but the firm is investigating when Disney knew about subscriber losses, and whether they actively concealed this information from investors, before the loss of 3 million subscribers was reported in a 10-K filing with the SEC on November 25, 2015. The Disney stock price was at $118.67 on that day, and fell by almost $30 per share over the three months that followed.
According to Deadspin, Labaton Sucharow has been reaching out to former ESPN employees to see what they know about the company’s knowledge of subscriber losses prior to that November release. They are looking for notes, presentations, and emails that could show that Disney/ESPN knew how serious the subscriber losses were earlier in the year, but chose not to reveal it to investors.
The Big Lead has reported on multiple occasions on ESPN concerns over the cord-cutting phenomenon, before last November. On July 1, 2015, in a story about Keith Olbermann being not likely to return to ESPN (and he did not), ESPN cost-cutting measures were discussed. Within that, we reported that ESPN President John Skipper was told to slash the 2016 budget by $100 million, and the 2017 budget by an estimated $250 million. On the subject of cord-cutting and losing subscribers, Jason McIntyre wrote:
One increasing fear among suits at ESPN: Cord Cutters. You may or may not know anybody who has cut the cord on TV, but millennials are eschewing expensive cable TV bills and streaming everything online.
…
Media Life Magazine recently wrote about Cord Cutting, and, citing Digitalsmiths, claimed more and more people are ditching their TVs.
It was unclear how many people Digitalsmiths polled to get their numbers, but privately, this phenomenon has ESPN freaked out. Live sports TV rights are only escalating, but on the other side, ESPN is losing cable subscriptions. It’s only a drip now, but in a decade, it could be significant.
How did that “freak out,” as it was phrased, manifest itself within the company? That will be of interest in this law firm’s investigation.
Then, on August 5, 2015, the Disney stock took a one-day plummet after concerns over the subscribers came up. As Deadspin notes, Disney CEO Bob Iger called them “modest” losses in his statements to investors. That can be a vague term and in the eye of the beholder. Are 3 million subscribers out of 95 million total a modest loss?
That day, The Big Lead published “Cord Cutting, Declines in Live TV Viewership “Taking its Toll” on ESPN.”
The table was set for this bad news in May, and internally, ESPN has been in a panic for quite some time. The cord cutting fears have gone from “potential problem” to “very real problem” faster than anyone imagined.
Again, the law firm will be looking for clearly documented examples showing that the Disney and ESPN brass viewed the subscriber losses as a very real problem, something that would contradict a public dismissal of modest losses.
Keep in mind that last September, as we reported, ESPN was going to layoff 200 to 300 employees (mostly older veteran employees). That’s a large group of potentially disgruntled employees for the Labaton Sucharow law firm to explore. Right now, it appears to be a fishing expedition to see if anything is there; we’ll see if they can find the smoking gun that raises the specter of an investor lawsuit, over how ESPN and Disney handled concerns over subscriber losses privately versus the public statements to investors.
from The Big Lead http://ift.tt/2a22VWI
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