The operator welcomes participants to The Walt Disney Company's second quarter 2024 earnings call. The call will be led by Bob Iger, CEO, and Hugh Johnston, CFO. The company had a strong performance in the quarter, with a 30% increase in adjusted earnings per share and a raised full-year EPS growth target of 25%. The Experiences segment and streaming business were the main drivers of this success, with the Entertainment portion of the streaming business achieving profitability. This is attributed to the turnaround efforts of last year and the leadership of Disney Entertainment Co-Chairmen Alan Bergman and Dana Walden.

Despite reporting losses 18 months ago, the company remains on track to reach profitability in streaming by Q4. They have launched Hulu on Disney+ and plan to add an ESPN tile by the end of the year. They also have a strong lineup of highly-anticipated theatrical releases and successful series, such as FX's Shogun. The key to their success in streaming is their exceptional content that appeals to audiences of all ages and backgrounds.

The show airing on FX is the most-watched in the network's history on streaming platforms and is driving a high number of sign-ups. Linear networks are still important in reaching wider audiences, with 17 of the top 20 most viewed series on streaming coming from linear channels. ESPN had a successful April with record-breaking ratings for various sports events. The Experiences business is also a strong financial driver, with plans for expansion at Disneyland Resort receiving approval from the Anaheim City Council.

The final vote for bringing Avatar to Disneyland is expected to take place tonight, marking a significant milestone for the original theme park. Disney's various businesses, including Entertainment, Sports, and Experiences, have yielded positive results and are executing their strategic priorities with speed and determination. In the second fiscal quarter, Disney saw strong double-digit percentage year-over-year earnings growth and exceeded all financial guidance. The Entertainment segment saw a 70% increase in operating income, driven by direct-to-consumer revenue and a 2% increase in core Disney+ subscribers. This exceeded expectations due to expense savings. Disney+ core ARPU also increased by 6%, reflecting price increases and international growth.

The recent Charter deal has contributed to the growth of Disney+ ad tier subscribers, and the company expects to see continued growth in the future. However, they are forecasting a loss in the third quarter due to expenses related to ICC cricket rights. The Entertainment Linear Networks and Content Sales/Licensing and Other segments saw a decrease in operating income due to lower revenue. In the Sports segment, operating income decreased slightly at ESPN but improved at Star India Sports. The decrease at ESPN was due to higher costs for a college football playoff game, partially offset by higher ad revenue.

In the second quarter, ESPN's domestic ad sales increased by over 20%, driven by the NBA playoffs. Star also saw higher results due to a decrease in programming costs. Parks and Experiences saw a 10% increase in revenue and a 12% increase in operating income, with strong international growth. However, in the third quarter, operating income is expected to be comparable to last year due to non-comparable items and timing-related factors. Additionally, higher wage expenses, pre-opening expenses, and normalization of post-COVID demand will impact results.

The company is seeing evidence of a global moderation in demand for travel, but still expects healthy demand in the fourth quarter. They are also making progress on cost-efficiency initiatives and remain on track to exceed their annualized target. They expect to generate over $8 billion in free cash flow this fiscal year and continue returning capital to shareholders. During the Q&A, they ask analysts to limit themselves to one question. The first question asks for more detail on the demand for Parks and Experiences, specifically regarding attendance at the domestic and global level as they start to lap the post-COVID rebound.

Bob Iger, CEO of Disney, is optimistic about the future of the company's Parks business, expecting continued growth in attendance despite some softening trends. He also addresses the timing of double-digit operating margins for the Direct-to-Consumer (DTC) segment, which he sees as a key driver of growth for the company. He clarifies that the goal is to have both strong growth and healthy margins for the DTC business.

Bob is confident in ESPN's growth prospects and mentions several factors that will contribute to this growth, such as programming, bundling, and international expansion. He also mentions managing costs and leveraging technology to improve margins. He declines to comment on specific timing or strategies, but overall, he is positive about the future of the business.

Bob Iger, CEO of Disney, was asked about the potential for growth in their business in light of the current inflationary sports rights environment. He also discussed the health of their IP, specifically the Marvel content coming in the next few years. Iger believes that live sports will continue to be successful and generate engagement, and they will be adding an ESPN tile to Disney+ at the end of the year to introduce sports content to their subscribers.

The speaker discusses how ESPN will pivot towards digital while still maintaining a presence on linear platforms. They are confident in their long-term deals with major sports organizations and have a strong slate of programming. They also mention upcoming movies from their studio IP, including Planet of the Apes, Inside Out 2, Deadpool, Alien, Moana 2, and Mufasa.

The speaker discusses the company's efforts to reduce output and focus on quality, particularly in regards to Marvel. They plan to decrease TV series to two a year and film output to two to three a year. They express confidence in the upcoming slate and the team working on it. The speaker also addresses topics such as advertising, password sharing, and the recent loss of subscribers for ESPN+. They mention their confidence in securing a long-term contract with the NBA, but there may be higher costs and fewer games. No comment is given on profitability with the new contract.

The paragraph discusses the potential impact of the conclusion of NBA negotiations on strategic investment. It also addresses questions about advertising and password sharing, with the executives expressing confidence in the advertising market and plans to crack down on password sharing. They also mention the strong lineup of programming across their various platforms.

The question asks about the importance of securing global sports rights for driving international growth for ESPN and Disney+, and how this factors into decision-making for investing in sports rights.

During a recent investor call, Disney executives Bob Iger and Hugh Johnston discussed the company's strategy for growth in their sports and studio divisions. Iger mentioned that they are being selective about investing in international sports rights, while Johnston stated that the studio profitability has some cyclicality to it but should get back to profitability with the upcoming slate. When asked about the growth framework for the Theme Park business, Johnston and Iger did not provide specific details but stated that the business has historically grown at mid-single-digit rates and they have a significant CapEx plan for the next decade.

Hugh Johnston addresses the potential for growth and high returns in the Parks and Cruise businesses. Bob Iger discusses the Board's involvement in succession planning and his goal for a smooth transition to the next CEO.

John Hodulik asks Bob Iger about declining engagement on Disney+ and efforts to boost viewership, including revamping technology and the UI. Iger mentions the importance of programming, recommendation engines, and bundling to drive engagement. He assures that they are focused on increasing engagement as it leads to subscriber satisfaction and lower churn.

The speaker was asked about the company's strategy for ESPN+ once they launch flagship. They explained that if you buy ESPN flagship, you will also get all the ESPN+ programming. However, if you do not want that, you can buy ESPN+ on its own. The speaker also mentioned that with the combined Disney+ Hulu app, there will be an ESPN tile where you can access ESPN+ if you are a subscriber. The next question was about the balance between established franchises and new IP in the company's upcoming slate. The speaker stated that they will balance sequels with originals, particularly in animation. They also mentioned that they will be releasing several films from 20th Century Fox IP in the summer.

The speaker discusses the value of sequels in the current movie marketplace and mentions upcoming original and sequel films from Marvel and 20th Century Fox. They also mention a partnership with Charter and its performance in terms of subscriber engagement and churn. The speaker hints at potential future partnerships using this template.

The speakers discuss the success of their recent licensing deal with Charter and its potential impact on future partnerships. They also mention their current licensing agreements with Netflix and express a willingness to explore other opportunities, though they do not foresee a significant shift towards licensing off-platform content.

Alexia Quadrani thanks everyone for joining the call and reminds listeners that a reconciliation of non-GAAP measures can be found on the Investor Relations website. She also cautions that certain statements made on the call may constitute as forward-looking statements and are subject to risks and uncertainties. These include economic and industry conditions, competition, and execution risks, among others. The company's expectations for DTC profitability, subscriber levels, and ARPU are based on assumptions around subscriber additions, content strength, pricing decisions, and technological advances, which could impact their outlook.

The company provides information about key risk factors on their Investor Relations website and in their filings with the Securities and Exchange Commission. They thank participants for joining the call and conclude the conference.

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