declining income at espn continued to overshadow quarterly results at walt disney co. , with the sports powerhouse posting lower advertising and subscription revenue that dragged company earnings below wall street expectations. operating income for the company<u+2019>s cable networks segment, which includes espn, fell 13% to $1.45 billion. disney said a 13% fall in espn ad revenue was driven in part by a decrease in fantasy-sports advertising and more money flowing to advertising during the olympic games, carried by rival nbcuniversal. fees from cable and satellite-television services, known as affiliate revenue, declined due in part to a loss in subscribers, the company said, and contractual rate increases couldn<u+2019>t make up the shortfall. the company didn<u+2019>t offer details of the subscriber decline, which has been the subject of a heated dispute between disney and ratings company nielsen . disney shares initially fell nearly 4% in after-hours trading, but rebounded as chief executive robert iger told analysts during a conference call that he was <u+201c>bullish<u+201d> about espn<u+2019>s future. new espn deals with hulu and at&t /directv could help the company attract elusive millennial customers who are opting out of traditional cable packages. <u+201c>we believe these new services will ultimately move more millennials into the pay-tv universe,<u+201d> mr. iger said. all eyes have been on espn since august 2015, when mr. iger acknowledged it was seeing <u+201c>some subscriber losses,<u+201d> three words that have prompted investor scrutiny across the broader media industry for any signs of sagging growth. espn had 92 million subscribers at the end of disney<u+2019>s 2015 fiscal year, ended oct. 3, 2015, about 7 million fewer than in 2013, according to the company. nielsen last week said espn lost 621,000 subscribers in the span of a month, a number espn has disputed. mr. iger called for nielsen to scrutinize its methodology and start measuring subscribers to online cable-tv players like sling tv. a year after mr. iger<u+2019>s remarks, disney gave investors some r elief with a $1 billion deal to acquire a 33% stake in bamtech, a streaming-video unit created by major league baseball that will help disney launch a digital-sports service separate from its cable bundles. without getting specific, mr. iger said bamtech and other services could help disney ramp up direct-to-consumer offerings. <u+201c>we<u+2019>re obviously interested in the opportunity to have a more direct relationship with the consumer,<u+201d> he said. for the quarter ended oct. 1, disney posted revenue of $13.14 billion, a 3% decrease from last year<u+2019>s fourth quarter and below wall street expectations of $13.52 billion. year-to-year comparisons were complicated by an extra week of business in disney<u+2019>s fourth quarter last year. disney<u+2019>s full-year revenue went up 6% to $55.6 billion. the focus on what is happening to espn presently overshadowed two major events from the past year: the return of <u+201c>star wars<u+201d> and the opening of the shanghai disney resort, both major initiatives trying to secure long-term returns at the company. shanghai disney resort had 4 million visitors in its first four months of operation, which include the peak summer season, said mr. iger. he declined to give full-year projections, but the park<u+2019>s majority owner, the government<u+2019>s shanghai shendi group co., said before its june opening it expected 10 million people to visit. analysts put the number at as many as 15 million. about 50% of shanghai disney guests are coming from outside shanghai, a higher proportion than disney expected, mr. iger said. earlier this week, disney said it had broken ground on an expansion at shanghai disney called toy story land, based on the pixar animation franchise. the attraction, which the company said will be <u+201c>authentically disney and distinctly chinese,<u+201d> will open in 2018. overall operating income in disney<u+2019>s parks and resorts division fell 5%, in part due to decreased attendance at disneyland paris because of terrorism fears and political instability in the region, said christine mccarthy, disney<u+2019>s chief financial officer. disney<u+2019>s movie division has posted record-setting returns this year, surpassing $6 billion at the global box office thanks to hits that include <u+201c>star wars: the force awakens,<u+201d> <u+201c>finding dory<u+201d> and <u+201c>zootopia.<u+201d> fourth-quarter operating income for the company<u+2019>s studio entertainment segment fell 28%, though, because of lackluster results for releases <u+201c>the bfg<u+201d> and <u+201c>pete<u+2019>s dragon.<u+201d> disney is among the first major companies to report earnings since tuesday<u+2019>s presidential election. asked about any affect donald trump<u+2019>s victory may have on business, mr. iger said his company has been lobbying legislators to lower the corporate tax rate. <u+201c>we are no longer competitive with the rest of the world,<u+201d> he said. the election of mr. trump means a change in that tax policy could come <u+201c>sooner rather than later.<u+201d> a post-election change is already coming to the company<u+2019>s theme parks. a bust of president-elect trump is being prepared for walt disney world<u+2019>s hall of presidents, said mr. iger. <u+2014>shalini ramachandran and tess stynes contributed to this article. write to erich schwartzel at erich.schwartzel@wsj.com
disney results disappoint as cable revenue declines - wsj
erich schwartzel