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2,200 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: I spoke with Rita Ferro, who runs global ad sales for the company yesterday, just to get some up-to-the-minute flavor or color on what's going on in the market. One of the things that she said, by the way, is that linear is very strong right now. One of the reasons for that, by the way, is live and also because it provides – linear provides a differentiated audience than streaming. And the way we integrate those businesses, not just from a programming perspective or technology perspective, but from an advertising perspective gives us some interesting leverage in the business and enables us to offer advertisers a much broader, even deeper offering in terms of avails. So it's basically the combination of both is working for us. We're also programming them in an integrated way. So if you look at the fact that ESPN uses ABC to program the NFL on Monday nights in a simulcast way, significant amount of college football. You'll note when the season opens, NBA will continue to have a great presence on ABC. So you're not only offering the advertiser a differentiated audience and live, but you're also offering the consumer that, meaning the ability to watch sports on multiple platforms. Bottom line, it's working. Hugh? You're on mute, Hugh.
Hugh Johnston: Sorry. So yes, Jessica, I'll add to that as well. As you know, in 2024, advertising were 3%. We expect to be at or stronger than that as we enter 2025. As Bob mentioned, in particular, the ad tech stack that we've put together or our ability to deliver the right ads more effectively to consumers, particularly in the streaming business, is a competitive advantage that we've built. And it's owned and is proprietary to Disney. So we certainly feel optimistic about our ability to gain share in advertising based on that. |
2,201 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: By the way, one thing I don't think is appreciated is that we're also working well selling inventory with Google and YouTube, basically offering advertisers to buy those platforms a differentiated audience through a trade desk mechanism. And our ad tech obviously enables us to do that.
Carlos Gomez: Thanks, Jessica. Operator, next question, please.
Operator: Yes, sir. And our next question today comes from Robert Fishman with MoffettNathanson. Please go ahead.
Robert Fishman: Great. Thank you. Bob, since hiring Adam Smith from YouTube, anything you can share about his priorities and how that can impact the future of Disney+ or the other streaming products? And then, Hugh, can you maybe just share your confidence in achieving the strong double-digit margins beyond 10% in DTC in fiscal 2026? And because that guidance doesn't include Hulu Live, maybe just help us think about the future of that product, please? Thank you. |
2,202 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: Thanks for the question. Adam is already hard at work and making progress in improving the technology across all of our streaming businesses. And he's got a number of priorities. One, obviously, is flagship. Another is, as we noted in our comments earlier, that we're launching an ESPN tile on Disney+ on December 4th. So he's working on that. In addition to that, personalization, customization, designed initially to improve engagement. Just basically by adding a stronger recommendation engine capabilities on the home page, we're already seeing increased engagement in a very short period of time. He's going after password sharing. We launched in LatAm just this week, and we now are – we have password sharing or anti-password sharing initiatives, I think, at over approximately 130 countries. So that's also on his list. We're unifying tech stacks, including media serving and our entire ad stack across Disney+ and Hulu and basically a lot more. Obviously, what we're doing here is designed not only to create a better customer experience, but to increase engagement and reduce churn. |
2,203 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston: Yes. And Robert, in terms of your answer on confidence around achieving the double-digit margins, it's probably best to sort of go back to the building blocks as to how we get there. Number one, we're looking to continue to grow subscribers as we have. And the thing I'd remind you of in that regard, given the point that we're in many ways that the DTC business shares a lot of the characteristics of a software business where an incremental subscriber has very, very high margins attached to them because it's relatively low incremental cost. So continuing to grow subscribers, number one. Number two, we certainly look to continue to increase pricing in line with the value that we're providing to consumers. And a lot of the growth that we're seeing right now is because of the exceptional content that's coming out of both the movie and the TV studios that's obviously our proprietary content. So that will certainly enable us to increase pricing over time. Number three, as Bob mentioned, a lot of Adam's priorities around product updates and features that will increase engagement and reduce churn, including improving the recommendation engine, is certainly going to be a benefit to our growth, increasing our ad monetization, as I was just discussing with the ad tech that we've built. And then, of course, international is – continues to be a significant opportunity. So add all of that together, we wouldn't give any of the guidance that we did if we didn't have confidence in delivering.
Carlos Gomez: Thanks, Robert. Operator, next question, please.
Operator: Yes, sir. Our next question comes from Steven Cahall with Wells Fargo. Please go ahead. |
2,204 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Operator: Yes, sir. Our next question comes from Steven Cahall with Wells Fargo. Please go ahead.
Steven Cahall: Thank you. So a multi-year guide is really impressive, and it's helpful since there are so many moving pieces of the segment. Over the last five years or so, I think Disney investor experience with guidance has at times been mixed under prior management. So just wondering how we should think about the ideological approach here to guidance as it relates to some of the conservatism that you've baked in. And in broad terms, is the acceleration in EPS growth from fiscal 2025 to fiscal 2026, is that basically just comping the flagship launches and the hurricane and that sort of thing? And then just on flagship, just how do we think about maybe what the year one launch costs are, what the ARPU of that product could be? And when do you think you might be able to get to breakeven on that product? Thank you. |
2,205 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston: Sure. So why don't I handle the guide? In terms of the way that we're thinking about it, it's really driven by a couple of things. Number one is obviously the significant improvement in DTC, where we've invested a considerable amount of money in building that product. And number two, it's in light of the significant investments that we've made and are going to continue to make in parks and cruise ships and in – even in consumer products. So as we thought about those investments, we've obviously talked about the results that we've seen. And we feel very, very positively about those results. But we thought it was also very fair to give to investors not just operational results, but an expectation as to what we expect these investments to return, hence, the guidance rather than just focus it on the narrow pieces, although we've given you, I think, good segment detail, we thought it was also important to give you a picture of the overall company. So philosophically, because we've invested, we do feel like it's appropriate for us to give you a multiyear look because these investments are obviously multiyear in nature. In terms of our confidence in delivering it, obviously, we've got confidence in it. Otherwise, we wouldn't do it. We know it's important to deliver the guidance that we give, and that's why we've given it. So as it relates to flagship, I think it's a bit early to be talking about ARPU on flagship. We do think that product will be additive to us in 2026. And yes, there'll be an investment, then that's part of the 2025 guide. But that investment, we're looking to pay back relatively quickly in 2026. |
2,206 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: To add to that, we have considerable visibility on our content pipeline as well. And one of the things that we've seen lately that is heartening is that when we have success in a feature film or even when there is expected success, the consumption of basically prior films – movies that have been made prior to the one that's coming out, goes up, spikes significantly on the platform. So if you were to look at the numbers for Inside Out 1 as Inside Out 2's trailer hit or what's happening with the first Moana film or what's happening with a number of Marvel properties since Deadpool & Wolverine came out. And I could go on and on. It's quite interesting for us in terms of raising consumption. So as we look ahead, I noticed some of the films in 2025, which is going to end with Zootopia and Avatar. And then you look at 2026 and you consider that we've got a Star Wars film, Mandalorian and Avengers film, a live-action version of Moana and on and on. We feel that one, we're confident in our ability to execute those films in a way that will serve us well, both qualitatively and commercially; and two, we have a strong sense that they're going to enable us to strengthen our streaming performance significantly as well as we're currently seeing with the films that we're putting out.
Carlos Gomez: Thanks, Steve. Operator, next question, please.
Operator: Thank you. And our next question today comes from John Hodulik with UBS. Please go ahead. |
2,207 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Operator: Thank you. And our next question today comes from John Hodulik with UBS. Please go ahead.
John Hodulik: Hey. Thanks. Two, if I could. First of all, Bob, it looks like Comcast is going to move ahead with a spinoff of the cable networks. And I know you guys have looked at something similar in the past, maybe on the linear entertainment side. Is that something that you guys could revisit either as part of sort of the sort of more industry move? And then maybe more broadly, does the change in the administration, does that change your view on sort of opportunities with regard to M&A? And then secondly, maybe for Hugh, and I know you guys get this question every quarter, but just give us an update on sort of your view on the impact that the launch of the Epic Universe is going to have. It looks like that's going to hit early summer sort of just as you're expecting an acceleration in the parks business, just how you expect that to impact the sort of midyear and that acceleration in Experiences. Thanks. |
2,208 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: John, Hugh and I will both take the question as it relates to divestitures or consolidation. I'll start on the consolidation front. In 2017 – late 2017, when we announced initially that we were acquiring assets from 20th Century Fox, we specifically mentioned that we were doing so through the lens of streaming. We saw a world where streaming was going to proliferate, and we knew we needed not only more content with – but more distribution. And with that came just a tremendous amount of content. We've talked about it when we talk – when you talk about 60 Emmy's, so much of that came from that acquisition or when we talk about Avatar as for instance, that came from that acquisition. I could go on and on. In addition to that, people forget, that came with control of Hulu and ultimately ownership of Hulu. That distribution packaged well, integrated well with Disney+ has enabled us to achieve the numbers we have achieved, which is approximately 174 million global subscribers and an ability to really see into the future of streaming with – through a very optimistic lens. So in a way, we've already consolidated. And while I think we'll always look opportunistically at opportunities as we've proven in the past, we certainly don't shy away from those. We, in many respects, have already consolidated. We don't really need more assets right now, either from a distribution or from a content perspective to thrive in basically a disruptive media world. |
2,209 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston: Got it. And John, I'll answer the divestiture piece as well as your question on Epic. Regarding divestitures, one of the first things I did when I came in as CFO of PepsiCo was to take a look at whether there was an opportunity here to create value through divestitures. And candidly, I just didn't see one, and I spent a considerable amount of time studying it first from a financial perspective. And it's always easy to sort of play with spreadsheets and sort of make the math look like there's value creation. But at the end of the day, there's two things to consider. Number one is, what are the prices you would get? And then number two, what's the frictional cost operationally of separating those assets? And as I went through the math on both, it was pretty clear to me that there wasn't a value-creating opportunity for Disney. I can't speak to other companies and what opportunities they have with the assets they have. But I absolutely did not see that for Disney. Regarding Epic, we did model that into our expectations for the experiences outlook. As I mentioned earlier, the early bookings that we have next summer are actually positive. So that's certainly a positive indicator. We also looked at the history of other attractions opening up and other parks opening up in Florida. And it's generally been beneficial to us. So that is all very much captured in the guide that we provided.
Carlos Gomez: Thanks, John. Operator, next question, please.
Operator: Thank you. And our next question comes from Michael Morris of Guggenheim. Please go ahead. |
2,210 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Operator: Thank you. And our next question comes from Michael Morris of Guggenheim. Please go ahead.
Michael Morris: Thank you. Good morning, guys. A couple of questions. First, with respect to content production, you've been focused on quality over quantity have you been – as you've been strengthening the core of the business. How are you thinking about growth in spend into that pipeline going forward, both in 2025 and maybe just sort of the pace of content growth beyond that? And then secondly, appreciate the listing of the new projects that you have on the Experiences side. You have a number of footprint expansions, especially in the U.S. So when you think about the longer-term return on these investments, how much of that is driven by really expanding capacity and accommodating more guests maybe versus driving the pricing power at the parks because you have these great new attractions? Thank you. |
2,211 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: I'll take the content production side. We feel we have a great hand. But as we look to grow our streaming business, we believe there will be opportunities and even a need for us to do some selective investing outside the United States, notably in EMEA and in APAC. We've slowed down our investment in those markets. And in fact, we're being careful about our overall investment until we get the technology right, until we improve the technology because clearly, if we can use technology to reduce churn, which we're already doing, then in reality, what we're doing is we're increasing return our investment in content. And we don't – so we don't want to spend on the content side until we're confident that we can get the necessary returns on those investments. But we know as we look to grow our streaming business that prioritizing markets outside the United States with specific content in those markets will be part of that strategy. I don't think you should consider those investments to be enormous in nature by any stretch of the imagination because we know that we're making content that has global application. If you look at just the movies that I mentioned as for instance, that work not in all markets, but in most markets. But we don't have to spend as much as some of our competitors. And as there's movies – it's not just the franchise value. As they become more successful, obviously, they drive more value as well. |
2,212 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston: Yes, Mike. And just to add to Bob's comments on that, we have modeled in some incremental growth in content spend, not enough to be significantly disruptive to the overall cash flow or algorithm for the company, but we have absolutely modeled that in because we do view international as a terrific opportunity. Regarding your question on Experiences and particularly the parks pricing versus attendance, what we projected in is a balance of both. So I don't want to get into specific numbers on it. But we're not assuming it's going to be just price or it's just going to be attendance. There'll be a balance of both. And frankly, we'll have the ability to flex that as we learn our way into it. But I think we've got it modeled reasonably conservatively.
Carlos Gomez: Thanks, Mike. Next question, please.
Operator: Absolutely. And our next question today comes from David Karnovsky with JPMorgan. Please go ahead.
David Karnovsky: Hi. Thank you for the question and forward commentary. One area that understandably received less focus on the outlook was linear network. Interested to understand better how you built the multiyear forecast, how you thought about managing that business over the next several years. And then just relatedly, it's the first call post the DirecTV agreement. Can you speak to any important impact to Disney, how we should think of that deal structure as a template going forward versus some other deals you've done in the recent past like Charter? Thanks. |
2,213 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston: I'll handle that one, David. Regarding linear, we modeled that it would continue to decline. The beauty of the position we find ourselves in right now with roughly 175 million streaming consumers is we have a bit of a natural hedge in the way that our portfolio operates. So to the degree that people leave linear and choose to go to streaming route, generally speaking, they're going to be coming our way. And we have obviously terrific ways to monetize those. So as that evolves based on consumer choice, I think we're well positioned if they decide to stay in linear for longer. I think we're well positioned if they decide to move over to the streaming side. And frankly, with what we've put on the service and what – the plans that we have to put more things on the service, I think in many ways, we're sort of a must-have platform inside of most households. Regarding DirecTV, like all of these deals, they're basically uniquely crafted to the situation of that particular partner. So I wouldn't try to read through any of that into any other deals. I think it's a good deal for us. I think it's a good deal for them, and we both feel good about where we've gone. But I think these things are generally going to be somewhat bespoke.
Carlos Gomez: Thanks, David. Operator, next question, please.
Operator: Yes, sir. And our next question today comes from Laurent Yoon with Bernstein. Please go ahead. |
2,214 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Operator: Yes, sir. And our next question today comes from Laurent Yoon with Bernstein. Please go ahead.
Laurent Yoon: Thank you for taking the question. It's great to see continuing momentum in streaming, and the margin expansion story is certainly very promising. Building on your comments around the building blocks of that growth, could you provide some color on how much of that growth is subscriber growth versus pricing in the foreseeable future and of course, 2025 – fiscal year 2025, in particular. And on a related question, local language content seems paramount to – very important to increase engagement in local markets. And we see our competitors expanding local content perhaps more than what we see on Disney platforms. So do you have plans to be more aggressive in international expansion with more locally tailored content? Thank you.
Hugh Johnston: Sure. Happy to address those. Regarding streaming, we expect our growth to come from a balance of pricing as well as growth. It may tilt slightly towards pricing. And again, we're going to read the market, and we can react to it as it plays out. But our expectation right now is it will be both subs and pricing, a little bit more tilted towards pricing. Regarding local content, I'm not sure I have much more to add to what Bob had already mentioned, which is we do see it as valuable. We actually do a reasonable amount of that already, particularly in APAC with some of the Korean dramas that we do, and we also do some in Latin America. But as Bob mentioned, we don't want to invest too heavily there until we feel like we're comfortable with the product such that we'll have the churn operating at right levels. So that's my expectation. |
2,215 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: I'll add to that. We had two billion-dollar movies so far this year, actually the only two in the industry. The box office that those movies garnered came from all over the world. So those movies resonate in those markets. And if you look at some of our competitors who don't have movies of basically that quality or that level of success, they have to spend more in local content because they don't have that. The other thing I would just want to say about pricing is it's not just about raising pricing, it's about moving consumers to the advertiser-supported side of the streaming platform. So right now, in the United States, about 60% of all new subs are going to – are buying our streaming services, advertiser support or AVOD. I think right now, I think it's 37% of total subs in the U.S. are AVOD subs and – 37% in the U.S. and 30% globally. So the pricing that we recently put into place, which has increased pricing, was actually designed to move more people in the AVOD direction because we know the ARPU and interest in it from advertisers and streaming has grown.
Carlos Gomez: Thanks, Laurent. Operator, next question, please.
Operator: Thank you. And our next question today comes from Tim Nollen with Macquarie. Please go ahead.
Tim Nollen: Hi. Thanks, very much. Could you please address the topic of divestitures in India? I think you mentioned in the guidance a few lines that incorporate those. I just wonder if there's anything more to add to adjustments we should make for the sale of the assets in India? And then relatedly, what are the – what is the business going to look like for you in India? I think you're going to retain a stake with Reliance. Just talk a little bit about your presence in India post the divestiture or the partial sale, please.
Hugh Johnston: Yes, happy to address that. We're very, very excited about the deal with Reliance. Obviously, they're a terrific company and have huge presence in India. Going forward, we will have a percentage ownership... |
2,216 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: I was supposed to disclose those AVOD numbers...
Hugh Johnston: We'll have a percentage ownership in the high 30s. And obviously, the Reliance people with their share of ownership will be managing the business. In terms of the specific implications on Disney's financials, we did anticipate closing. We've got it included in the guidance. To the degree that you have more detailed questions around that, I'm sure the Investor Relations team can help you model that out.
Carlos Gomez: Thanks, Tim. Operator, we have time for one last question.
Operator: Thank you. And today's final question will come from Bryan Kraft with Deutsche Bank. Please go ahead.
Bryan Kraft: Thank you. Good morning. I wanted to ask just one on Parks and one on Disney+. So on Parks, is the softness in domestic behind you at this point? It seems like performance there was better than you expected when you reported back in August. And on the international side, it seems like there was some new softness that showed up in 4Q in the international parks. So in light of that, I just wanted to ask how we should think about international growth going forward? And then my question on Disney+ really has to do with the sub growth in the quarter, which was strong in international core subs. Was there anything chunky in the quarter like a wholesale relationship coming online? Or is this seasonality? I know there was a similar jump in 4Q 2023, or was it some other factor? Thank you. |
2,217 | DIS | 4 | 2,024 | 2024-11-14 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: Sure. Happy to take those, Bryan. You're right. In domestic, we certainly feel like the consumer is strengthening. As I mentioned earlier, we obviously saw growth in domestic parks and certainly feel very positively about that. And that's our expectation going forward, is a gradual strengthening in the consumer. Regarding international, two factors. Number one, the Olympics in Paris, that whenever there is an Olympics in the city that we have a park, we typically see an attendance hit, and that's exactly what we saw. We saw that coming, which is why we indicated that to you back on the Q3 call in terms of our expectation. In addition to that, we saw some consumer softness in Shanghai. Candidly, we expect that to be temporary, and we expect that to bounce back as well. But it was nothing that should be concerning for the long-term regarding the parks. Regarding international subs, no, nothing chunky. This was good solid additions to the subscriber base in international. So we came off of Q3 and obviously had considerable success in adding subs in Q4.
Carlos Gomez: Thanks, Bryan, and thanks, everyone, for your questions. We want to thank you again for joining us, and wish everyone a good rest of the day.
Operator: Thank you. This concludes today's conference call, and we thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day. |
2,218 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: Good day and welcome to The Walt Disney Company Third Quarter 2024 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After some brief introductory remarks, there will be an opportunity to ask questions. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Alexia Quadrani, Vice President, Investor Relations. Please go ahead.
Alexia Quadrani: Good morning. It's my pleasure to welcome everybody to The Walt Disney Third Quarter 2024 Earnings Call. Our press release, Form 10-Q and management's prepared remarks were issued earlier this morning and are available on our website at www.disney.com/investors. Today's call is being webcast and a replay and transcript as well as the third quarter earnings presentation will all be made available on our website after the call. As we previously announced, today's call will follow a new format consisting only of a question-and-answer session. Joining me this morning are Bob Iger, Disney's Chief Executive Officer; and Hugh Johnston, Senior Executive Vice President and Chief Financial Officer. As we start the Q&A session, we ask that you please try to limit yourself to one question in order to help us get to as many analysts as possible today. And with that, operator, we're ready for the first question.
Operator: Yes, ma'am. [Operator Instructions] Today's first question comes from Jessica Reif Ehrlich with Bank of America. Please go ahead. |
2,219 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Jessica Reif Ehrlich: Thank you. I'm going to try to squeeze in two, one on theme parks and one on NBA. So first on theme parks, there's really a lot of moving pieces here. Can you provide color on global park demand and where you expect this protracted weakness? Maybe include the benefit from cruise ships, since you have three ships coming on over the next, I guess, 18 months or so. And with the stated fiscal Q4 mid-single-digit decline and the expectation that this will last for several quarters, is that the right level to think about OI as we think about fiscal '25? And on the NBA, with the rights now complete, you'll likely have several hundred million dollar step-up when the new contract begins in fiscal '26. Are there incremental monetization drivers, including maybe WNBA growth that can make the new contract profitable in the early years? Thank you. |
2,220 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston: Great. Thanks, Jessica. This is Hugh. Good morning. That was a six-part first question. So I'll try to answer it as best I can. First, just to sort of peel apart Q3 again. I want to emphasize we actually had 2% revenue growth in Q3. The reason, obviously, is the IP is so strong in our parks. It really does attract a strong audience and people are reluctant to cancel vacations. So while we saw a slight moderation in demand, I certainly wouldn't call it a significant change. That said 40% of the Experiences business is actually not domestic parks. It's either international parks or consumer products and that's from an operating income perspective. 60% is domestic parks, including cruise ships. Within that, we saw attendance flat in the quarter and we saw per caps up a little bit. We expect to see a flattish revenue number in Q4 coming out of the parks. And as we mentioned in, earlier in the letter, really just a few quarters. So I don't think I'd refer to it as protracted, but just a couple of quarters of likely similar results. Now, keep in mind, we do have some expenses attached to our ships coming in and that will affect us a bit in '24 and a bit in '25. But overall I would just call this as a bit of a slowdown that's being more than offset by the entertainment business both what we've seen so far and our expectations for Moana 2 as well as Mufasa. |
2,221 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: Regarding the NBA deal, Jessica, first of all, let me just remind you and everyone that the deal doesn't kick in next year, it's a year later. We have one more year on the current deal. And as we looked at it, first of all, one goal was to maintain what we'll call the A package, which means we've got the finals for 11 more years or now we have the finals for 12 years and they drive significant value for us. Also, overall, the deal reflects the value of live programming. We know that that's been an advertiser's delight and also an audience's delight. It also reflects the growing value of basketball and the growing value of women's sports. There's a large WNBA component to this. Also as part of this deal and has been the strategy of ESPN for a while to lock in sports rights for a long period of time. It secures our ability to bring ESPN in the digital direction, particularly as we look to launch flagship sometime at the end of 2025. So we believe that by the time this kicks in and a year from now that a lot of the pieces will be in place in terms of driving more advertising revenue, more distribution revenue, moving to digital. And another thing that we've done here is we've secured international rights, particularly to the finals, not in every market around the world, but in most markets. And that will drive some added revenue as well. Not going to be specific about the profitability in the early years, but there's tremendous value in this deal.
Alexia Quadrani: Thank you. Next question.
Operator: Thank you. Our next question today comes from Ben Swinburne at Morgan Stanley. Please go ahead. |
2,222 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: Thank you. Our next question today comes from Ben Swinburne at Morgan Stanley. Please go ahead.
Benjamin Swinburne: Thank you. Good morning. Maybe for Bob. I wanted to ask you about sort of the outlook for Disney+ both in the context of where the product's going, but also how this becomes a significant earnings contributor to the company as you look ahead. We look at the product, it's really broadening. You've got obviously brought in Hulu. Now you're adding news. A lot of sports, ESPN coming in. You've added the international NBA rights to the product overseas. What's the vision here? And in your mind, does it support both continued subscriber growth and pricing power? I think there's probably some concern out there that the recent price increases might face some consumer pushback. So I'd love to get your thoughts on that big topic. And then just wanted to clarify, Hugh, when you say flattish revenue, Q4, are you talking about at the Experiences segment level or is that just the domestic parks comment? Just wanted to clarify. Thank you. |
2,223 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: Let me start by saying that what we've been seeing with streaming is significant success, driven largely by the success of our creativity, whether it's in the television side. The company had 183 Emmy Nominations, for instance, led by shows like Shogun and The Bear and Abbott Elementary and Only Murders in the Building. And I can go on and on. And obviously on top of the television success creatively, we've had huge success in the motion picture front recently. And when you look at what the current motion picture lineup drives in terms of value on streaming, it's profound. So Inside Out, as it's in our comments today, the first film has had tremendous consumption since the first trailer for Inside Out 2 launched in November. The same thing is true for the early Deadpool movies, for the early Planet of the Apes movies, I could go on and on. So when we look across our portfolio of IP, and this includes Disney branded, Fox branded, obviously everything that's on Hulu, programming from FX, programming from ABC, National Geographic, what we're basically seeing is we're seeing growth in consumption and the popularity of our offerings, which gives us the pricing leverage that we believe we have. So every time we've taken a price increase, we've had only modest churn from that. Nothing that we would consider significant. We believe that as we add these new features like the channels that we're going to be adding later this year that and the success of our movie slate, and I'll get into that a little bit more, that the pricing leverage that we have is actually increased. We're not concerned. The goal is to grow engagement on the platform. And what I mean by that is obviously offering a wider variety of programming, which is why we're adding news, why we're adding the ESPN tile to it, while we're bundling aggressively to give consumers the ability to buy across all of our basically creative engines. And we feel very bullish about the future of this business. We're not saying much more about it, except you can |
2,224 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | engines. And we feel very bullish about the future of this business. We're not saying much more about it, except you can expect that it's going to grow nicely in fiscal 2025. The other thing I want to add is that we've been talking a lot about adding the technology features that we need to basically make it a higher return, a higher margin business and a more successful business. And we're doing that right now. We started our password sharing initiative in June. That kicks in, in earnest in September. By the way, we've had no backlash at all to the notifications that have gone out and to the work that we've already been doing. We know that we need stronger recommendation engines and we're working on that technology and we need to make our marketing more efficient. But by adding all of these features, both on the technological side and also on the programming side, we're bullish about the future of this business. And then when you think about it over to Hugh mentioned Moana and Mufasa, let me just read to you the movies that we'll be making and releasing in the next almost two years. We have Moana, Mufasa, Captain America, Snow White, Thunderbolts, Fantastic Four, Zootopia, Avatar, Avengers, Mandalorian, and Toy Story, just to name a few. And when you think about not only the potential of those in box office, but the potential of those to drive global streaming value, I think, there's a reason to be bullish about where we're headed. |
2,225 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston: And Ben to answer your other question, flattish was a reference to Experiences.
Alexia Quadrani: Thank you. Next question, please.
Operator: Yes, ma'am. Our next question today comes from Robert Fishman with MoffettNathanson. Please go ahead.
Robert Fishman: Thank you. Bob, as you think about the future of content spending for Disney, especially after the NBA deal and all the content that you're just talking about now. What is the right balance of investment between sports, scripted TV and movies going forward? And then for Hugh, can you just update us on free cash flow expectations this year with one quarter to go and how to think about the parks impact and the content spending on free cash flow in '25? Thank you.
Robert Iger: Well, we obviously are investing significantly in all directions because of the value that it creates and also because of the value that it represents to our future in streaming. We talked about sports, the long-term deals that we've made. Obviously, College Football is part of that. And on top of the NBA, on top of the NFL, on the movie side, we've talked a lot about our the creative improvements that our studio has brought to bear and the quality of the IP and the known quality of our IP. And television, I can't say enough about how great our television businesses have been performing both in terms of the bottom line, but also in terms of creatively. You don't get 183 Emmy Nominations by accident. That's the work of a lot of really great, talented people, meaning on the management side, working with a lot of talented, creative people. So it's a balance, it's a mix and I think it's one that you'll ultimately see really blended together as our streaming platform grows over time.
Hugh Johnston: And, Robert, on free cash flow. We had previously guided to $8 billion. We don't have any news on that, but if there were a material change on it, obviously we would have changed the guide.
Alexia Quadrani: Thank you. Next question, please. |
2,226 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Alexia Quadrani: Thank you. Next question, please.
Operator: Thank you. And our next question comes from Steven Cahall with Wells Fargo. Please go ahead.
Steven Cahall: Thanks. So, Hugh, you talked about DTC getting to double-digit margins with the big price increases and the paid sharing efforts coming. I was wondering if you could just update us on your thinking. We'd love to get some timing around double-digit margins if that's something you're comfortable with at this point, but any context would be helpful. And then just on parks, as we think about cruise ship pre-opening costs in there, what's implied in the fourth quarter and as we think about cruise pre-opening costs in fiscal '25, what do those look like? I think you'll sail the Treasure, but you've still got the Adventure and the Destiny. I think the Singapore dock is a little heavier on cost, so we just love to understand that component. Thank you. |
2,227 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston: Sure. Happy to talk about both. In terms of the journey on getting to double-digit margins, the levers haven't changed and frankly we're actually doing quite well with them. Bundling has had a positive impact on churn. So from that perspective, obviously, that helps us with growth, which is one of the drivers. Password-sharing is just starting to roll out. That's also going to be helpful in terms of driving growth. We've announced pricing and we feel good with all of the value that we're providing to consumers. With all the creative that Bob mentioned earlier and all the creative that's still to come. We do feel like we've earned that pricing in the marketplace and we feel positively about that. With that will come scale benefits. The product improvements also should reduce churn and keep our consumers with us as they're evaluating their options. And then obviously we're going to look at the entire cost structure and continue to drive productivity. In terms of timing, no update on that. It's something that we've said we are approaching with great urgency. We still intend to do that. Obviously, I think, we've made a ton of progress. We were losing $1 billion a quarter not all that long ago and now we're making money and our expectation is we're going to continue on that journey to making more money to get to and then ultimately well surpass the double-digit margins that we've talked about. Regarding the cruise ships, we've shared a number for this year. The number will be a little over double that in terms of the startup costs in 2025. So you can assume that, that'll be about that. That said, the cruise ships tend to pay back very quickly. So we certainly feel positive about those investments.
Alexia Quadrani: Thank you. Next question, please.
Operator: Thank you. And our next question comes from David Karnovsky with JPMorgan. Please go ahead. |
2,228 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: Thank you. And our next question comes from David Karnovsky with JPMorgan. Please go ahead.
David Karnovsky: Hi. Thank you. On Sports, Bob wanted to see if you could update on strategic partner conversations for ESPN. Is this still a priority? And if so, can you refresh on what you're looking for in terms of marketing or content? And then for Hugh, in the exact commentary, there's multiple references to tightly managing costs. So I wanted to see if you could expand on this, where you're realizing savings now, how much opportunities left? Thanks.
Robert Iger: I know I've sounded like a broken record because I've talked about strategic partnerships for ESPN over the last number of quarters. The only thing I can say is, believe it or not, we're still having conversations about it. We thought and continue to believe there may be opportunities to partner with others, particularly on the content side, and that's why we've continued to explore it. But nothing more to add.
Hugh Johnston: Right. And regarding cost, recall, our original cost estimate was $5.5 billion. We raised that to in excess of $7.5 billion. Look, in big companies, my worldview is there's always opportunity to do more with less. So we're going to continue to go after it aggressively as we can to both deliver the bottom line and to invest back in the business with all the great opportunities we have.
Alexia Quadrani: Thank you. Next question, please.
Operator: Thank you. And our next question today comes from John Hodulik with UBS. Please go ahead.
John Hodulik: Great. Maybe first on the parks. Any further details in terms of the softening and the flat revenues that you expect for 4Q and looking out into '25. I mean, do you expect attendance to continue to soften or potentially turn negative and just any commentary on what you're seeing or expectations are on the per cap side? And then secondly, Venu launches this fall, just any expectations in terms of what it could do to trend in the linear business for you guys? Thanks. |
2,229 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston: Yeah, I'll take that. In terms of the parks business, I've kind of given you a lot of our expectation already. I'm not sure I'm ready to peel it down to attendance versus per caps. I think, again, we're going to be pretty consistent with what we saw in Q3. And we talked about the fact that the lower income consumer is feeling a little bit of stress. The high income consumer is traveling internationally a bit more. I think you're just going to see more of a continuation of those trends in terms of the top line. And then the bottom line will be reflective of the fact that we've got some one-time costs coming in and going out both this year and last year. I do expect to see international strengthen. Disneyland Paris has obviously felt some challenge due to the Olympics. Not a surprise, but something that happens. And the good news is the Olympics are over in a couple of weeks and the booking will certainly look good in that regard. So overall feeling positively on that front.
Alexia Quadrani: Next question, please.
Operator: Yes, ma'am. Our next question comes from Michael Morris at Guggenheim. Please go ahead.
Michael Morris: Thank you. Good morning, guys. I wanted to ask you on ARPU at domestic Disney+. It did slip a little bit in the quarter and you cited the impact of subscriber mix shift. Are you saying that that's a function of bundling in terms of mix shift or is it mix shift to the ad-supported tier? And if so, can you talk a little bit about what you're seeing in the CTV environment, how you're performing there? And just one follow-up on the Experiences segment. We generally think of parks vacations as being booked pretty well in advance. So it was a little bit surprising to hear about demand moderation within the quarter. So can you help us a little bit with how much visibility you feel like you have? And if it does vary by quarter, if there's maybe less advanced bookings in certain quarters versus others? Thank you. |
2,230 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston: Yeah. To answer the question on ARPU, you hit both points correctly. Number one, bundling has a small effect. And then in addition to that, the shift to the ad model certainly has a small effect as well. From a profitability standpoint, we're pretty happy with whether people choose the ad model or the ad-free model. Regarding visibility, we do have very good visibility, which is why I'm emphasizing. These are really all changes at the margins, daily visitors and late bookers and things like that. Looking forward, we have very good visibility into the book that we're expecting, which is why I've got a good level of confidence in the projections that I'm sharing with you.
Alexia Quadrani: Thank you. Next question, please.
Operator: Our next question today comes from Bryan Kraft at Deutsche Bank. Please go ahead.
Bryan Kraft: Hi. Good morning. I had two if I could. Just first on advertising. You highlighted the strong results from the upfront this year, which is very encouraging. But I wanted to ask what you're seeing more immediately in terms of advertising demand today, given some of the macro pressures that have recently come to light. Are advertisers becoming more cautious? Are you seeing that in more in the real-time ad sales part of the business? And then just on the content sales and licensing part of the business, the press release mentioned increased sales of TV content and content sales, licensing, and other as a driver of the OI performance this quarter, along with the box office of course. Is there anything to read into this? Is it the beginning of a trend toward increasing content licensing to third parties or is just a timing benefit or one-off? Thank you. |
2,231 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston: Sure. Happy to talk about it. Ad market is actually very healthy right now. We saw overall advertising grow 8% for the quarter. ESPN was up 17%, DTC streaming was actually up 20%. So certainly feeling very, very positively in that regard. And in terms of the categories, financial services, consumer products doing very well, consumer services doing very well and technology doing very well. Auto is a little bit softer in that regard. But overall, the ad market is really, really strong and healthy for us. And a lot of that is a product of the fact that we have live sports and the fact that our streaming service is doing so well in terms of the IP that we have. It's an attractive audience. We also have a new capability called Disney Streaming that allows us to basically sell across our platforms very effectively. We're selling audiences rather than just selling streaming channels, which enables advertisers to more effectively target the audiences that they're seeking. So from a technology perspective, we're seeing good payback. The second piece was around licensing. Yeah, the licensing numbers that you see are mostly a reality around the fact that we've had so much success at the box office. That's really what's driving things more than anything else. No change in our licensing strategy, which has been pretty clear. The things that we consider core IP to the company, we don't license. There are things that are non-strategic. We'll continue to license tactically. But it's not a big strategy for us. The big strategy is producing our own IP and monetizing it.
Alexia Quadrani: Thank you. Operator, we have time for one more question.
Operator: Yes, ma'am. Our next question comes from Kannan Venkateshwar with Barclays. Please go ahead. |
2,232 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: Yes, ma'am. Our next question comes from Kannan Venkateshwar with Barclays. Please go ahead.
Kannan Venkateshwar: Thank you. So maybe in theme parks, I mean, there's a few growth elements I guess over the next few years in terms of cruise ships and broadly other CapEx investments that you're making in the parks. Maybe if you could just step back and talk about what kind of growth impact you expect, maybe over the next two or three years, and if that can offset to what extent that can offset some of the weakness you're seeing in the parks, that would be useful. And then one other segment which probably goes out of your numbers next year is India. And that's been a loss-making business. So to the extent you can talk about the potential earnings contribution once India is deconsolidated that would be much appreciated. Thank you.
Hugh Johnston: Yeah. Good morning, Kannan. Two things. One, obviously, the investments that we're making into the Experiences business, we feel very, very good about it. It's been a great returning business for a long time. So while I'm not here to give you long-term guidance in terms of that segment of the business. We wouldn't be making capital investments in an accelerated way if we didn't expect to accelerate growth out of those businesses and that's true of the cruise ships as well. Now, keep in mind, that the lead time on investments in this business are multiple years. So when exactly all of that manifests, we'll share with you as we go along. But, obviously, we're investing because we're looking to accelerate growth and hence the term turbocharge. Regarding the India question, we will share that when we close the deal. I think that's the right time to do it. And we'll lay it out for you all very clearly so that you can model it very, very effectively.
Alexia Quadrani: Okay. Thank you. Thanks for the questions and I want to thank everyone for joining us today. |
2,233 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: Note that a reconciliation of non-GAAP measures that were referred to on this call to the most comparable GAAP measures can be found on our Investor Relations website. Let me also remind you that certain statements on this call, including financial estimates or statements about our plans, guidance or expectations and drivers, including future revenues, profitability, DTC subscribers, free cash flow, adjusted EPS and capital allocation, and other statements that are not historical in nature, may constitute forward-looking statements under the securities laws. We make these statements on the basis of our views and assumptions regarding future events and business performance at the time we make them and we do not undertake any obligation to update these statements. Forward-looking statements are subject to a variety of risks and uncertainties, and actual results may differ materially from the results expressed or implied in light of a variety of factors. These factors include, among others, economic or industry conditions, competition and execution risks, including a connection with our business plans, potential strategic transactions and our content, cost savings, the market for advertising, our future financial performance, and legal and regulatory developments. In particular, our expectations regarding DTC profitability, subscriber levels, and ARPU are built on certain assumptions based on the future strength of our content slate, churn expectations, the financial impact of the Disney+ ad tier and ESPN flagship, pricing decisions, bundling and availability of our other streaming services on Disney+, technological advances and paid sharing efforts, our ability to continue to rationalize costs while preserving revenue and macroeconomic conditions, all of which, while based on extensive internal analysis as well as recent experience, provide a layer of uncertainty in our outlook. For more information about key risk factors, please refer to our Investor Relations website, the press release issued today, |
2,234 | DIS | 3 | 2,024 | 2024-08-07 08:30:00 | The Walt Disney Company | 191,564 | For more information about key risk factors, please refer to our Investor Relations website, the press release issued today, and the risks and uncertainties described in our Form 10-K, Form 10-Q, and other filings with the Securities and Exchange Commission. We want to thank you for joining us and wish everyone a good rest of the day. |
2,235 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: Good day, and welcome to the Walt Disney Company's Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note, today's event is being recorded.
I would now like to turn the conference over to Alexia Quadrani, Executive Vice President of Investor Relations. Please go ahead.
Alexia Quadrani: Good morning. It's my pleasure to welcome everybody to the Walt Disney Company's Second Quarter 2024 Earnings Call. Our press release was issued earlier this morning and is available on our website at www.disney.com/investors. Today's call is being webcast, and a replay and transcript as well as the second quarter earnings presentation will all be made available on our website after the call.
Joining me for today's call are Bob Iger, Disney's Chief Executive Officer; and Hugh Johnston, Senior Executive Vice President and Chief Financial Officer. Following comments from Bob and Hugh, we will be happy to take some of your questions. So with that, let me turn the call over to Bob to get started.
Robert Iger: Thank you, Alexia, and good morning, everyone. Our strong performance in Q2 demonstrates we are delivering on our strategic priorities while building for the future. Overall, this was another impressive quarter for us with adjusted earnings per share up 30% compared to prior year. And I'm pleased to say this outperformance raises our full year adjusted EPS growth target to 25%.
Our results were driven in large part by our Experiences segment and our streaming business, which achieved an important milestone with the entertainment portion of the streaming business, achieving profitability in the quarter. This is a testament to the turnaround we set in motion last year and the outstanding leadership of Disney Entertainment Co-Chairman, Alan Bergman and Dana Walden. It is particularly noteworthy when you consider we reported peak losses only 18 months ago. |
2,236 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | We also remain on track to reach profitability in our combined streaming businesses in Q4. We've said all along our path to profitability will not be linear. And while we are anticipating a softer third quarter due in large part to the seasonality of our India sports offerings, we fully expect streaming to be a growth driver for the company in the future and we have prioritized the steps necessary to achieve this.
In March, we successfully launched Hulu on Disney+, bringing extensive general entertainment content to the platform for bundled subscribers, and we're encouraged by the early results. And by the end of this calendar year, we will be adding an ESPN title to Disney+ giving all U.S. subscribers access to select live games and studio programming within the Disney+ app. We see this as a first step to bring ESPN to Disney+ viewers as we ready the launch of our enhanced stand-alone ESPN streaming service in the fall of 2025.
The key to our success in streaming and what consistently brings consumers back for more is the array of exceptional content we produce that captivates audiences of all ages and backgrounds. Looking at our film studios. We have a number of highly anticipated theatrical releases arriving over the next few months, including Kingdom of the Planet of the Apes, which opens this Friday, as well as Pixar's Inside Out 2, Marvel's Deadpool and Wolverine and 20th Century Studios, Alien: Romulus, which are all slated for this summer. |
2,237 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | Later this year, we're looking forward to Moana 2 and Mufasa: The Lion King. And in 2025, our slate remains just as robust with Captain America: Brave New World, Fantastic Four, Elio, Zootopia 2 and Avatar 3. Our series also continued to resonate with audiences and critics alike. FX's Shogun has proven to be a global hit, with success on both linear and streaming. It's tracking as FX's most watched show ever on our streaming platforms, and it's driving the second largest number of sign-ups to our streaming services since 2022, behind only Black Panther: Wakanda Forever. This is a great example of how we are successfully reaching wider audiences with our combined linear and streaming ecosystem.
In Q2, series that aired on linear networks accounted for 17 of the top 20 most viewed series on our streaming platforms with almost 3 billion hours of consumption. Our linear channels are deeply embedded in our direct-to-consumer strategy as they continue to deliver high-quality content that reaches demographics not captured on streaming alone, allowing us to broaden our audiences and leverage our unmatched content engine across an expansive base.
Turning to ESPN. Sports continues to stand out when it comes to convening large audiences with recent big ratings wins across a variety of sports. ESPN had a fantastic April in terms of total day viewership, the highest April since 2012. For Primetime viewership, it was ESPN's highest April on record. The NCAA Women's Final Four in Cleveland was the most viewed on record and the championship between Iowa and South Carolina was ESPN's most viewed college basketball game ever, men's or women's. |
2,238 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | We also saw record-breaking ratings for the WNBA draft. Monday Night Football had its most watched season since 2000, and the NFL postseason also broke viewership records. The divisional playoff game between the Houston Texans and Baltimore Ravens was ESPN's most watched NFL game ever with 32.4 million viewers. Looking at our experiences business, which remained an impressive financial driver in the quarter, we are focused on turbocharging growth with a number of long-term strategic investments.
That includes our Disneyland Forward initiative the first step in our expansion plans at Disneyland Resort, which received unanimous preliminary approval by the Anaheim City Council last month. This was a significant milestone and the final vote is expected to take place this evening. We're incredibly excited for the many potential new stories our guests could experience at Walt's original theme park including the much anticipated opportunity to bring Avatar to Disneyland.
When you consider all of our businesses as a whole, from entertainment, to sports, to experiences, it's clear that no one has what Disney has. The turnaround and growth initiatives we set in motion last year have continued to yield positive results, and we are executing against our ambitious strategic priorities with both speed and determination.
To walk you through more of our results from the quarter, I will now turn things over to Hugh.
Hugh Johnston: Thanks, Bob. Diluted earnings per share, excluding certain items, for the second fiscal quarter were $1.21 and reflect the second quarter in a row of strong double-digit percentage year-over-year earnings growth. We also met or exceeded all of our financial guidance for the quarter. And as Bob mentioned, we are now targeting adjusted EPS growth of 25% for the full year. |
2,239 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | At our Entertainment segment, second quarter operating income increased by over 70% versus prior year, driven by direct-to-consumer. Entertainment DTC revenue increased 2% sequentially and 13% year-over-year and generated operating income of $47 million. These results exceeded our guidance primarily due to expense savings. Core Disney+ subscribers increased by $6.3 million in the quarter, reflecting nearly 8 million additions domestically driven by charter entitlements and a slight loss internationally from the impacts of wholesale deal changes and price increases.
Disney+ core ARPU increased sequentially by 6% or $0.44 reflecting price increases for the domestic premium tier as well as international ARPU growth, partially offset by lower ad supported ARPU domestically, driven by dilution from charter entitlements. And the recent Charter deal also drove Disney+ ad tier subscriber growth in the quarter. We ended Q2 with 22.5 million ad tier subscribers globally. We are pleased with the progress we're making in streaming, although as we said before, the path to long-term profitability is not a linear one.
On that note, we are forecasting a loss for entertainment DTC in the third quarter, the vast majority of which is due to Disney+ Hotstar's ICC Cricket rights. We also do not expect to see core subscriber growth at Disney+ in the third quarter, but anticipate sub growth will return in Q4.
As Bob mentioned, we continue to expect our combined streaming businesses to be profitable in the fourth quarter and expect further improvements in profitability in fiscal 2025. At Entertainment linear networks, a decrease in operating income versus the prior year was primarily driven by lower affiliate and advertising revenue domestically and lower affiliate revenue internationally. And at content sales, licensing and other lower Q2 results versus the prior year reflect the absence of significant theatrical releases in the quarter. |
2,240 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | For Q3, we expect this business to generate modestly positive operating income, an improvement over the prior quarter and prior year. Moving to sports. Second quarter operating income decreased slightly versus the prior year, driven primarily by a decrease at ESPN, offset by improved results at Star India sports. As expected, at ESPN, lower results at the domestic business reflects higher programming and production costs from the timing of an additional college football playoff game in the quarter versus the prior year, which were only partially offset by higher ad revenue.
Domestic affiliate revenue also decreased in the quarter. ESPN domestic ad sales increased by more than 20% versus the prior year or high single digits when adjusted for the college football playoff timing shift of an additional game as well as a new NFL divisional playoff game in Q2 of this year. Q3 to date, we are seeing healthy demand driven by the NBA playoffs and domestic ESPN cash ad sales are pacing up.
At Star, higher results in Q2 versus the prior year include the impact of a decrease in programming and production costs attributable to the nonrenewal of BCCI cricket rights. Looking ahead, note that we are currently expecting to incur linear ICC rights expense at Star India in Q3. At Experiences, second quarter revenue grew 10%, operating income grew 12%, and segment margins expanded by 60 basis points versus the prior year. Parks and Experiences OI increased by 13% year-over-year and consumer products OI increased by 7%.
Strong international Parks growth was driven by Hong Kong Disneyland Resort while Walt Disney World and the Cruise business both contributed to domestic growth. At Disneyland, despite growing attendance and per capita spend, results declined year-over-year due to cost inflation including from higher labor expenses. We continue to expect robust operating income growth that experiences for the full year. However, third quarter OI is expected to come in roughly comparable to the prior year. |
2,241 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | Several noncomparable or timing-related items are expected to adversely impact Q3 results, including timing of media and tech expenses, noncomparable items in the prior year at consumer products and the timing of Easter. Beyond these comparability related headwinds, the third quarter's results will be impacted by 3 additional factors, higher wage expenses, preopening expenses related to the Disney Treasure and Adventure Cruise ships as well as Disney Cruise Line's New Island Lookout Cay and some normalization of post-COVID demand.
As it relates to demand, while consumers continue to travel in record numbers, and we are still seeing healthy demand, we are seeing some evidence of a global moderation from peak post-COVID travel. While pressures from wages, preopening costs and demand impacts are expected to persist in Q4, we do expect year-over-year experiences operating income growth to rebound significantly in the fourth quarter due to fewer comparability or timing factors.
On an enterprise level, we continue to make good progress on our cost efficiency initiatives and remain positioned to exceed our $7.5 billion annualized target. We still expect to generate over $8 billion in free cash flow this fiscal year and the shareholder return goals we've previously spoken about are also still very much on track. We repurchased $1 billion of stock in the second quarter. We continue to position the company for long-term growth and profitability and are making tangible progress on generating compounding earnings and free cash flow growth, which will enable us to continue returning capital to shareholders.
I'll now hand the call back to Alexia for Q&A.
Alexia Quadrani: Thanks, Hugh. [Operator Instructions] And with that, operator, we're ready for the first question.
Operator: [Operator Instructions] Today's first question comes from Steven Cahall with Wells Fargo. |
2,242 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: [Operator Instructions] Today's first question comes from Steven Cahall with Wells Fargo.
Steven Cahall: So first, thanks for that detail on Parks and Experiences and what you expect in the third quarter. I just wanted to dig into some of those demand comments a little more. So as you start to lap some of the post-COVID rebound, what's your expectation for attendance maybe at the domestic level and at the global level as you start to exit fiscal '24 and into '25?
Do you think things will continue to be stable? Or are any of those softening trends sufficient that you expect attendance to have any kind of year-on-year declines? And then on the DTC side of things, Hugh, I think you've talked about a double-digit operating margin as the aspiration. I was wondering if you could just give us any timing as to when we can expect those types of margins? And maybe you could speak to the underlying performance of DTC excluding Hotstar since I think you're going to be consolidating that next year?
Robert Iger: Great. Steve, happy to weigh in on both of those. First, in terms of attendance, what we're basically communicating is relative to the post-COVID highs, things are tending to normalize. The Parks business did 10% growth in the quarter. And obviously, that's an extremely high revenue number. That said, we still see in the bookings that we look ahead towards indicate healthy growth in the business.
So we still certainly feel good about the opportunities for continued strong growth. In addition to that, just to comment a bit more on the timing. As I mentioned on the intro, we do have some onetime expenses occurring in Q3. If we were to back out one-timers both for Q3 and Q4, we expect OI for the quarter to be in the mid- to high single-digit range for Q3 and to be double digit for Q4.
So certainly feel like the Parks business is still doing very, very well. Obviously, we've got the best in the business in terms of product and people still have a strong desire to basically go on vacation and come to see us. |
2,243 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | With regard to DTC margins, a couple of comments on that. First, our goal with this business is to make it a great growth business with healthy margins, right? We want both, not one versus the other. We've got a lot of levers that give us strong reasons to believe that there's good growth in front of us, whether it's the great programming we have, whether it's higher engagement through bundling. And we've got examples of that coming in Latin America as well as adding the sports tile, the ESPN tile to our Disney+ offering.
And obviously, we've already added Hulu. In addition to that, password sharing remains an opportunity. We're just getting started on reducing distribution costs or an opportunity and leveraging technology for direct-to-consumer marketing as well as recommendation engines, which help both on the revenue and cost side. And ultimately, we'll get to building out the international business even more strongly.
So from the perspective of building the business, it will be a combination of both managing costs more tightly but also growth, which will allow us to leverage the cost structure we have right now. And we feel very, very positively about that. Specific timing, I'm not going to comment on for margins. I don't like to get ahead of the next year until we get to the next year.
And in addition to that, from a competitive perspective, I'd rather not give my competitors the pathway and exactly how and when we're going to achieve the margin goals we're looking to achieve. But overall, business is in great shape, and we feel good about the growth prospects.
Operator: And our next question comes from Ben Swinburne with Morgan Stanley. |
2,244 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: And our next question comes from Ben Swinburne with Morgan Stanley.
Benjamin Swinburne: Two questions. Bob, on ESPN, there's obviously a lot of focus on the NBA. You've got a lot going on in terms of new product launches, rights packages coming up. You sound as bullish as ever on sort of pivoting this business. Can you just talk about the next kind of 12 to 18 months and what we think -- what do you think ESPN looks like a couple of years from now?
And specifically, if you think you can grow this business from an OI point of view, while navigating what is clearly a still inflationary sports rights environment? And then I would love to just get your perspective on sort of the health of the IP at your studios. I know we've talked about this a lot since you've come back into the CEO role. But you -- specifically a lot of Marvel content coming, both on TV and film over the next couple of years. That's an area investors are particularly focused on. How are you feeling about the sort of pipeline on the Marvel side specifically and whether you think this IP is being reinvigorated to the extent you'd like it to be?
Robert Iger: Thanks, Ben. First on ESPN. I think you have to start in terms of projecting the next 12 to 18 months and also considering where it might go from an OI perspective, as it transitions more to a digital business. You have to look at today and the ratings success of ESPN's phenomenal menu of sports product or the ratings success of live sports in general across the business.
I mean what you saw with obviously the women's NCAA basketball championships. But across the board, I mentioned in my comments, what the April numbers look like, highest April on record as it for instance, in Primetime at ESPN. So I see sports continuing basically to shine in a world where there's just considerably more choice. Live matters. The other thing that's really important is the engagement that live generates. And I mentioned in my comments, which we haven't really talked about much. |
2,245 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | And I guess a lot of attention has been on the JV that we announced as well as on flagship, which has taken ESPN direct at the end of '25. But at the end of this year, we're going to put an ESPN tile on Disney+ which will have a modest amount of programming, but it's a start in terms of essentially conditioning the audience or subscribers to Disney+ and Hulu, the fact that sports is going to be there. And it also will help us in terms of overall engagement with our bundle.
As I look ahead, I think ESPN is going to make a pivot toward digital, but without abandoning linear. So it will remain on linear if people want to get ESPN and its different channels through a cable or a satellite subscription, that's fine. And if they want to pivot smoothly because there will be many different access points to get the digital product to ESPN Digital. They can do so as part of a bundle with other sports services. They can do so directly from ESPN with the ESPN app or they can do it as part of a bundle with our own services. So I feel very bullish about it.
You also have to look at the menu of sports rights that ESPN has bought and Hugh did a good job describing this on the air this morning in one of his interviews. First of all, we've locked up long-term deals with significant sports organizations. That includes college football championships, all the NCAA championships and the NFL. We're confident or optimistic we're going to end up with an NBA deal that will be long term in our best interest and the best interest of our subscribers.
And then you look at all the studio product, there's really nothing like ESPN in the sports world and their hand is solid for the next decade. So I feel I'm very bullish, smooth transition to digital, multiple touch points for the consumer, quality programming and sports in general live being very, very attractive in terms of its programming. |
2,246 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | IP at the studio. I've talked a lot about this, as you know. We feel great about the slate coming up, including 3 of the big movies that we have with Planet of the Apes this weekend. Followed by Inside Out 2, which is a great film. And then Deadpool, you mentioned Marvel Ben, in -- coming in July. And then the end of the year, we've got -- we have Alien in the end of the summer, and then we've got Moana 2 and Mufasa at the end of the year.
We've been working hard with the studio to reduce output and focus more on quality. That's particularly true with Marvel. I know you mentioned television shows. Some of what is coming up is a vestige of basically a desire in the past to increase volume. We're slowly going to decrease volume and go to probably about 2 TV series a year instead of what had become 4 and reduce our film output from maybe 4 a year to 2 to the maximum 3.
And we're working hard on what that path is. We've got a couple of good films in '25. And then we're heading to more Avengers, which we're extremely excited about. So -- and overall, I feel great about the slate. It's something, as you know, that I've committed to spending more and more time on. The team is, I think, one that I have tremendous confidence in. And the IP that we're mining, including all the sequels that we're doing is second to none. So I feel really good about what's coming up.
Operator: Our next question comes from Jessica Reif Ehrlich with Bank of America Securities.
Jessica Reif Cohen: I will also have 2 different topics. First, on I guess, advertising, direct-to-consumer. Can you give us your thoughts going into the upfront, particularly with the integration of the Trade Desk and Google's TV 360? How does that impact advertising? And any comment you can give us on pivot sharing, like when will you implement it in multitude of borrowers or sharers? |
2,247 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | And then last thing on DTC, but ESPN+ lost subs, which was a little surprising. Can you give us some color on what happened there? And then turning to Sports. Bob, you mentioned the confidence of getting the NBA for a long-term contract. But I guess everybody is expecting that you'll pay a lot more, probably get fewer games. Is there any comment that you can give us on your outlook for profitability with the new contract? And will the inclusion of the NBA negotiations open the door to strategic investment?
Robert Iger: Sure. I'll take that. Thanks for the question, Jessica. I think that was 2 questions, parts A through E if I captured it correctly. In terms of advertising, generally speaking, the advertising market is pretty healthy right now as we head into the upfront. Certainly, live and sports are playing out very well. And in addition to that, we feel good about the offering we have, particularly in terms of the premium offerings that we have, both in sports as well as with the Disney+ offering.
The challenge, obviously, in the advertising market right now is there's a lot more supply in the market, largely as a result of one of our competitors entering the ad tier. But that said, I think generally speaking, we feel like we're in a better place than we were a year ago, and we have healthy momentum across nearly all the categories. Auto may be one exception and maybe to some degree, electronics as well. But by and large, demand is out there, and it's pretty high.
So we lap our way out of the supply increase, I think we're going to be in a good spot as we enter next year. Password sharing beginning next month, in very select markets. We're starting to go after people who are sharing passwords improperly. And that will roll out in earnest or across the globe in September. We feel quite bullish about it. Obviously, we're heartened by the results that Netflix has delivered in their password sharing initiative and believe that it will be one of the contributors to growth, as you noted, going forward. |
2,248 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | I think it's also important to note, look, Netflix is, in many respects, the gold standard when it comes to streaming. But what I mean by that is if you look at programming, we stack up really well. We have a great lineup and quality of programming across not just ESPN and Disney+, but also Hulu. What we're building is the technology that Netflix has had in place and has been building for well over a decade to improve the business from a bottom line perspective. And that starts with password sharing, but it's all the things that Hugh mentioned as well.
So I feel good about this being a necessary and very, very productive next step in terms of rolling out the technology that we need to get to the double-digit margins that he has talked about. Lastly, in terms of the NBA, I'm really not going to comment about profitability or about the cost of the package except to say, as we've said before, we continue to look at the NBA, not only as a premium sports product but is a sports product that has growth ahead of it. Obviously, with great demographics. We feel really good about the potential package that we will end up with in terms of it basically enabling ESPN to continue to shine in the television sports business.
And I think it would be -- I won't say anything more about it at this point. If and when there's an announcement, we'll give more details.
Hugh Johnston: And then last on your question around the timing on ESPN+ subscriptions. That's normal seasonality. That's one of the challenges when you look at things from 1 quarter to the next, the seasonality tends to get ignored, but the end of college football season, we do typically see a decline. So nothing out of the ordinary there.
Operator: Our next question comes from Robert Fishman with MoffettNathanson. |
2,249 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: Our next question comes from Robert Fishman with MoffettNathanson.
Robert Fishman: One for Bob and one for Hugh, if I can. Bob, back to sports, just maybe more broadly, as you think about which sports rights to invest in, how important is securing global rights to drive the international growth for ESPN or even Disney+ as part of your analysis to drive returns to combat the sports rights increases?
And then for Hugh, as a follow-up to the theatrical slate that Bob was speaking about before, can you just help investors think about the Disney studio profit potential and success and maybe even relative to pre-COVID peak levels?
Robert Iger: I'll start on the sports question. We have selective rights -- international rights for sports of the sports properties that we've licensed largely for the United States. We also have an array of sports rights in Latin America, many of them came with the acquisition of 20th Century Fox. We're being selective about adding international rights right now where possible, where the opportunity exists, we're doing so. But we're not investing heavily at this point in growing international rights, except again, where we can buy them along with the rights that we're licensing for the United States.
It's an opportunity for us to plant the seeds of more growth for ESPN outside the United States, but we're walking before we run in that regard.
Hugh Johnston: And then, Robert, to answer your question about studio profitability, as I look back, studio profitability has got some cyclicality to it. And we certainly feel very good about the upcoming slate. That business should get back to profitability, and we certainly feel good about it being a healthy, profitable business over time. Beyond that, I don't want to get into quarterly guidance on a subcomponent of one of our segments. So it's just getting a little bit too low into the details.
Operator: And our next question comes from Kannan Venkateshwar with Barclays. |
2,250 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: And our next question comes from Kannan Venkateshwar with Barclays.
Kannan Venkateshwar: In terms of the theme park business, maybe Hugh or Bob, if you could talk about the growth framework, which anchors your CapEx plan, it's obviously a pretty significant plan over the next decade. And the business has grown over mid-single digits for a very long period of time. How much upside do you see to this trajectory over the investment horizon?
And then, Bob, from a succession planning perspective, you've obviously been highly engaged with the Board on this. Could you talk about what your goal is in terms of the hand off? What do you hope to achieve in your tenure before the next CEO takes over?
Hugh Johnston: Okay. I'll take the first one. Regarding the investment in the parks, you know the financials of that business well. It's a 25-plus margin business and has been for an extended period of time, has terrifically high guest satisfaction scores, which create layers of advantage, would suggest we should be able to sustain high margins and high returns on investment. With the business with that profile, you invest in it. We know there are lots of opportunities to continue to grow attendance, both domestically and internationally.
And the cruise business, frankly, is one that has an enormous number of opportunities for us over time. And that is why we're leaning, we're heavily into that business. So we're not investing capital, obviously, to achieve poor returns. We expect to get excellent returns out of the business, in particular in cruises, given the margin profile of the business, and the fact that it's got the highest guest satisfaction scores in the company. This leads just to conclude, this is a business with a lot of runway left in it, and that will deliver great returns to our shareholders. |
2,251 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: Regarding succession, Kannan, as we've said before, the Board is heavily engaged in the process and has appointed a succession planning committee that is meeting on a regular basis to not just discuss, but also to manage the process, I'm confident that they will choose the right person at the right time. And that to the extent that I can, we'll participate in the smooth transition.
Operator: Our next question comes from John Hodulik with UBS.
John Hodulik: Bob, engagement on Disney+ has been declining a bit based on the Nielsen gauge data, although I guess it's ticked up a bit here recently at Hulu. But ESPN tile definitely makes sense, but can you talk about efforts to boost viewership on the platform, including the revamp of the technology and maybe the UI that you referenced last quarter? When should we expect to see these benefits or that technology rolled out? Anything you can tell us about engagement for users on the new combined Disney+ Hulu platform?
So that's one, I guess, with multiple parts. And then following up on ESPN+, again, you lost subs again this quarter. What's the plan for that service once the flagship platform is launched next fall?
Hugh Johnston: John, I'm happy to talk about engagement a little bit on the platform. As I mentioned earlier, the things that we believe drive engagement and still represents significant incremental opportunity for us is number one, programming, having terrific programming is obviously the leading factor. And with what we've been introducing recently, whether it's Shogun, whether it's The Bear over the next couple of years on the TV side. And obviously, the terrific movie slate that's right in front of us. |
2,252 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | As we window it into the streaming service, we think that's going to do great things for engagement. In addition to that, things like recommendation engines, obviously, increase engagement because people are getting more of a sense of what it is that they want to watch based on the suggestions that we make. In addition to that, we do see bundling as an opportunity. Sports bundling, which is why we're putting the ESPN Taiwan. In Latin America, we're combining all into the Disney+ app. Again, all this is geared towards driving engagement.
So overall, you can be confident we've got laser focused on driving engagement because we know it leads to subscriber satisfaction and it leads to lower churn over time.
Alexia Quadrani: And John, your second question was about our strategy for ESPN+ once we launch flagship? Was that the question?
John Hodulik: Yes, exactly. I mean is that going to remain a separate service sort of alongside the sort of full blown ESPN streaming service once that's launched next year?
Robert Iger: The plan is if you buy ESPN flagship, then you'll get all the ESPN+ programming in it. If you do not want that, then you can buy ESPN+ on its own. In addition, if you -- our current plan is that with the tile that we're putting on, the combined Disney+ Hulu app, the ESPN tile, you'll be able -- if you're an ESPN+ subscriber, you'll be able to get ESPN+ through that tile.
Operator: Our next question comes from David Karnovsky with JPMorgan. |
2,253 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: Our next question comes from David Karnovsky with JPMorgan.
David Karnovsky: Maybe following up on the studio commentary from earlier. As you noted, your upcoming slate is a number of sequels and that's a strategy where you've had a lot of success in the past. But as you look out over the medium term, how do you think about the balance of leaning on established franchises versus investment in new IP? And then separately, when we look at your summer releases, there are several films from 20th Century Fox IP. So I wanted to see what opportunity you think there is to bring more titles from the Fox library to the forefront?
Robert Iger: We're going to balance sequels with originals, particularly in animation. We had gone through a period where our original films in animation, both Disney and Pixar were dominating. We're now swinging back a bit to lean on sequels. And so we've talked, as you know, about Toy Story and obviously, Inside Out this summer. I just think that right now, given the competition and the overall movie marketplace that actually, there's a lot of value in sequels, obviously, because they're known, and it takes less in terms of marketing.
In terms of Marvel specifically, it implies there too. We actually have both Thunderbolts as if for instance, is coming up in 2025 as an original. And then, of course, we mentioned Deadpool this summer, which is a sequel. And I talked about Avengers and Captain America is coming out in 2025. It will just be a balance, which we think is right.
In terms of 20th Century Fox, we continue to look at the library to see what can be mined. I mentioned Alien earlier. We talked about Avatar 3, which is coming, obviously, Planet of the Apes where there might be more opportunity pending the success of the film to do more. I don't think we'll necessarily lean into the library, but we'll continue to look opportunistically at it.
Operator: Our next question comes from Michael Morris at Guggenheim. |
2,254 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: Our next question comes from Michael Morris at Guggenheim.
Michael Morris: Two questions. First, can you expand or give us an update on the charter partnership. You mentioned a couple of times. I know it was the first quarter of that kind of new relationship or at least new structure. So the questions are, how did that subscriber base perform from an engagement perspective? How was churn? Did the quarter reflect the full impact at this point from a financial perspective? And is this a template that you do expect to use more frequently going forward?
So that's the first topic. And then second, I wanted to ask about licensing content. And what your view is or your updated view of licensing your content off-platform? What the growth opportunity is there and whether you kind of look at the so-called Netflix effect is something you could benefit from by licensing off platform or whether you want to create that effect yourselves on your own platform and keep content in-house?
Hugh Johnston: Yes. I'll take the first question on this. Look, it's very early days, obviously, in terms of the Charter deal. During the quarter, it was only in place for a couple of months. That said, we're happy with it so far. We obviously have gotten added subscribers. And in addition to that, cannibalization has not been very high. And overall, the engagement has been good. So as for it being a template for the future, I don't think I would go to that level. Each of these deals in many ways has to be architected to the specific needs of the partner as well as our needs.
So I don't think I would think of it as a template for the future, but it's been a successful deal for us and for Charter. So we feel good about it. |
2,255 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | Robert Iger: We are already doing some licensing with Netflix, and we're looking selectively at other possibilities. I don't want to declare that it's a direction will go more aggressively or not, but we certainly are taking a look at it and being expansive in our thinking about it. We had previously thought that exclusivity, meaning our own product and our own platforms had huge value. It does -- definitely does have some value.
But as you know, we're also watching as some studios of licensed content to third-party streamers, and that then creates more traction, more awareness. In effect, increases not only the value of the content from a financial perspective, but just in terms of traction. So we're looking at it with an open mind. But I don't think you should expect that we'll do a significant amount of it.
Alexia Quadrani: Okay. Thanks for the questions, and I want to thank everyone for joining us today. Note that a reconciliation of non-GAAP measures that were referred to on this call to the most comparable GAAP measures can be found on our Investor Relations website. Let me also remind you that certain statements on this call, including financial estimates or statements about our plans, guidance or expectations and drivers, including future revenues, profitability, DTC subscribers free cash flow, adjusted EPS and capital allocation and other statements that are not historical in nature may constitute as forward-looking statements under the securities laws. |
2,256 | DIS | 2 | 2,024 | 2024-05-07 08:30:00 | The Walt Disney Company | 191,564 | We make these statements on the basis of our views and assumptions regarding future events and business performance at the time we make them, and we do not undertake any obligation to update these statements. Forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results expressed or implied in light of a number of factors. These factors include, among others, economic or industry conditions, competition and execution risks, including in connection with our business plans, potential strategic transactions and our content cost savings, the market for advertising, our future financial performance and legal and regulatory developments.
In particular, our expectations regarding DTC profitability, subscriber levels and ARPU are built on certain assumptions around subscriber additions based on the future strength of our content slate, churn expectations, the financial impact of Disney+ ad tier, pricing decisions, bundling and availability of Hulu on Disney+, technological advances and paid sharing efforts, our ability to continue to rationalize costs while preserving revenue and macroeconomic conditions, all of which, while based on extensive internal analysis as well as recent experience provide a layer of uncertainty in our outlook.
For more information about key risk factors, please refer to our Investor Relations website. The press release issued today. The risks and uncertainties described in our Form 10-K, Form 10-Q and other filings with the Securities and Exchange Commission. We want to thank you for joining us and wish everyone a good rest of the day.
Operator: The conference has now concluded. We thank you all for participating in today's call. You may now disconnect your lines, and have a wonderful day. |
2,257 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Operator: Good day and welcome to The Walt Disney Company's First Quarter 2024 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Alexia Quadrani, Executive Vice President, Investor Relations. Please go ahead.
Alexia Quadrani : Good afternoon. It's my pleasure to welcome everybody to The Walt Disney Company's first quarter 2024 earnings call. Our press release was issued about 25 minutes ago and is available on our website at www.disney.com/investors. Today's call is being webcast, and a replay and transcript as well as the first quarter earnings presentation will all be made available on our website after the call. Joining me for today's call are Bob Iger, Disney's Chief Executive Officer; and Hugh Johnston, Senior Executive Vice President and Chief Financial Officer. Following comments from Bob and Hugh, we'll be happy to take some of your questions. So with that, let me turn the call over to Bob to get started. |
2,258 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Bob Iger : Thanks, Alexia, and good afternoon, everyone. Just one year ago, we outlined an ambitious plan to return to a period of sustained growth and shareholder value creation. And our strong performance this past quarter demonstrates we have turned the corner and entered a new era. As previously noted, we're focused on transitioning ESPN into the preeminent digital sports platform, building streaming into a profitable growth business, reinvigorating our film studios and turbocharging growth in our parks and experiences. Before we dive deeper into our results, let me start by making a number of significant announcements that represent important and exciting steps forward. First, we announced yesterday the full suite of ESPN's channels will now be available direct-to-consumer as part of a new joint venture with Fox and Warner Brothers Discovery to create a new streaming sports service launching this fall. This brings together content from all of these companies' combined assets, including all the major professional sports leagues and college sports. And in the fall of 2025, we'll be offering ESPN as a stand-alone streaming option with innovative digital features, creating a one-stop sports destination unlike anything available in the marketplace today. ESPN is also adding a sports icon to its lineup with Coach Nick Saban joining the network as an on-air commentator later this year. We're excited to share that in November, we will release a feature-length animated sequel to Moana, which joins a very robust lineup of upcoming theatrical releases. We're also thrilled to share that we're entering into an exciting relationship with Epic Games, acquiring a small equity stake and launching a groundbreaking new games and entertainment universe that brings together Disney's beloved brands and franchises with the hugely popular Fortnite. And I'm pleased to share that Disney's board has declared an additional dividend and will be embarking on a $3 billion stock buyback program in fiscal '24. And one more thing. Next |
2,259 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | an additional dividend and will be embarking on a $3 billion stock buyback program in fiscal '24. And one more thing. Next month, ESPN+ will become the exclusive streaming home of Taylor Swift's historic concert film, Taylor Swift: The Eras Tour, Taylor's Version. I'll be sharing more with you about these announcements momentarily, but what's clear is that the important transformation we undertook last year is bearing fruit. And looking at our results this quarter, we can say with confidence our strategy is working. In Q1, segment operating income increased by 27%, and adjusted earnings per share rose 23% compared to prior year. We've improved our entertainment streaming operating income by a remarkable 86% year-over-year and remain poised to reach profitability in our on streaming business by the end of fiscal '24 and build on our momentum to deliver significant sustained profit margins in the future. Disney's experiences business generated all-time records in revenue, operating income and operating margin. And we are on track to meet or exceed $7.5 billion in cost savings as we continue to look for further efficiency opportunities across the company. Diving deeper into our announcements, let's first talk about ESPN, which continues to deliver meaningfully for the company and will be a key value driver in the future. ESPN's domestic sports business continues to grow and even amid a challenging linear landscape, ESPN increased its overall audience in calendar year 2023, and it continues to break records in ratings. Ultimately, our mission is to make ESPN into the preeminent digital sports brand, reaching as many sports fans as possible and giving them even more ways to access the programming they love in whatever way best suits their needs. One way will be through the new streaming sports service coming this fall that we announced yesterday in conjunction with Fox and Warner Brothers. Discovery. This service will bring together our collective portfolios of sports channels and direct-to-consumer services on a |
2,260 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Discovery. This service will bring together our collective portfolios of sports channels and direct-to-consumer services on a non-exclusive basis, providing consumers with more of the sports they want in a single place. It's important for us to serve the needs of consumers looking for a seamless way to access an aggregated collection of sports-centric content, including capturing fans moving away from the full cable and satellite bundle. And it's an attractive business proposition for ESPN, allowing us to command per unit economics in line with established market rates for our sports content, just like we do with any streaming or linear service where we offer our programming. Another exciting option available to sports fans will come in the fall of 2025, when we make the full suite of ESPN's channels available as a standalone and highly interactive digital destination. Not only will consumers be able to stream their favorite live games and studio programming, they'll also have access to engaging digital integrations like ESPN Bet and Fantasy Sports, e-commerce features and a deep array of sports stats, all of which we know will be incredibly compelling to younger sports fans in particular. It will also have very robust personalization features. ESPN has long prioritized its desire and ability to serve sports fans wherever they are, and these steps will strengthen ESPN's ability to deliver on that promise. And as you know, we've also engaged in productive conversations with potential content and marketing partners for ESPN. We've made progress towards securing deals, and we expect to have more to share with you in the near future. We're excited to offer a more unified streaming experience, which we expect will deliver strong benefits in terms of higher engagement, lower churn and greater advertising potential. When we launch our stand-alone ESPN service, we will also make it available on Disney+ for bundled subscribers just as we've done for Hulu. We've already seen an incredible response to the beta launch of |
2,261 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | on Disney+ for bundled subscribers just as we've done for Hulu. We've already seen an incredible response to the beta launch of Hulu on Disney+, which has far exceeded every metric, and we're looking forward to the full launch next month. This is all part of the ambitious streaming strategy we've been building: From our acquisition of 21st Century Fox that expanded our vast content library and strong pool of creative talent, to the launch of Disney+ at home to a century of content, to securing full control of Hulu and expanding our streaming offerings to reach greater audiences, to our significant investments in technology, and now taking significant steps toward ESPN's streaming future. Disney also has a great advertising story to tell with unparalleled scale and very strong advertising technology, and our ad-supported Disney+ offering is off to a great start. We successfully expanded outside the U.S. with launches in EMEA and Canada and grew to over 1,000 global advertisers in the first quarter. That's a tenfold increase from launch. More than anything, the success of our streaming services is a testament to the amazing content we create with six of the top 10 most streamed movies across all streaming platforms in the U.S. in 2023. Our best-in-class storytelling continues to entertain millions of people. We received 27 Golden Globe nominations and won top prizes for FX's The Bear and Searchlight's Poor Things. At this year's Primetime Emmy Awards, we took home 37 wins, more than any other entertainment company. And we lead the industry with 20 nominations heading into the Oscars, which will air on March 10 on ABC. We're also proud of our recent Disney-branded programming successes. Percy Jackson and the Olympians, which premiered on both Disney+ and Hulu in December, has become a bonafide hit. Books from the series returned to the number one slot on The New York Times Best Seller list following the debut of the Disney+ series, and I'm thrilled to share that we just picked up a second season. And the hit |
2,262 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | list following the debut of the Disney+ series, and I'm thrilled to share that we just picked up a second season. And the hit children's animated series, Bluey, which is exclusive to the Disney Channel and Disney+ in the United States was recently the number one most streamed show across any streaming platform. Looking ahead, we have an exciting slate of originals coming to Disney+, including Agatha from Marvel Studios, Skeleton Crew and The Acolyte from Lucasfilm, Win or Lose from Pixar and much more. Additionally, later this month, Hulu will launch FX's highly anticipated Saga Shogun in the U.S. In March, all seasons of Grey's Anatomy, our number one streamed title globally, will join our extensive library of titles on Hulu. When the show returns next month for its 20th season, Hulu will be the only place to see the current and all previous seasons of this truly iconic series. And speaking of icons, over the past year, we've all witnessed the creative genius and sheer power of a true cultural phenomenon, Taylor Swift. When her blockbuster concert film debuts on Disney+ on March 15, it will feature the concert in its entirety, including the song Cardigan and four additional acoustic songs which were not in the theatrical or digital purchase release of the film. We know audience are going to absolutely love the chance to relieve the electrifying Taylor Swift: Eras Tour Taylor's Version whenever they want on Disney+. Turning to our film studios. We have an incredibly robust slate of new releases as we continue revitalizing our creativity. Just consider the lineup of titles we will release through the end of 2026. This year, we have Kingdom of the Planet of the Apes, Inside Out 2, Deadpool 3, Alien: Romulus and Mufasa: The Lion King. As I mentioned at the top of the call, this November, we'll release a feature-length animated sequel to Moana. This was originally developed as a series, but we were impressed with what we saw, and we knew it deserved a theatrical release. The original Moana film from 2016 recently |
2,263 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | we were impressed with what we saw, and we knew it deserved a theatrical release. The original Moana film from 2016 recently crossed 1 billion hours streamed on Disney+ and was the most streamed movie of 2023 on any platform in the U.S. Along with the live-action version of the original film that's currently in development, Moana remains an incredibly popular franchise, and we can't wait to give you more of Ohana and Maui when Moana 2 comes to theaters this November. Looking to our 2025 theatrical slate, we're excited to bring audiences Captain America: Brave New World, Fantastic 4, Pixar's Elio, Zootopia 2 and Avatar 3. And we're already looking forward to 2026 and beyond with Frozen 3, the first Toy Story movie since 2019, new Star Wars movie that brings The Mandalorian and Grogu to the big screen for the very first time. These films will not only reach global audiences and theaters, but as we consistently demonstrated, they will become important anchors on our global streaming platforms, driving subscriptions and engagement while also continuing to fuel growth in our experiences business. After all, one of the things that truly sets Disney apart is our unique ability to turn top-quality IP into top-quality experiences, leading to significant growth. That was certainly true this quarter. Every one of our parks was profitable in Q1, giving us an incredibly solid foundation to build upon as we invest significantly to turbocharge growth in this business. We've had a tremendous response from guests visiting our newly opened World of Frozen at Hong Kong Disneyland as well as our first-ever Zootopia Land at Shanghai Disney Resort. And as I've said before, we also have so many untapped stories just waiting to be brought to life in our parks across the globe as we continue to invest in this extraordinary business. But it's not just our parks where we're creating new opportunities for consumers to engage with the characters and franchises they love. Our new relationship with Epic Games will create a transformational |
2,264 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | to engage with the characters and franchises they love. Our new relationship with Epic Games will create a transformational games and entertainment universe that integrates Disney's world-class storytelling into Epic's cultural phenomenon, Fortnite, enabling consumers to play, watch, create and shop for both digital and physical goods. This marks Disney's biggest entry ever into the world of video games and offers significant opportunities for growth and expansion. The new immersive universe will allow fans to unleash their own creativity and experience the Disney stories in worlds that they love in groundbreaking new ways. Younger audiences in particular are huge consumers of video games. In fact, among millennials, Gen Z and Gen Alpha, a significant amount of time spent on screen-based platforms is playing video games. This new universe from Disney and Epic provides us with a tremendous opportunity to not only meet more consumers where they are, but to allow more audiences to cultivate a bond with Disney's iconic brands and franchises, including Marvel, Star Wars and much more. Looking at the renewed strength of our businesses this quarter from sports to entertainment to experiences, the stage is now set for significant growth and success. In that regard, we see ample opportunity to increase shareholder returns as our earnings and free cash flow continue to grow. Our current position of strength and confidence in our path ahead already led us to pay a dividend to our shareholders last month. And I'm pleased to share that the board declared that our next semi-annual dividend to be paid in July will be 50% higher versus the last dividend paid in January. The board has also authorized the company to begin repurchasing shares for the first time since fiscal 2018, and we plan to start by targeting $3 billion this fiscal year. As we continue to invest in our growth businesses and maintain our strong balance sheet, we also expect to prioritize dividend payments and share repurchases in the coming years. I'm proud |
2,265 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | our strong balance sheet, we also expect to prioritize dividend payments and share repurchases in the coming years. I'm proud of our company's remarkable achievements, and I'm grateful to a deep bench of seasoned executives who are helping guide Disney into the future. And that includes Hugh Johnston, our new CFO, who has already proven to be an outstanding addition to the team. We feel very fortunate to have Hugh with us. And now to take you through more of our results this quarter, I'll turn things over to Hugh. |
2,266 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston : Thanks, Bob. I joined Disney a little over two months ago. And the more I learned about this incredible company, the more excited I am about the opportunities ahead of us. I'm looking forward to continuing to partner with Bob and our management team as we execute on our strategy with the goal of delivering significant consistent long-term earnings and free cash flow growth. We are very pleased with this quarter's financial results. Fiscal first quarter diluted earnings per share excluding certain items increased by 23% versus the prior year to $1.22, and segment operating margin increased by 350 basis points, reflecting both strong pricing and operating expense reductions. Both revenue and operating income at direct-to-consumer, domestic ESPN and experiences all increased versus the prior year. And operating income across each of our business segments grew nicely, in part due to the diligent and ongoing cost efficiency work we're driving throughout our businesses as evidenced by the realization of over $500 million in SG&A and other operating expense savings across the enterprise in the first quarter. Moving to our results by segment. At entertainment, first quarter operating income more than doubled driven by significant improvement at direct-to-consumer. Entertainment direct-to-consumer operating income improved by about $850 million versus the prior year and by nearly $300 million versus Q4. And revenue increased sequentially by over 10%, benefiting from higher subscription and advertising revenue. Operating income in the first quarter was better than the guidance the company gave in the last earnings call primarily due to expense favorability. Hulu subscribers increased by 1.2 million from Q4 to Q1, and Disney+ core subscribers decreased sequentially by 1.3 million, in line with prior guidance, driven by the expected temporary uptick in churn given the recent domestic price increases as well as the end of the global summer promotion. Those impacts were partially offset by strong ad tier net |
2,267 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | price increases as well as the end of the global summer promotion. Those impacts were partially offset by strong ad tier net adds due to domestic growth as well as the launch in certain international markets in the first quarter. Domestically, we saw continued net additions to our bundled offerings in Q1, which, as a reminder, has significantly lower churn versus our standalone products. Disney+ core ARPU increased by $0.14 versus the prior quarter and by $1.07 versus the prior year driven primarily by price increases. We expect Disney+ core ARPU to increase in the second quarter due to the continued benefit of price increases, which should only be partially offset by the impact of adding Charter's Spectrum TV Select subs to the Disney+ ad tier. I'll note that we are being paid on all entitled Charter subs, which will also be a key driver of accelerated Disney+ core sub growth in Q2. We expect net adds of between 5.5 million and 6 million in the second quarter. Domestic net adds are expected to be in the 7.5 million range driven by Charter entitlements net of cannibalization. And international core subs are expected to decrease modestly, reflecting changes to certain wholesale deals and slightly elevated churn impacts from price increases. While subscriber growth will vary from quarter-to-quarter, we are confident in our prospects for ongoing sub growth over the longer term driven by the continued global strength of our content slate; advancing our paid sharing efforts; technology advances that are intended to improve our content promotion and discovery capabilities, drive up engagement and lower churn; the impact of making Hulu content available on Disney+ for bundled subs; and continued adoption of the bundle domestically, which should both increase engagement and lower churn, a strategy we will repeat in Latin America this summer when we combine Disney+ and Star+; and our continued use of tiering to provide subscribers with more choices. As it relates to the opportunity we see on paid sharing, beginning |
2,268 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | use of tiering to provide subscribers with more choices. As it relates to the opportunity we see on paid sharing, beginning this summer, Disney+ accounts suspected of improper sharing will be presented with new capabilities to allow their borrowers to start their own subscriptions. Later this calendar year, account holders who want to allow access to individuals from outside their household will be able to add them to their accounts for an additional fee. While we are still in the early days and don't expect notable benefits from these paid-sharing initiatives until the back half of calendar 2024, we want to reach as large an audience as possible with our outstanding content, and we're looking forward to rolling out this new functionality to improve the overall customer experience and grow our subscriber base. For Q2, we are expecting revenue at entertainment DTC to grow sequentially and anticipate that operating losses will be relatively in line with the first quarter. We still expect to reach profitability at our combined streaming businesses in Q4 of fiscal 2024 and have never been more confident about our path to creating a strong and sustainable streaming business with growing subscribers over the long term, and ultimately, double-digit operating margins, a business which we fully expect to be a key earnings growth driver for the company. Moving on to entertainment linear networks. The decrease in the first quarter operating income versus the prior year was due to lower advertising and affiliate revenues, partially offset by lower programming and production costs. Lower domestic advertising revenue was driven primarily by lower impressions, including from strike related impacts in addition to an adverse comparison to the prior year midterm-related political advertising at our owned stations. Domestic entertainment affiliate revenue decreased by 5% in the first quarter versus the prior year as a five-point benefit from higher rates was more than offset by a 10-point decline from fewer subscribers. Adjusted |
2,269 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | year as a five-point benefit from higher rates was more than offset by a 10-point decline from fewer subscribers. Adjusted for the non-carriage of certain networks at Charter as a result of our recent deal, the sub decline impact was closer to 7%. Lower programming and production costs benefited from strike related impacts, and we also remain focused on driving ongoing cost efficiencies. At content sales, licensing and other results came in lower versus the prior year and below the guidance we provided due to the performance of theatrical titles in the quarter. We do not have any new key theatrical releases in Q2 due to production delays stemming from the strikes and expect content sales, licensing and other operating income to come in roughly breakeven for the quarter. Sports operating income improved versus the prior year due to strength at ESPN, partially offset by lower results at Star India driven by higher rights costs from airing of the ICC Cricket World Cup. At domestic ESPN, year-over-year growth was driven largely by a decrease in programming production costs from the timing of college football playoff games. Domestic affiliate revenue in Q1 was comparable to the prior year as an increase of 6% from higher contractual rates was offset by a commensurate decrease from fewer subscribers. ESPN domestic ad sales in the quarter were down 2% versus the prior year but up mid-single digits when adjusted for various timing shifts and onetime impacts. The strength we are seeing gives us confidence that leaning into sports will continue to create value for our shareholders. Second quarter to date, we are seeing continued healthy advertising demand in the sports marketplace with domestic ESPN cash ad sales pacing up double digit percentage points versus the prior year. The trend is still solid even when adjusted for the CFP timing shift of an additional game as well as an extra NFL divisional game in Q2 this year. Our experiences business posted strong Q1 results with year-over-year operating income growth of 10% |
2,270 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | game in Q2 this year. Our experiences business posted strong Q1 results with year-over-year operating income growth of 10% at parks and experiences and 4% at consumer products. Record setting results this quarter were primarily driven by our performance at Shanghai and Hong Kong theme parks, continued strength at Disney Cruise Line and the success of Marvel's Spider Man 2 at our games business. And segment margins expanded by over 50 basis points versus the prior year, an achievement delivered despite tough comparisons at Walt Disney World coming off its highly successful 50th anniversary celebration in the prior year and significant cost pressures driven by wage increases. We remain optimistic about the segment's continued top line and profit growth, notwithstanding the tough comps domestically in Q2, and we still expect robust OI growth at experiences for the full year. We plan to invest approximately $60 billion into the business over the next 10 years, of which approximately 70% is earmarked for incremental capacity expanding investments around the globe, which we expect to generate attractive returns. On a total company basis, as Bob mentioned earlier, we are still on pace to meet or exceed our $7.5 billion annualized cost target by the end of fiscal 2024. I'm pleased with how this is tracking so far. Total expenses in Q1 were down 4% versus the prior year, and the efficiencies we've been realizing are a key contributor to that progress. And we are also still on track to generate about $8 billion in free cash flow this fiscal year. Putting all this together, we are confident in the progress we are making and the path it puts us on to become a strong cash generator and earnings compounder starting in fiscal 2024. To that end, we expect full year fiscal 2024 earnings per share excluding certain items to increase by at least 20% versus 2023 to approximately $4.60. You already heard from Bob about our updated plans for shareholder returns this year. And as he mentioned, we intend to continue investing in our |
2,271 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | from Bob about our updated plans for shareholder returns this year. And as he mentioned, we intend to continue investing in our growth businesses while also maintaining a balanced and disciplined approach to capital allocation. And with that, we're happy to take your questions. |
2,272 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Alexia Quadrani : Thank you. As we transition to a Q&A, we ask that you please try limit yourself to one question in order to help us get as many analysts as possible today. And with that, operator, we're ready for the first question.
Operator: Thank you. [Operator Instructions] Today's first question comes from Ben Swinburne with Morgan Stanley. Please go ahead.
Ben Swinburne : Thank you. Good afternoon. You guys had a lot of news for us to chew on tonight. I wanted to maybe start, Bob, asking you about sports since you led with that. You guys have a lot going on with ESPN, new channels package, flagship, obviously having conversations. Can you kind of put it all into context for us? And how you're sort of thinking about these different products and whether they address different parts of the market and what your sort of priorities are between the two? And really, what are we -- what is success for Disney shareholders in sport? How do we think about that kind of financially and strategically? And I was just wondering if you had an update for us on expense growth this year. I think you guys guided to slight growth overall in '24 last quarter. It seems like you're on track with your savings program. So any update to that would be appreciated. Thanks so much. |
2,273 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Bob Iger : Thanks, Ben. Permit me to throw a couple of cliches your way. But as you know, ESPN has always aimed to serve the sportsman effectively no matter where the sports fan is. And so all of the steps that we've been taking and that we announced today and that we will continue to take are aimed at doing just that. And when you think about today's environment where you've obviously got some challenges in linear TV, a lot more competition, both for people's time and just specifically in sports, and you think about the fact that ESPN finished '23 in really good shape, ratings continue to rise. Sports is still an advertiser's delight. You have to consider that ESPN has been successful in what their primary goal was. They're reaching sports fans effectively, which is why advertisers and distributors and sports leagues and organizations feel they have to kind of be part of or partnered with ESPN. As we look to the future, we're obviously mindful of, one, the state of the multichannel ecosystem; two, where people are spending their time and their money with media. And you have to basically serve them effectively there. We've been saying for a long time that taking ESPN in the direct-to-consumer direction was inevitable and that we were looking for partners to do so. This is really not a first step, it's a second step. The first step was launching ESPN+ some years ago, which has actually been quite successful. The second step is finding these partners to distribute basically the equivalent of a multi-channel, sports-centric tier via app. So one, we're serving sports fans well. Two, we're doing it with partners. Three, we're doing it in a more modern way rather than cable and satellite in this case, it's app-based. And that's a big step for us because we know that there are a number of people who have never signed up for multi-channel television. This gives them a chance to do so at a price point that will be obviously more attractive than the big fat bundle. Two, there are people who have left that ecosystem |
2,274 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | price point that will be obviously more attractive than the big fat bundle. Two, there are people who have left that ecosystem because they didn't want all those channels or that cost. And this is a way of basically preserving a relationship or creating one with those that are no longer part of the multi-channel ecosystem. The next step after this, and we announced today that we'll launch it in probably August of '25, is to bring out ESPN flagship. I say on its own, but it will be bundled ultimately with Hulu and Disney+. And that will be a very, very immersive, very obviously sports-centric app, which will have features that this combination with Fox and with Time Warner Discovery will not have, such as integrated betting, integrated fantasy, likely to have some sales arm or merchandise capabilities. Obviously, deep dive into stats and high degree of customization and personalization. Again, another kind of feature that we'll bring out to engage with sports fans. I can't tell you right now how that ultimately will fit into all of this, except it will be a progression. We haven't really talked much about how it will be further -- how it will be bundled except with our own services. But I think success will be, for us, in this basically migration would be to maintain ESPN's position in sports in general and the affinity that its fans have with ESPN and the attractiveness of ESPN to advertisers and sports leagues. That simple. |
2,275 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston : Right. I'll take the cost side, Ben. You're right, in the past, we've talked about slight growth in operating expenses year-over-year. We obviously have terrific momentum on cost management coming out of the first quarter. And the team is relentlessly looking for further opportunities to drive cost savings, both to reinvest back in the business to continue the growth momentum that we have as well as deliver margin growth to the bottom line. Net, no change in guidance versus what we said previously. We should do at least as well as the guidance we previously committed to, which was slight growth in operating expenses year-over-year.
Alexia Quadrani : Thanks, Ben. Operator, next question please?
Operator: Absolutely. Our next question today comes from Michael Nathanson with MoffettNathanson. Please go ahead.
Michael Nathanson : Hi. One for you, Bob, one for you, Hugh. Bob, in answer to Ben's question, we're still kind of wondering, how does Hulu Live fit into the long-term picture here, right? It stopped growing. YouTube is twice the size. When you think about the future of your offerings, how does that fit into what you just announced with direct over-the-top ESPN and then sports bundle? And then for Hugh, you broke some news, too, with a double-digit margin target for streaming. Any help on a timetable that gets us there? Or what factors do you think will drive you from here to double digits in the next couple of years? Thanks. |
2,276 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Bob Iger : As you know, Hulu Live is more reflects the bigger, fatter bundle of television channels of -- like many other services that are out there. It just happens to be integrated or attached to Hulu if you subscribe to it. So this, in a way, I guess, you'd argue, competes with Hulu Live directly, but it doesn't compete with Hulu because this will be bundled with Hulu. So if you're a Hulu subscriber and you want to get this new sports service, you can buy that as an add-on to Hulu. And as we see it, that's a real positive because if you consider the fact that Disney+ and Hulu will be together once we come out of beta in March already together in beta, and then you add a sports feature with so many sports that this new joint venture will offer, that's very, very compelling in terms of reducing churn for Hulu and increasing engagement. So we look at this as a huge positive for Hulu. We're realistic about Hulu Live in terms of the impact this could have, but that Hulu Live is certainly a nice, important feature of our Hulu business, but the critical part of that business is Hulu itself. |
2,277 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston : And Michael, I'll take the question on DTC profitability in double digit. Yeah, I know we -- for the first time, we put out that our objective is to get to double-digit margins. In some ways, it probably shouldn't be a surprise to investors because the goal has always been to build what I would characterize as a good business. What does a good business look like? Number one, it's got growing; and number two, it has attractive margins, which we're defining as double digits. So I know in a sense it's news, but in a sense, it shouldn't be news because we've always wanted to build a good business in that regard. In terms of how we get there, it's really in many ways the way that we've gotten from where we were to the point we're at right now. Number one, we're going to grow subscribers. Number two, you'll see some level of pricing. And both of those things will probably be similar to what you've seen over the last couple of years, maybe a slightly different balance but roughly similar. And then we'll actually get some leverage out of marketing spend, content and technology spend. All of those will grow a little bit less -- at a lesser rate than the rate of revenue growth. In terms of the specifics on how do we get there with sub growth, I think it will be a couple of things. Number one, paid sharing is an opportunity for us. It's one that our competitor has obviously taken advantage of and one that sits in front of us. And we've got some very specific actions that we're taking in the next couple of months, which I discussed earlier, which will benefit us to some degree in the back half of this year and very much next year. Number two, we'll see lower churn with the bundles that we're looking to put out. Number three, international remains a growth opportunity for us. So if you put all of those pieces together, it's kind of doing a lot of what we've been doing with maybe some slightly different tactics to get to a level that, again, we would characterize as a good business. Not going to put a specific |
2,278 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | slightly different tactics to get to a level that, again, we would characterize as a good business. Not going to put a specific time frame on that right now. Some of that is going to be driven by the marketplace. Just know that we feel a sense of urgency in getting there, and that's probably the way we're going to operate the business. We'll feel urgency, but only to get to a good, sustainable business. |
2,279 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Alexia Quadrani : Thank you. Operator the next question please?
Operator: Our next question today comes from Jessica Reif Ehrlich with Bank of America Securities. Please go ahead.
Jessica Reif Ehrlich : Thank you. You guys covered so much ground tonight. So I have one question and two follow-ups. You announced -- or Hugh, for the first time, I've heard you say this that in parks, 70% of the $60 billion in CapEx that you outlined over the next 10 years, like -- I'm sorry, that 70% of that will go to incremental capacity, so like over $40 billion in new parks and attractions. Can you give us some color on timing and location? There's been speculation that you may open a fifth gate in Florida. And then just a follow-up to a couple of things you said. One on paid sharing crackdown, which came up twice. Have you sized the number of borrowers? And on the sports JV, how do you plan to attract non-pay TV subs to what sounds like it might be an expensive sports service without a significant decrease in traditional pay TV subs who would actually save money? Like how do you not cannibalize? |
2,280 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Bob Iger : Okay. You asked a lot of questions on a lot of different subjects. I'll take the first one on park's timing and location. We're already hard at work at basically determining where we're going to place our new investments and what they will be. You can pretty much conclude that they'll be all over, meaning every single one of our locations will be the beneficiary of increased investment and thus increased capacity, including on the High Seas, where we're currently building three more ships. And in a business that is obviously, extremely positive to us, we may look expansively, at least in the next decade in that direction. I'm not going to really give you much more of a sense of timing, except that we're hard at work at getting these things basically conceived and built. And we've got a menu of things that will basically start opening in '25, and there'll be a cadence every year of additional -- basically additional investment and increase capacity. I'll let Hugh take care of the paid sharing. Hugh?
Hugh Johnston : Yeah.
Bob Iger : On the sports service and the pricing, I think the way you have to look at it is the sports service is going to be substantially less expensive to consumers than the big bundle that they'd have to buy to get those same channels on cable and satellite. And again, designed for two things. One, we believe there are a number of sports fans out there that want to watch sports on television but didn't want to sign up to the big cable and satellite bundle. And so we think they will be accretive to us. We also believe that either consumers have left the bundle because it wasn't serving them well or they may leave the bundle, and we want to make sure that we grab them, too. So we view this whole thing as, one, being a good proposition for sports fans because of the cost and certainly being positive for us because of the dynamics in the marketplace right now. |
2,281 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston : Okay. And Jessica, I'll handle the paid sharing question. We have sized it. I don't want to put a specific number out there right now because these numbers are obviously rough estimates anyway. Suffice to say that the opportunity that we see on a percentage basis probably isn't all that dramatically different from what our competitor has found in terms of their subscriber base. In terms of getting at it, there's a couple of actions that we've taken in order to do that. Number one, we have some -- made some changes to the user language that we have in the U.S., Canada and certain markets so that we'll actually have the opportunity to act on the paid sharing opportunity. Number two, the accounts that we think are doing unpaid sharing right now will get communication this summer, and we'll give them opportunities to allow their borrowers to start new subscriptions. And then later this year, we'll actually also have account holders who want to allow further individuals to access their accounts from outside that they'll be able to access the account, but they'll be able to do so for an additional fee. So we've got a number of tactical actions to take in order to take advantage of what we think is a pretty good sized opportunity in front of us. And it's one of the things that gives us confidence in our subscriber growth numbers.
Alexia Quadrani : Thank you. Operator, next question, please?
Operator: Thank you. And our next question comes from Steven Cahall with Wells Fargo. Please go ahead. |
2,282 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Operator: Thank you. And our next question comes from Steven Cahall with Wells Fargo. Please go ahead.
Steven Cahall : Thank you. So Bob, you mentioned a lot of content in your remarks. It seems like the operations are really starting to hum again. But I think the lifeblood of the company is always going to be the studio output. It drives so much culture. I think that's an area you've said that you've been spending a lot of time on. Do you feel like the content is also now turning the corner like you've seen in the operations? And if so, when do you think we might see some of the results of that renewed focus on the studio output? And then, Hugh, I think the inevitable question with the buyback announcement is what you expect you might end up ultimately paying for Hulu. Just wondering if you have any sense on the timing of that outcome or situation. And related to that, I think the exceed $7.5 billion in savings was a bit new. Curious just where you found those extra buckets of cost savings. Thank you. |
2,283 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Bob Iger : Steven, I feel great about where we are with the studio. Let's not lose sight of the fact that in the last year, the studio had some real success, not to suggest that we didn't have some films that were not successful that we were really disappointed in, but we also had some great success too with the Guardian sequel and Avatar at the end of calendar '22 but part of fiscal '23. One of the things that I've been saying before is that volume sometimes can be detrimental to quality. And in our zeal to greatly increase volume, partially tied to wanting to chase more global subs for our streaming platform. Some of our studios lost a little focus, so the first step that we've taken is that we've reduced volume, we've reduced output, particularly in Marvel. When you fix or when you address these issues with -- in movies, you do three things. You get aggressive at making sure the films you're making can be even better. Sometimes you kill projects you don't believe in. And of course, you put new things in the pipeline that you do believe in that you have much more confidence in. And we're doing all of that. I've also observed over the years that managing creativity sometimes is best done with great partnerships. And I have established great partnerships with the people at our company that really manage their creativity, Alan Bergman with the studio, Dana Walden on the television side, Jimmy Pitaro at ESPN. And the partnership that Alan and I have is a strong one, and we believe that the time that I'm now devoting to this and the attention that the two of us are giving this business not only will bear fruit, but it's already starting to. We're very bullish about the films coming out. We mentioned Insight Out 2, and we talked about Deadpool and the Planet of the Apes film. We feel good about that. Obviously, the end of the calendar year, we've got Mufasa, prequel to Lion King. We are very excited about the addition of Moana, which is the number one streamed movie of -- across all streamers in the U.S. in '23 and |
2,284 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | excited about the addition of Moana, which is the number one streamed movie of -- across all streamers in the U.S. in '23 and is at over 1 billion hours of consumption on Disney+. And that's now going to be released in November. And then I mentioned what we're doing after that. I'd say we're leaning a little bit more into sequels and franchises, some that we feel great about, like Toy Story is -- for instance, obviously, Star Wars, Avatar, we've talked about. Marvel is starting to focus on some of its stronger franchises going forward, but I'll leave it at that. And I think given the environment and given what it takes to get people out of their homes to see a film, doing that, leaning on franchises that are familiar is actually a smart thing. So we've got work to do still. We're not resting on our laurels or sitting on our hands. We're working hard at it, but I feel quite good about the trajectory. |
2,285 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Hugh Johnston : Right. And Steve, from my perspective, regarding Hulu timing on that, we've got a pretty clearly defined process. That process is going to take a little bit of time based on the work that needs to go into valuing the business. I would expect before we get to the end of the year that we should have this figured out and closed. Regarding cost savings, it's pretty well spread out across the board. One of the things you tend to find is when a company goes on a cost effort, once you start to build momentum on that, people tend to find additional opportunities. And that's what gives us the confidence around the numbers to at least meet if not exceed them. So no one specific area. It's content side as well as the SG&A side. I think we just have momentum on managing our expenses more tightly, which is great news, I think, for investors.
Alexia Quadrani : Thank you. Operator, next question please?
Operator: And our next question today comes from Bryan Kraft with Deutsche Bank. Please go ahead.
Bryan Kraft : Hi, good afternoon. Since there's so much discussion about bundling and distribution, I was wondering if I could ask you if you could share any observations related to Charter integrating Disney+ into its pay TV programming tiers. Is there anything you could say about the percentage of customers actually using it or engagement levels relative to the average Disney+ subscriber? And maybe lastly, do you think that this is a model that you'd like to replicate with other pay TV distributors over time as your agreements come up for renewal? Thanks. |
2,286 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Bob Iger : Thanks, Bryan. It's really early. They didn't start introducing this to their subscribers really until January, and they didn't roll it all out right away. And so we're seeing some stats on this that are somewhat encouraging, but I want to be careful that because it's early, we're not sure whether those trends will continue or not. I do think that this kind of arrangement is one that we'll likely see with other multi-channel distributors. It seemed like it was a win-win for both of us. Important to us, obviously, because it gives us access to more of their customers and important to them in terms of bundling this service with their multichannel customers. So I think it's -- again, I think you'll see more in this direction, but too early yet. We may have more to say about this next quarter when we know a lot more.
Bryan Kraft : Thank you.
Alexia Quadrani : Operator, we have time for one more question.
Operator: Thank you. And our next -- our final question today comes from Michael Morris with Guggenheim. Please go ahead.
Michael Morris : Thank you. Good afternoon. One follow-up on the sports JV first, and that's how did you comfortable that the availability of the service won't drive accelerated cord-cutting and become an economic drag on your business and the business more broadly? And how do you expect this to impact your renewal discussions with your distribution partners? That's my first. And then my second, Bob, you've seen several iterations of the video game strategy during your tenure. Can you talk a little bit more about why this investment in Epic Games is the right move for you here and what a product might look like and when that may come to market? Thank you. |
2,287 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Bob Iger : Sure. Let me take the second part of the question first. Yes, you're right. We've tried our hand at video games in a number of different directions. And actually, the one that ended up being the most successful for us was the license. And in fact, we've licensed, I think, $9 billion franchises, including the Spider-Man franchise, which is the most successful video game last year. After I came back, I sat down with Josh D’Amaro, who runs our experiences business and his executive who actually manages games, Sean Shoptaw. And one of the things they showed me -- actually, the first thing they showed me were demographic trends. And when I saw Gen Z and Gen Alpha and even millennials and I saw the amount of time they were spending in terms of their total media screen time on video games, it was stunning to me, equal to what they spend on TV and movies. And the conclusion I reached was we have to be there, and we have to be there as soon as we possibly can in a very compelling way. We knew through our relationship with Fortnite that there was already success when some of our characters and franchises were expressed or showed up in Fortnite. And we knew Tim Sweeney at Epic because we were involved -- he was involved in our Accelerator program, I think in 2017. And so, I met with Tim, and Josh and his team started a discussion about what if we create a gigantic Disney World a la Fortnite that could live next to Fortnite and be completely interconnected with it, a world where people could play games that we create, could create their own games, could watch. You can imagine the creation of short-form videos or may -- we may even use the platform to actually distribute some of our content, also the people that could interact with one another, and ultimately, some form of shopping as well and other forms of creation. Obviously, there'll be some -- there are the opportunities to buy digital goods, but maybe even at some point, physical goods. And I just think that given the demographic trends and given the |
2,288 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | digital goods, but maybe even at some point, physical goods. And I just think that given the demographic trends and given the success of Fortnite -- and by the way, they're experiencing really a great era of both customer satisfaction and growth as they return to some of their roots. The numbers at Fortnite have been really compelling. And we just think this is -- just as we take our IP from our movies and our television and have them expressed in our parks, this is a great way to do it in games. And for us, it's a way to have skin in the game with them with the investment of $1.5 billion, strengthen a partnership because we have skin in the game, but also build a world where we're actually not creating too much risk for the company. So as we see it, this is the best of all worlds in many respects from a business venture perspective and certainly great for consumers who love to interact with our characters already in video game format. So I'm actually really thrilled about it. And the second -- or the first part of your first question, accelerating cord-cutting. Understand that we're going to get paid in this new joint venture for our channels at a level that's commensurate with the level that we get paid for those channels in the multi-channel ecosystem. And so if a consumer moves out of that and then into this, then what we get paid for our -- certainly, these channels that are in it is equal to where we get paid there. We have some other channels that are not part of this new bundle. But frankly, if you look at our company and you look at what we've done with FX on Hulu, with the Disney Channel on Disney+, with National Geographic on Disney+, we're really very well positioned to withstand, basically, the continued challenges that the multi-channel ecosystem will have. And while there might be some de minimis economic impact on us with more cord-cutting for those channels, we're backstopped in all of those channels with the content that exists or that we ultimately put on Hulu and Disney+. So it's -- for |
2,289 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | in all of those channels with the content that exists or that we ultimately put on Hulu and Disney+. So it's -- for us, it's very low risk and actually, as I talked earlier, potentially quite accretive to us in terms of signing up sports fans that have never signed up for the bundle where they may no longer want it. |
2,290 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | Alexia Quadrani : Okay. Thanks for the question. And I want to thank everyone for joining us today. Note that a reconciliation of non-GAAP measures that were referred to on this call to the equivalent GAAP measures can be found on our Investor Relations website. Let me also remind you that certain statements on this call, including financial estimates or statements about our plans, guidance or expectations and drivers, including future revenues, profitability, subscribers free cash flow, adjusted EPS and capital allocation and other statements that are not historical in nature, may constitute forward-looking statements under the securities laws. We make these statements on the basis of our views and assumptions regarding future events and business performance at the time we make them, and we do not undertake any obligation to update these statements. Forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results expressed or implied in light of a variety of factors. These factors include, among others, economic or industry conditions, competition and execution risks, including in connection with our business plan, potential strategic transactions and our content, cost savings, the market for advertising for future financial performance and legal and regulatory developments. In particular, our expectations regarding DTC profitability, subscriber levels and ARPU are built on certain assumptions around subscriber additions based on future strength of our content slate, churn expectations, the financial impact of the Disney+ ad tier and price increases, the impact of bundling and availability of Hulu on Disney+, technological advances and paid sharing efforts, our ability to continue to execute on cost rationalization while preserving revenue and macroeconomic conditions, all of which, while based on extensive internal analysis as well as recent experience provides a layer of uncertainty in our outlook. For more information about key risk |
2,291 | DIS | 1 | 2,024 | 2024-02-07 16:30:00 | The Walt Disney Company | 191,564 | analysis as well as recent experience provides a layer of uncertainty in our outlook. For more information about key risk factors, please refer to our Investor Relations website, the press release issued today and the risks and uncertainties described in our Form 10-K, Form 10-Q and other filings with the Securities and Exchange Commission. We want to thank you for joining us and wish everyone a good rest of the day. |
2,292 | DIS | 2 | 2,025 | 2025-05-07 08:30:00 | The Walt Disney Company | 191,564 | Operator: Good day, and welcome to The Walt Disney Company's Second Quarter 2025 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations. Please go ahead, sir. |
2,293 | DIS | 2 | 2,025 | 2025-05-07 08:30:00 | The Walt Disney Company | 191,564 | Carlos Gomez: Good morning. It's my pleasure to welcome everyone to The Walt Disney Company's second quarter 2025 earnings call. Our press release, Form 10-Q and management's posted prepared remarks were issued earlier this morning and are available on our website at www.disney.com/investors. Today's call is being webcast and a replay and transcript will be made available on our website after the call. Before we begin, please take note of our cautionary statement regarding forward-looking statements on our Investor Relations website. Certain statements on this call, including those regarding our expectations, beliefs, plans, financial estimates and prospects, trends, outlook and guidance, and other statements that are not historical may be forward-looking statements under the securities laws. We make these statements on the basis of our assumptions regarding the future at the time we make them and do not undertake any obligation to provide updates. Forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from the results expressed or implied in light of a variety of factors. These factors include, among others, economic or industry conditions, competition, execution risks, the market for advertising, our future financial performance and legal and regulatory developments. Refer to our IR website, the press release issued today and the risks and uncertainties described in our Form 10-K, Form 10-Q and other filings with the SEC for more information about key risk factors. A reconciliation of certain non-GAAP measures referred to on this call to the most comparable GAAP measures can be found on our IR website. Joining me this morning are Bob Iger, Disney's Chief Executive Officer; and Hugh Johnston, Senior Executive Vice President and Chief Financial Officer. Following introductory remarks from Bob, we will be happy to take your questions. So with that, I will now turn the call over to Bob. |
2,294 | DIS | 2 | 2,025 | 2025-05-07 08:30:00 | The Walt Disney Company | 191,564 | Bob Iger: In the 102 year history of The Walt Disney Company, there have been many defining moments and countless achievements. One such moment was the opening of Disneyland in 1955. Now 70 years later, having entertained 4 billion guests across six Disney theme park destinations around the world, we are celebrating another great moment in our storied history. I’m joining you from the United Arab Emirates, where we just announced an agreement to bring a Disney theme park to Abu Dhabi. Disneyland Abu Dhabi will be authentically Disney and distinctly Emirati. It will serve as an oasis of extraordinary Disney entertainment for millions and millions of people in this crossroads of the world, connecting travelers from the Middle East and Africa, India, Asia, Europe and beyond. This seventh Disney theme park resort will rise from the shores of this land in spectacular fashion, blending wonderful Disney stories and characters with the cultures and tastes of this country and this region. It will combine contemporary architecture and cutting-edge technology with the timeless magic of Disney to offer guests deeply immersive experiences in unique and modern ways. As part of our new strategic partnership with the Miral Group of Abu Dhabi, Disney will oversee design, license our IP and provide operational expertise, while Miral will provide the capital, construction resources and operational oversight. Our Imagineering team is already hard at work designing this large and very special destination that will become a source of joy and inspiration for generations to come. This is my third visit to Abu Dhabi in the last nine months. And each time, I gain more appreciation and respect for the UAE government, the government of Abu Dhabi, for our partners at Miral and for the people and the culture of Abu Dhabi. As we prepare to embark on this exciting new addition to our experiences portfolio, we already have more expansion projects underway domestically and around the world than at any time in our history. That includes investing |
2,295 | DIS | 2 | 2,025 | 2025-05-07 08:30:00 | The Walt Disney Company | 191,564 | more expansion projects underway domestically and around the world than at any time in our history. That includes investing more than $30 billion in our theme parks in Florida and California to enhance our offerings, create jobs and support the U.S. economy. Our focus must always be on building for tomorrow, as much as it is on managing for today. That eye to the future and driving growth is central to the important work we've done advancing our four strategic priorities. And looking at our second quarter results, we're making excellent progress. We had a very strong Q2 with adjusted EPS, up 20% from the prior year, rounding out a solid first half of fiscal 2025. Our Experiences segment delivered strong results this quarter, driven by the outstanding performance from our domestic businesses. Investments in this segment have delivered impressive returns on invested capital with returns from our experiences businesses at all-time highs. Experiences is obviously a critical business for Disney and also an important growth platform. Despite questions around any macroeconomic uncertainty or the impact of competition, I'm encouraged by the strength and resilience of our business, as evidenced in these earnings and in the second half bookings at Walt Disney World. Our Entertainment business, including movies, television series, news and sports continues to generate strong growth. Our feature films continue to enjoy success at the global box office. Thunderbolts from Marvel Studios opened this past week and is currently the number one movie in the world and the best reviewed Marvel film in the last few years. We are also excited about our upcoming theatrical slate for the remainder of the calendar year, including the live action Lilo & Stitch, Pixar's Elio, Marvel's The Fantastic Four: First Steps, Freakier Friday, Zootopia 2 from Walt Disney Animation Studios and the spectacular Avatar: Fire and Ash. We're also quite pleased with the performance of our general entertainment and news programming. Finally, sports |
2,296 | DIS | 2 | 2,025 | 2025-05-07 08:30:00 | The Walt Disney Company | 191,564 | Fire and Ash. We're also quite pleased with the performance of our general entertainment and news programming. Finally, sports viewership trends continue to be healthy. ESPN's Q2 primetime audience among the key 18 to 49 demographic was up 32%, making it ESPN's most watched Q2 in primetime ever, driven by ESPN's fantastic programming, including NFL and college football, the NCAA Women's Basketball Tournament and other exciting events, all of which is giving us optimism, as we head into the upfront next week. Meanwhile, we are only a few months away from the launch of ESPN's exciting new direct-to-consumer product offering, and we look forward to sharing pricing and timing details very soon. Overall, our expansive portfolio of high quality content and programming is enabling us to continue to grow revenue and profitability in our streaming business. Streaming remains a key priority and a core growth platform for Disney. And as we move forward, our improvements in the product will continue to enhance the user experience, increase engagement and reduce churn, thereby enabling us to grow the strategic business at an accelerated rate over time. This has been an excellent first half of the fiscal year with strong results powered by our disciplined and focused growth strategy. We remain confident about the direction of the company and optimistic about our outlook for the rest of the fiscal year. And with that, Hugh and I would be happy to take your questions. |
2,297 | DIS | 2 | 2,025 | 2025-05-07 08:30:00 | The Walt Disney Company | 191,564 | Carlos Gomez: Thanks, Bob. As we transition to Q&A, we ask that you please try to limit yourself to one question in order to help us get through as many analysts as possible today. And with that, operator, we are ready for the first question.
Operator: Thank you, sir. [Operator Instructions] Today's first question comes from Ben Swinburne with Morgan Stanley. Please go ahead.
Ben Swinburne: Good morning or good evening, I guess, if you're overseas. Bob, I want to pick up on the streaming commentary you just were talking about. Over the last year plus, you guys have been bringing more Hulu content and sports content into Disney+, you're bringing a flagship in from a bundling perspective. I'm just wondering, if you're seeing benefits to this broader content strategy within the Disney+ app, whether you look -- this is obviously a domestic comment, but when you look at engagement, sign-ups, etc., is the broadening out of Disney+ into other areas of content helping the business from a sign-ups, churn engagement point of view? And is there more ahead that you think can really drive the business? And I just wanted to ask you because I don't think it was in any of the prepared commentary. The three year guidance, the double-digit earnings growth in '26 and '27, I assume all that is still in place off of the new '25 higher EPS base. Just wanted to make sure we had that correct. Thanks so much. |
2,298 | DIS | 2 | 2,025 | 2025-05-07 08:30:00 | The Walt Disney Company | 191,564 | Bob Iger: Thanks, Ben. To answer your question specifically, the presence of Hulu embedded in Disney basically from a user experience perspective and the addition of sports content is definitely having an impact, definitely having a positive impact. Not only is engagement up, but churn is down and significantly. And as we look ahead, it's obviously our desire and in fact, we're optimistic about being able to execute against it to turn the streaming business into a true growth business. And as we see it, there are three ways to do it. One is, what we've just talked about, which is to continue to put Disney+ and Hulu together as a user experience. You'll see more of that in the months ahead. In addition, we plan when we launched ESPN direct-to-consumer to be really smart about bundling that. And for those that bundle, the experience will be fully integrated, that will be another big step. So when you consider the Disney brands that are part of Disney+, the general entertainment that's part of Hulu and the volume, and then the live sports that will be part of the experience. In a way, there's nothing like it in the streaming world. It's unrivaled in terms of quality, in terms of volume and just in terms of variety. We're very excited about it. Two other pillars of growth for that business will be technology. We're also hard at work in improving our basically the tech side of that business. We've taken a lot of steps already, including paid -- including paid sharing, which we're just kicking in with Hulu that's also starting to work. A lot more in terms of personalization and customization, a lot on the ad-tech side and much more coming. I was just taken through a roadmap for the rest of the year. So we're not talking about many years. We're talking about near-term where the technology improvements to the platforms will be significant. And of course, the third pillar of growth will be investment in content, particularly outside the United States where we know that we need to invest more in local content and we've |
2,299 | DIS | 2 | 2,025 | 2025-05-07 08:30:00 | The Walt Disney Company | 191,564 | in content, particularly outside the United States where we know that we need to invest more in local content and we've already started that process. It takes time and we don't really end up booking those costs until the shows air, but we're already starting to develop more aggressively in markets -- in very, very targeted markets outside the United States. |
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