The Walt Disney Company Third Quarter 2024 Financial Results Conference Call has begun with Alexia Quadrani, Vice President of Investor Relations, welcoming everyone and introducing the speakers, CEO Bob Iger and CFO Hugh Johnston. The call will consist of a question-and-answer session and a replay and transcript will be available on the company's website. The first question, from Jessica Reif Ehrlich of Bank of America, addresses theme parks and the potential impact of protracted weakness and the upcoming addition of three new cruise ships.

In response to a question about the expected decline in operating income for the fiscal fourth quarter and the impact of the new NBA contract, Hugh Johnston, speaking on behalf of the company, clarified that while there was a slight moderation in demand for the company's experiences business, there was still 2% revenue growth in the third quarter due to the strong appeal of the company's intellectual property. He also noted that 40% of the experiences business is not domestic, and that they expect to see similar results in the fourth quarter but do not anticipate a protracted decline. He mentioned the potential impact of expenses related to new ships in the next few years, but overall sees the slowdown being offset by the success of upcoming entertainment projects.

Robert Iger discusses the upcoming NBA deal and its impact on ESPN's programming and revenue. He mentions the value of live programming and the growing value of basketball and women's sports. He also talks about securing international rights and the potential for increased profits in the future. Another topic of discussion is the outlook for Disney+ and its potential as a significant earnings contributor for the company, especially with the addition of Hulu.

Disney CEO Robert Iger discusses the success of their streaming services, driven by the company's strong creativity in both television and motion pictures. He mentions the significant consumption and popularity of their IP, including Disney, Fox, Hulu, FX, ABC, and National Geographic, which gives them confidence in their ability to continue increasing prices without significant churn. He also clarifies that their flattish revenue in Q4 refers to the domestic parks segment.

The company is confident in its ability to increase pricing leverage with the addition of new features and a successful movie slate. The goal is to grow engagement on the platform by offering a wider variety of programming and bundling options. The company is also focused on improving technology and marketing to make the business more successful. The upcoming movie releases, including Moana, Mufasa, and several popular franchises, are expected to contribute to the company's growth in the next two years.

The potential for box office and global streaming value is reason for optimism, according to Disney executives Hugh Johnston and Bob Iger. They plan to invest significantly in sports, scripted TV, and movies to create value and support their streaming platform. This balance of investments will be key for the company's future success. Johnston also provided an update on free cash flow expectations for the year.

Hugh Johnston discusses the company's progress towards achieving double-digit margins for DTC, stating that the levers for growth, such as bundling and password-sharing, are working well. He also mentions the positive impact of pricing and product improvements on reducing churn and keeping consumers with the company. He expresses confidence in the company's value and potential for continued growth.

The company is focused on driving productivity and reducing costs. They have made progress in turning a profit and are aiming to surpass double-digit margins. They have shared a number for cruise ship costs for this year and expect it to double in 2025. The company is still exploring strategic partnerships for ESPN. The cost estimate for the company's operations was originally $5.5 billion.

The speaker discusses the company's increase in revenue to over $7.5 billion and their goal to continue finding opportunities to do more with less. They plan to aggressively invest back in the business and are positive about the upcoming launch of Venu. They also mention the softening in the parks business and expect a continuation of current trends, with international attendance expected to improve after the Olympics.

An analyst from Guggenheim asks about the recent decline in ARPU for Disney+ and whether it is due to bundling or the shift to the ad-supported tier. The CFO confirms that both factors have a small effect and they are happy with the profitability of both options. When asked about demand moderation in the Experiences segment, the CFO explains that they have good visibility and the changes are minor. The next question comes from Deutsche Bank, who asks about the strong results from the upfront advertising this year.

The speaker discusses the current state of advertising demand, noting that the market is healthy and growing. They attribute this to the success of live sports and their streaming service, as well as a new capability called Disney Streaming. The speaker also mentions increased sales of TV content and licensing, which is primarily due to the success of the box office.

The company has a clear licensing strategy, focusing on producing and monetizing its own IP. The investments being made in the Experiences business, including cruise ships, are expected to accelerate growth. The lead time on these investments is multiple years, so the exact timing of the growth is not yet known. The company expects to see a return on these investments in the future.

The speaker states that they will share information about the India question when the deal is closed and will provide clear details for modeling. The operator reminds listeners that non-GAAP measures can be found on the Investor Relations website and that forward-looking statements may be made, but are subject to risks and uncertainties. These include economic and industry conditions, competition, execution risks, and legal and regulatory developments.

The expectations for DTC profitability, subscriber levels, and ARPU are based on certain assumptions, including content strength, churn, pricing, bundling, and technological advances. There is uncertainty in the outlook due to these factors and potential risks and uncertainties. More information can be found on the Investor Relations website and in recent filings with the Securities and Exchange Commission. The speaker thanks the audience for joining and wishes them a good day.

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