Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Adjusted earnings per share increased by 30% compared to the previous year, with a new full year adjusted EPS growth target set at 25%.
- The entertainment portion of the streaming business achieved profitability for the first time this quarter, marking a significant milestone.
- Successful launch of Hulu on Disney+, enhancing content availability and subscriber experience, with plans to add ESPN content by the end of the year.
- Strong performance in the Experiences segment, driven by strategic investments and expansions such as the Disneyland Forward initiative.
- Record-breaking viewership for ESPN, including the most watched NCAA Women's Final Four and NFL postseason, highlighting strong audience engagement and potential for future growth.
Negative Points
- Anticipated softer performance in the third quarter due to seasonality, particularly in India sports offerings.
- Challenges in the streaming segment with Disney+ Hotstar expected to incur losses in the third quarter due to expensive ICC Cricket rights.
- Decrease in operating income for Entertainment linear networks, driven by lower affiliate and advertising revenue both domestically and internationally.
- Higher wage expenses and preopening costs impacting profitability in the Experiences segment, with expected normalization of post-COVID demand.
- Concerns over international subscriber growth due to impacts from wholesale deal changes and price increases.
Q & A Highlights
Q: Can you discuss the expectations for attendance at Disney Parks as you start to lap the post-COVID rebound, both domestically and globally?
A: (Robert A. Iger - CEO & Director) Attendance is normalizing relative to post-COVID highs, but bookings indicate healthy growth. The Parks business grew 10% in the quarter, showing strong revenue. Despite some one-time expenses in Q3, the outlook remains positive with expected mid- to high single-digit growth in Q3 and double-digit growth in Q4.
Q: With the upcoming launch of ESPN on Disney+, how do you see ESPN evolving over the next 12 to 18 months, especially in terms of profitability in a high-cost sports rights environment?
A: (Robert A. Iger - CEO & Director) ESPN will pivot towards digital while maintaining its linear presence. The focus is on live sports' strong engagement and ratings. ESPN will offer multiple access points for consumers, both as part of bundles and standalone options. Long-term sports rights agreements provide stability, and the addition of an ESPN tile on Disney+ later this year will start integrating sports into the platform.
Q: How do you view the health of Marvel IP and the balance between sequels and new content?
A: (Robert A. Iger - CEO & Director) The strategy includes balancing sequels with new content, especially in animation. Marvel will reduce output to focus on quality, planning about two TV series and two to three films per year. Upcoming releases include high-profile sequels and new entries that are expected to drive continued interest and engagement.
Q: Can you provide insights into the advertising outlook as you approach the upfront season and the impact of integrating new technologies like the Trade Desk and Google's TV 360?
A: (Robert A. Iger - CEO & Director) The advertising market is healthy, with strong demand across most categories. Live sports and premium content offerings are performing well. The integration of new technologies is expected to enhance advertising capabilities and efficiency, positioning Disney favorably as it navigates increased market supply.
Q: What are the plans for ESPN+ once the flagship ESPN streaming service launches?
A: (Robert A. Iger - CEO & Director) ESPN+ will continue as a separate service, and subscribers will have access to ESPN+ content through the new ESPN tile on the Disney+ platform. The flagship service will include all ESPN+ content for those who choose the comprehensive package, providing flexibility for consumers.
Q: How is Disney handling the shift towards direct-to-consumer streaming, particularly in terms of technological enhancements and subscriber engagement?
A: (Hugh F. Johnston - Senior EVP & CFO) Disney is focused on driving subscriber engagement through high-quality programming and technological improvements like recommendation engines and bundling options. The upcoming integration of sports content and enhancements in direct-to-consumer marketing are key strategies to boost engagement and reduce churn.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
