Here's a portion of what the Times says:
According to multiple sources, the once-close relationship between Disney and Walden began to unravel when, after the first "Narnia" film cleaned up at the box office, Anschutz essentially put a gun to Disney's head and demanded that the studio renegotiate its deal with Walden. Anschutz insisted that Disney either give back a sizable chunk of the studio's lucrative distribution fee or Anschutz would distribute the "Narnia" series on his own. Believing the franchise was too good to give up, Disney reluctantly changed the terms of its Walden deal, but the renegotiation poisoned relations between the two behemoths. When the second film faltered, there was so little goodwill left over that Disney had far fewer qualms about cutting its ties with the franchise.
To be fair, Walden wasn't all that happy with the way Disney handled the film. The first movie had been released at Christmas, which seemed a logical slot for a family-oriented picture. But when Disney saw that "Prince Caspian" was an edgier, more youth-oriented film, it decided to go after teenagers as well as family filmgoers. That decision led to what, in hindsight, appears to be a huge blunder, releasing "Prince Caspian" in May, at the start of summer. Sandwiched between "Iron Man" and "Indiana Jones and the Kingdom of the Crystal Skull," "Prince Caspian" not only failed to attract many teenagers, it also lost a large piece of its family following, which was turned off by the edgier, not especially well-focused marketing materials.
I don't think "Dawn Treader" is sunk. It just may have a different engine. Word is that Fox is seriously looking at picking up the franchise, though they should be wary of dealing with Walden. If you know the story of the third book in the Narnia series, then you know it's much more suited for an action movie. "Prince Caspian" had a problem from the beginning - the story is a good read, but not so exciting to watch. In fact the big invasion of Miraz' castle doesn't even exist in the book - screenwriters added it to get more action in the movie.