The operator welcomes participants to The Walt Disney Company's first quarter 2024 financial results conference call. Bob Iger, Disney's CEO, and Hugh Johnston, CFO, will be discussing the company's strong performance and ambitious plans for growth. Iger announces significant developments, including the transition of ESPN into a digital sports platform and plans for profitable streaming, revitalizing film studios, and boosting growth in parks and experiences.

Disney announced several exciting developments, including the launch of a new streaming sports service in partnership with Fox and Warner Brothers Discovery, the addition of Coach Nick Saban to ESPN's lineup, the release of a feature-length animated sequel to Moana, a new relationship with Epic Games, and a $3 billion stock buyback program. These announcements demonstrate the success of Disney's transformation and the company's strong financial results in Q1.

Disney has seen a significant increase in operating income for their entertainment streaming division and is on track to reach profitability by the end of fiscal '24. Their experiences business has also seen record revenue and operating income. ESPN remains a key value driver for the company and has seen growth in their domestic sports business. They are also launching a new streaming sports service in partnership with Fox and Warner Brothers to provide consumers with a single place to access their sports content. This move will also help capture consumers who are moving away from traditional cable and satellite bundles.

In the fall of 2025, ESPN will offer a standalone digital destination where fans can stream live games and studio programming, access features like ESPN Bet and Fantasy Sports, and personalize their experience. They are also making progress towards securing deals with potential content and marketing partners. The unified streaming experience is expected to lead to higher engagement, lower churn, and greater advertising potential. The standalone ESPN service will also be available on Disney+ for bundled subscribers. This is part of Disney's ambitious streaming strategy, which includes the acquisition of 21st Century Fox, the launch of Disney+, and investments in technology.

Disney has had great success with their streaming services, expanding outside the U.S. and gaining over 1,000 global advertisers. Their content continues to be highly acclaimed, with numerous award nominations and wins. They have also seen success with recent Disney-branded programming, such as Percy Jackson and the Olympians and Bluey. Looking ahead, they have a strong lineup of original content coming to Disney+ and Hulu, including new shows from Marvel Studios and Lucasfilm. Hulu will also be launching FX's Saga Shogun and adding all seasons of Grey's Anatomy to their library.

The upcoming 20th season of a popular show will only be available on Hulu, while a Taylor Swift concert film will be released on Disney+ featuring additional songs. Disney also has a strong lineup of new releases, including sequels to Moana and Zootopia, a live-action version of Moana, and highly anticipated films such as Deadpool 3 and Avatar 3.

Disney is looking forward to releasing highly anticipated movies such as Frozen 3, a new Toy Story movie, and a Star Wars movie featuring The Mandalorian and Grogu. These films will not only be shown in theaters but will also drive subscriptions and engagement on their streaming platforms. The success of their parks in Q1 has given them a strong foundation to invest in further growth. They have also formed a partnership with Epic Games to create a new immersive universe in the popular game Fortnite, providing opportunities for growth and expansion. This will allow fans to experience Disney stories in new and creative ways, particularly appealing to younger audiences who are avid consumers of video games.

The article discusses the significant amount of time spent by millennials, Gen Z, and Gen Alpha on screen-based platforms playing video games. The partnership between Disney and Epic provides an opportunity for more audiences to connect with Disney's iconic brands. The company's strong performance in various businesses has set the stage for growth and success. The board has declared a 50% higher dividend for July and authorized share repurchases. The company's new CFO, Hugh Johnston, is excited about the opportunities ahead.

The speaker is pleased with the financial results of the company's first quarter, with an increase in earnings per share and operating margin. They attribute this growth to strong pricing and cost efficiency measures. Each business segment saw an increase in revenue and operating income, with entertainment experiencing the most significant improvement at direct-to-consumer. The company's streaming services, Hulu and Disney+, saw changes in subscribers, with Hulu increasing and Disney+ decreasing, but overall still performing well.

In the first quarter, Disney+ saw an increase in its bundled offerings and a rise in core ARPU due to price increases. The second quarter is expected to see a further increase in ARPU, driven by continued price increases and the addition of Charter's Spectrum TV Select subscribers to the Disney+ ad tier. Net adds are expected to be between 5.5 million and 6 million, with domestic net adds driven by Charter entitlements. International core subs may decrease slightly due to changes in wholesale deals and higher churn from price increases. However, Disney+ is confident in its long-term subscriber growth, fueled by its strong content slate, paid sharing efforts, technology advancements, and bundling strategies. Beginning this summer, Disney+ will also have new capabilities to combat improper sharing.

In the upcoming year, account holders will be able to add individuals outside of their household for an additional fee. This is expected to benefit the company's subscriber base and improve the overall customer experience. In the second quarter, the entertainment DTC is expected to see growth in revenue and operating losses similar to the first quarter. The company remains confident in reaching profitability for their streaming businesses in Q4 of fiscal 2024. The entertainment linear networks saw a decrease in operating income due to lower advertising and affiliate revenues, offset by lower programming and production costs. Domestic advertising revenue was impacted by lower impressions and fewer political advertisements, while affiliate revenue decreased due to a decline in subscribers. Adjusted for certain networks not being carried by Charter, the impact of subscriber decline was closer to 7%.

In the first quarter, the company saw lower programming and production costs due to strike-related impacts. However, content sales and licensing were lower than expected due to underperforming theatrical titles. Domestic ESPN saw growth in operating income, but Star India saw a decline due to higher rights costs for the ICC Cricket World Cup. Domestic affiliate revenue remained steady, but ad sales were down slightly. The company is confident in the value of investing in sports. Second quarter advertising demand for sports is strong, even when adjusted for timing shifts. The experiences business, including parks and consumer products, saw positive growth in operating income.

The company had record-setting results in the quarter due to strong performance at Shanghai and Hong Kong theme parks, Disney Cruise Line, and Marvel's Spider Man 2. Despite tough comparisons and cost pressures, segment margins increased and the company remains optimistic about continued growth. They plan to invest $60 billion over the next 10 years, with a focus on capacity expansion. The company is on track to meet their cost target and generate $8 billion in free cash flow this fiscal year. They are confident in their progress and expect earnings to increase by at least 20% in fiscal 2024. The company will continue to invest in growth while maintaining a balanced approach to capital allocation.

The speaker, Alexia Quadrani, announces the start of the Q&A session and asks analysts to limit themselves to one question. The first question is from Ben Swinburne about Disney's recent news regarding sports and expenses. Bob Iger responds by saying that ESPN aims to serve sports fans no matter where they are and that the steps they are taking are to achieve this goal. He also mentions the challenges in the current TV landscape and the success of ESPN in the previous year.

ESPN has been successful in reaching sports fans, which is why advertisers, distributors, and sports leagues want to partner with them. They are aware of the changing media landscape and are looking for ways to effectively serve their audience. They have already launched ESPN+ and are now looking for partners to distribute a sports-centric tier through an app. This will allow them to reach new audiences and retain those who have left the traditional cable and satellite ecosystem. In the future, they plan to launch ESPN flagship, which will be bundled with Hulu and Disney+.

Bob and Hugh address questions about the future of Hulu Live and ESPN in the company's long-term plans. They mention a new immersive sports app that will have unique features, such as integrated betting and fantasy, and discuss the importance of maintaining ESPN's position in the sports industry. Hugh also confirms that there will be no change in operating expenses compared to previous guidance. A question is raised about Hulu Live's growth and its role in the company's future.

Bob Iger and Hugh Johnston discuss the future of Disney's offerings, including the recently announced direct over-the-top ESPN and sports bundle. Iger explains that the new sports service will be bundled with Hulu, which will increase engagement and reduce churn for the streaming platform. Johnston also mentions that the goal is to reach double-digit margins for Disney's direct-to-consumer business, which has always been the objective in order to build a strong and profitable business.

The company wants to build a good business and will focus on growing subscribers, managing pricing, and leveraging marketing, content, and technology spend. They plan to use paid sharing and bundles to increase subscriber numbers and reduce churn. International expansion is also a growth opportunity. The timeline for achieving a good business is uncertain and will depend on market conditions, but the company is committed to reaching this goal.

Jessica Reif Ehrlich asks a question about Disney's plans for new parks and attractions, including the possibility of a fifth gate in Florida. She also asks about the impact of the crackdown on paid sharing and how Disney plans to attract non-pay TV subscribers to their new sports JV. Bob Iger responds by saying that they are already working on new investments and increased capacity in all of their locations, including on the High Seas. He also mentions that there will be a cadence of new openings starting in 2025. Hugh Johnston addresses the question about paid sharing.

The sports service offered by Bob Iger's company will be cheaper for consumers compared to traditional cable and satellite bundles. It is targeted towards sports fans who don't want to pay for the entire bundle. The company also sees an opportunity to attract consumers who have left or may leave the bundle. The paid sharing opportunity for the company is similar to its competitor's and they have made changes to their user language and will communicate with accounts that are currently doing unpaid sharing.

The company is taking strategic actions to capitalize on opportunities and increase subscriber growth. The CEO is confident in the studio's output and the recent successes, while acknowledging some disappointments. The CFO is asked about the timing and cost of the Hulu acquisition and clarifies that the company has found additional cost savings.

The speaker discusses the negative impact of focusing on volume over quality in the film industry, and how they have taken steps to address this issue. This includes reducing output and focusing on making better films, while also establishing strong partnerships to manage creativity. They are optimistic about upcoming films, including sequels and franchises like Toy Story, Star Wars, and Avatar. They also mention the success of Moana on Disney+ and upcoming releases such as a Lion King prequel.

Marvel is focusing on its strong franchises and using familiar franchises to get people to see their films. They are working hard and have a positive trajectory. The process for closing the Hulu deal will take some time, but they are confident in cost savings across the board. The next question was about Charter integrating Disney+ into its pay TV programming tiers and the engagement levels of customers.

In response to a question about the sports JV, Bob Iger mentions that it is still early to determine the success of the model and whether it will be replicated with other distributors. He also mentions that the new partnership may lead to more access to customers and potential bundling opportunities. In regards to the video game strategy, Bob Iger believes that the investment in Epic Games is the right move and a potential product may come to market in the future.

The speaker discusses the success of their licensed video games, particularly the Spider-Man franchise, and the increasing amount of time people spend playing video games. They mention a meeting with Josh D’Amaro and Sean Shoptaw, who showed them demographic trends and the need for Disney to be involved in the video game industry. They also mention their relationship with Fortnite and a potential collaboration to create a Disney World-like game that would be interconnected with Fortnite and allow for various forms of interaction and potential shopping opportunities.

The speaker believes that investing in the popular game Fortnite is a smart move for the company, as it allows them to expand their IP and strengthen their partnership with the game. They also address the issue of cord-cutting and explain that they will still be compensated for their channels in the new joint venture. They are confident in their ability to adapt to the changing media landscape with their successful streaming services.

The speaker thanks the audience and reminds them to refer to the reconciliation of non-GAAP measures on the Investor Relations website. They also caution that forward-looking statements are subject to risks and uncertainties and may differ from actual results due to factors such as economic conditions, competition, and legal and regulatory developments.

The expectations for DTC profitability, subscriber levels, and ARPU are based on assumptions about subscriber additions, churn, the impact of bundling and Hulu, technological advances, and cost rationalization. These assumptions add uncertainty to the outlook. For more information on risk factors, refer to the Investor Relations website and recent filings with the Securities and Exchange Commission. The speaker thanks the audience and wishes them a good day.

This summary was generated with AI and may contain some inaccuracies.