Q4 2019 Earnings Call

Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

Ladies and gentlemen, thank you for standing by and welcome to the Walt Disney Company fiscal full year fourth quarter 2019 financial results Conference call.

This time, all participants' lines or in listen only mode.

After the speakers presentation, there will be a question answer session.

Yes. Good question. During this session you lead a press star one on your telephone please be advised that todays conference is being recorded.

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I'd now like to hand, the conference over to your speaker today.

There's little singer senior Vice President of Investor Relations. Thank you. Please go ahead Sir.

Good afternoon, and welcome to the Walt Disney Company fourth quarter 2019 earnings call.

Our press release was issued about 25 minutes ago, what is available on our website at www Dot Disney Dot Com forward Slash investors. Today's call is also being webcast and a transcript will be available on our website joining.

Joining me for today's call or Bob Iger, Disney's Chairman and Chief Executive Officer, and Christine Mccarthy Senior Executive Vice President and Chief Financial Officer.

Following comments from Bob and Christine will be happy to take your questions. So with that I'll turn the call over to Bob to get started.

Thanks, Mo and good afternoon, everyone.

We're now just days away from launching Disney plus the culmination of four years of planning organizational transformation and a lot of hard work and we're excited to be on the verge with this new era.

We're also pleased to have delivered a solid quarter, which Christine will discuss shortly.

Portion does I wanted to share a few thoughts about our DTC business to give your sense of the confidence we have in our strategy and to provide a few updates.

As you know we began this process with the acquisition of Bamtech, which gave us the means to implement our DTC strategy, putting us into that market quickly and ensuring we have the technology to deliver quality experience.

Our first after it was the SPM plus which was immediate hit with sports fans. When it launched last year and continues to deliver steady growth I'm pleased to announce that as of today DSP and plus has over 3.5 million paid subscribers, who are drawn to its unique and growing mix original content like the less.

And dairy NFL primetime with Chris Berman now exclusively on SPM Clos.

And exclusive live events, including U.S.C. College sports domestic and international soccer and top rank boxing.

You have seen to 44 pay per view of that last Saturday delivered one of the U.S.P. and pluses largest live audiences to date.

During pattern show SPM, plus appeals to a broad array of sports fans, those who want more of everything as well as fans who are highly passionate about a specific sport conference 14.

We believe we have numerous interesting opportunities to expand SCR plus is like an original program offerings.

Generally grow subscribers.

As I've said, our acquisition of 21st century, Fox was largely driven by the value. It brought to our overall DTC strategy, adding a number of critical elements, including controller, who which opens numerous growth opportunities domestically and internationally.

We also again, a large library of quality film and television content, along with additional filmmaking capabilities and the industry's best TV production studios, great talent, great brands and franchises like Nat Geo and FX, along with the Simpsons and Avatar.

This collection of IP and talent will contribute significantly to Disney plus and Hulu and with that in mind beginning in March Kulu will become the official streaming home for FX networks.

As I've mentioned on previous calls FX is a producer of high quality award winning content and will become a key content driver for who.

Its 2014 FX is around 277 Emmy nominations and 157 Emmys.

The awards FX have garnered come from programming that is recognized with quality and its bonus and the Hulu and ethics teams have been collaborating to develop and exciting strategy to bring the full breadth of FX concept and production capabilities, who subscribers with the introduction of FX on who.

Excellent who will include all seasons with more than 40, FX series and will offer episodes of current and new FX series immediately after the air on the linear network.

Additionally, FX will produce original series exclusively for FX on Hulu, starting with four new series in 2020 Dabs from Alex Garland Mrs America, starring Kate lunch at a teacher, starring Kate Mara and the old man, starting Jeff bridges and John Lithgow.

This is a great way to expand the FX brand and an important step for who as it adds original content to compete more aggressively with new and legacy DTC platforms.

FX presence on who combined with original production from our APC and Fox television Studios and our Fox movie Studios, including search life will greatly enhance who is consumer proposition.

Turning to Disney plus in preparation for the U.S. launch we tested the technology in the Netherlands, giving consumers free access to a curated collection of library content.

And we've been very pleased with the results, including the technical soundness and reliability of the platform.

The user feedback has been extremely positive with praise for the elegance and ease of the interface and the quality of the overall experience.

Ability to download the content has also been a big hit and the brands centric navigation has generated elegance and ease of use it was well received by users.

The viewing patterns in the Netherlands tests were also encouraging even without access to our full library or any original content. The service connected with users across all four quadrants male and female adults and kids driven by the breadth of our content and the affinity people have all ages have for it.

Disney plus launches in the U.S., Canada in the Netherlands next Tuesday, with Australia, New Zealand coming online November 19th.

And today I'm pleased to announce on March 30, Onest Disney plus will launch in markets across Western Europe , including UK, France, Germany, Italy, Spain and number of other countries in the region.

At launch Dizzy plus users will have immediate access to more than 500 movies, including all of our beloved volte titles and more than 7500 episodes of library television content, including 30 seasons of the Simpson.

Our your five this growing collection will include more than 620 movies and more than 10000 television episodes, along with countless shorts and features.

And as planned we first conceived the service.

Creative engines across our company, including the teams with Disney Pixar Marvel Lucasville National Geographic Disney Channel and Walt Disney Television Studios are focused on creating compelling original content for Disney plus.

At launch will offer 10 original movies specials and series exclusive to the platform, including the man to Loran.

First live action store were series is unlike anything audiences seen before on any platform and a strong indication of the quality in the storytelling that will define Disney plus.

We recently screened a significant portion of the first episode as a matter Laurie compressed.

Extremely positive reaction is driving tremendous buzz around this extraordinary series head of its debut on Disney plus.

Within a year of launch the amount of original content on Disney plus will increase to more than 45 series specials and movies will expand to more than 60 original projects per year by year five.

In addition to creating a phenomenal product we're supporting the launch of Disney plus with an unprecedented marketing campaign drawing on every existing connection the Walt Disney company has with consumers.

It's an historic effort to raise awareness and drive demand one that reflects our all in commitment through strategic initiative and our determination to launch big and scale fast.

We're also very pleased with the consumer enthusiasm, we're seeing as well as the interest from partners like Horizon, which has now offering of three year Disney plus the many of its customers.

Consumers can directly subscribed to the service for 699 month.

For 60, 990, 90 year at Disney plus Dotcom and starting November Twelveth, we can access the service through a growing variety of partners and platforms, including Apple, Google, Microsoft Sony and Roku and today, we're pleased to announce additional distribution partnerships with.

He is on fire Samsung and LG.

Disney plus will also be available in a bundle with SPM, plus and AD supported who for 12 99 month.

We spent the last couple of years completely transforming the Walt Disney company, making strategic acquisitions and organizational changes to focus the resources at a men's creativity across the entire company on delivering an extraordinary DTC experience unlike anything else in the market.

With the launch of Disney plus we're making a huge statement about the future of media and entertainment and our continued ability to thrive in this new era.

Like to take this opportunity to publicly acknowledge and sincerely. Thank the technical and creative teams along with countless others across our company, who invested their tremendous talent and a lot of time and effort in creating an exceptional DTC experience that is worthy of the Disney net.

Talk a lot about the inevitability of change our ability to both drive it and adapt to it as part of Disney's DNA helps keep as relevant each new generation, while also creating new opportunities for growth.

Is exciting and exhilarating and on the eve of launching one of our most ambitious initiatives to date on more confident than ever in our strategy and in our ability to execute as effectively deliver compelling value to our consumers and shareholders.

Going to turn the call over to Christine to talk better performance in the quarter and then we'll take your questions Christine.

Thanks, Bob and good afternoon, everyone, excluding certain items affecting comparability earnings per share from continuing operations for the fourth quarter, where a dollar seven.

We're pleased with our results this quarter and how we closed out the fiscal year.

Our core businesses delivered another solid year financial performance, we continue to make meaningful progress integrating the 21, CF businesses, while making significant investments to drive future growth.

Our studio had another great quarter and a phenomenon here in the fourth quarter operating income was up 79% driven by growth and worldwide theatrical due to the performance of the Lion King Toy story, four and Aladdin in the quarter compared to incredible too and ant man on the was last year.

The increase in operating income, partially offset by about a 120 million dollar loss at the 21 CF studio business, which was driven by the performance of AD Astra Arda racing in the rain and dark Phoenix.

The loss from the 20 once the studio business with about $100 million higher than the loss, we estimate the business generated in Q4 last year.

At Park experience and the products operating income was up 17% in the quarter driven by higher results, a consumer products and that our domestic park and experiences business.

Consumer products operating income was up 36% due to growth and merchandise licensing as a result of strong revenue growth from sales of frozen and toy story merchandise.

Apart our strategy of managing yield to drive greater profitability and enhance the guest experience continues to pay off.

Operating income at domestic parks and experiences with up 13% driven by growth at Disneyland on higher guest spending and an increase at Disney vacation club.

Results at Walt Disney World were comparable to the prior year as increases in guest spending occupied room nights and attendance were offset by higher cost associated with the launch of Star Wars Galaxy Thats.

Domestic parks and experiences margins were up 70 basis points in the quarter.

I'll note that hurricane Dorian had an adverse impact on Walt Disney World, which we estimate impact of the year over year chain can domestic parks and experiences margin by about 80 basis points.

Attendance at our domestic park, let's comparable to the fourth quarter last year and reflects the impact of hurricane during which we estimate adversely impacted attendance growth by about one percentage points.

Perks happen a guest spending was up 5% on higher admissions merchandise and food and beverage spending.

Her run spending at our domestic hotel was up 2% and occupancy of 85% with comparable to the fourth quarter last year.

Results at our international operations were comparable to the fourth quarter last year operating income growth at Disneyland, Paris, and Shanghai Disney Resort was largely offset by about a 55 million dollar decline at Hong Kong Disneyland as circumstances in Hong Kong have led to a significant decrease in tourism from.

China and other parts of Asia.

And based on the trends we saw in Q4 and what we're seeing so far in Q1, we expect operating income at Hong Kong Disneyland to decline by about $80 million for Q1.

If the current trends continue we could see a full year decline of approximately $275 million versus fiscal 2019.

On the domestic front, we expect Q1 revenue growth at our domestic parks and resorts to benefit from a full quarter of Star Wars galaxies hedge at Walt Disney World and the December opening a rise of the resistance at Walt Disneyworld. However, the revenue growth will be partially offset by meaningful cost growth.

Driven primarily by operational expenses associated with Galaxy Sad and higher labor expense due to the impact of higher wages under new collective bargaining agreement.

So far this quarter domestic resort reservations are comparable to prior year. We believe some guests are deferring visit to Disneyland and Walt Disney World until we complete opening of galaxies edge at those respective location.

Note that awareness and intend to visit remains strong.

Okay, great. Our domestic hotels are currently pacing up 5% versus this time last year.

Turning to media network operating income was down 3% due to declines that cable and broadcasting though results came in better than what we expected at the time, we reported Q3 earnings.

Lower cable result reflect a decrease study Sps, partially offset by the consolidation of the 21 the table businesses.

And he has been higher programming and production costs driven by contractual rate increases for NFL College sports and MLB programming and higher marketing expenses related in part to the launch of the HCC network more than offset growth in affiliate revenue.

FCM domestic linear advertising revenue was down 2% in the fourth quarter and so far this quarter ESPN domestic cash AD sales are pacing up 3% compared to last year.

At broadcasting results in the quarter were adversely impacted by lower program sales compared to last year.

We sold two Marvel theory, Daredevil and Ionsys during Q4 last year, and we Didnt have comparable sales in the fourth quarter. This year. We also had lower sales of black is in the quarter compared to last year.

Difficult program sales comp coupled with higher programming expenses that the APC television network and lower TV station AD revenue were largely offset by the consolidation of the 20 once the broadcasting business and higher affiliate revenue.

AD revenue at the APC network was up modestly in the quarter quarter to date Prime time scatter pricing at the APC network is running 47% above upfront level.

Total media affiliate revenue was up 18% in the fourth quarter and reflects the consolidation of 21, CF and growth at both cable and broadcasting.

The increase in affiliate revenue was driven by 15 points of growth from the acquisition of 21, CF and seven points from higher rates, partially offset by a four point decline due to a decrease in subscribers.

Results that are direct to consumer and international segment reflects the consolidation approval and ongoing investments at Disney plus India beyond plus partially offset by the consolidation of the 21 CF International cable businesses.

Results at our direct to consumer businesses had an adverse impact on the year over year change and segment operating income of about $600 million.

FCM class had a little over 3.4 million paid subscribers at the end of the fourth quarter, and who had approximately 28.5 million paid subscribers.

Overall, we're pleased with our fourth quarter and full year results and with the progress we're making on integrating 21 CF.

The 20 once the of businesses, we acquired excluding 21, CF taken Julio and net intersegment eliminations contributed approximately $130 million and segment operating income in the fourth quarter.

Consolidated crews operating losses, and netting out intersegment eliminations resulted in an adverse impact of segment operating income of about $170 million.

We estimate the acquisition of 21, CF and the impact of taking full operational control of who had a total dilutive impact on our Q4 EPS before purchase accounting a 47 cents per share.

Before I conclude I'd like to highlight a few additional items such should help frame, our fiscal 2021st quarter and full year results.

First we expect our direct to consumer and international segment to generate about $800 million, an operating losses for the quarter.

We expect the continued investment in our DTC services, specifically Disney class, which will launch in just a few days and the consolidation of Hulu to drive an adverse impact on the year over year change in segment operating income of our direct to consumer businesses of approximately $850 million.

At the studio we are very excited for the release of the much anticipated sequel to frozen and the final film in the Skywalker Saga Star Wars. The rise of sidewalk. We expect the theatrical performance of these films to be key positive drivers of studios Q1 results. However, we expect.

The results to be partially offset by an operating loss of about $60 million at the 21 CF film studio.

While 21, CF performance will not be reflected on our prior year results. We estimate that 21 CF film studio generated about $30 million, an operating income during Q1 fiscal 2019.

I'll note that we don't expect a material increase in studio profitability in the first quarter from licensing the legacy Disney studio Library to Disney plot.

We estimate the acquisition of 21st century, Fox and the impact of taking full operational control approval, we'll have a dilutive impact on our Q1 earnings per share the for purchase accounting of about 30 cents per share.

We still expect the acquisition to be accretive to EPS before purchase accounting for fiscal 2021.

We expect consolidated Capex in fiscal 2020 to be $500 million higher than in the prior year. The increasing capex is primarily due to increases at DTC in corporate.

And lastly, I'll note that our fiscal 2020 calendar will contain an extra week of operation. So our Q4 and full year results will benefit from the 50 Threerd week.

I'll now turn the call over to low and we would be happy to your comp.

Okay. Thanks, Christine and operator, we are ready for the first question.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question first the penalty. Please standby well, we compile the kunaev roster.

Our first question comes from Ben swimmer with Morgan Stanley . Your line is now open.

Thanks, Good afternoon.

Bob I want to ask you about.

Two of the most important brands at the company Marvel and Lucas and how we should think about the contribution of those businesses are those studios over the next couple of years I mean, there's been a lot written about what's happening on the Star Wars front I'd love to get your thoughts there.

And on Marvel sort of in the post the vendors World, How you think about mining that IP.

Broadly for the company, what do we should be expecting a bit of a gap period in terms of contribution.

Over the next couple of years and then Christine.

One of the things that happens when you give us a lot of guidance as we come back to that.

Ask you about the numbers you gave us at Investor Day for 2020 in particular around Disney plus I think you talked about 3 billion of Opex, you talked about Hulu peak losses of 1 billion and a half.

19, and DSP implied losses of 650, I'm just wondering if any of those numbers, we should be seeking have moved around materially or if those are still decent places to be thinking about.

Thank you guys.

Then when we think about those two businesses Marvel and Star Wars, we think about them as more than just films and film franchises, we look at them across multiple businesses and with different basically creative strategies in mind. So just as a for instance in both.

Cases, while there continues we will continue to be films either in development. During production. There's a lot of activity on the television front Star Wars has three television series there in various forms of production and more in development for Disney plus and Marvel is as many more.

So well in the Star Wars case.

Star Wars, nine which comes out this December will be the last of the size Skywalker Saga and we'll go into a hiatus for a few years before the next Star Wars feature there'll be a lot of creative activity in the interim and Marvel's case.

Ill call it in the post the vendors rolled it doesn't mean, they're on films that are being made characters from the vendors back we have black widow coming out.

In fiscal 20 and.

Our store for movie in the works and I could go on it on we also our mining other characters and Karen characteristics like a terminals. So as we look at these businesses there film business into the TV businesses that are still big consumer products drivers and more and more there ever greater presence of parks and resorts and.

We feel really good about both their creative direction, but also their commercial direction.

And then just discussing.

On the guidance question.

Regarding the guidance that we provided in April at the Investor Day.

It's fair to say that all of the guidance and that goes across the three platforms Disney plus SPM plus and Hulu is still is still as it was we haven't made and changes to that and having gone through the planning process for fiscal 20, we feel really good about fiscal 2008 and achieving the goals that we set.

Great. Thank you. Thank you Ben Operator next question. Please.

Thank you aren't next question comes from Alexia Quadrani with JP Morgan. Your line is now open.

Hi, Thank you so much just two questions on the on the streaming side. If I may ask first any color you can provide on the early sign ups, suggesting plus capital Hakim and just sort of general color not necessarily numbers. Okay. Im doubtful you might offer so early on.

And then if you can talk about the advertising opportunity of some of your other streaming services, specifically holu, where you're seeing a really meaningful scale now and is Penn Plaza, which also has.

Seen such great growth I think you've also recent increase the premium AD loads, there I guess, how meaningful Kenny advertising side become for you guys.

Well reserved significant driver of advertising revenue and we'll continue to be particularly as we grow who you out to essentially the guidance that we had given back at Investor day that basically AD supported who has very high ARPU, which is one of the reason this alexia.

It's being bundled with the SPM, plus and Disney plus for that 12 99 price.

Because the value of an AD supported who subscriber given the advertising revenue that it drives is very very high.

Yes, Pn Theres, all they're also opportunities for growth.

Probably the biggest opportunity is on the who on the Blue front.

On the.

Your first question just in terms of color into regarding Disney plus and we called Presales, we're not giving any specifics.

Consumers were drawn to.

The basically the marketing messages that we had out there which was a reaction to the brands and the content both library product and original product that's coming clearly the price was met.

Okay, great enthusiasm among consumers not just the single month price with because what we're really selling was the three year.

Subscription, which is a big deal for us in terms of lowering churn. We are still relatively small in terms of the scheme for the scope of things some number of subscribers, but I think the best way for me to.

Me to characterize it would be to say that we were enthusiastic about what we saw the consumer reaction to be.

Certainly feel good about the product that's going to the marketplace next week and.

Well no we'll know a lot more in just a few days, but it was good and I should also say I said in my comments. The Netherlands launch was also very very positive and what was positive there were few things not just the fact that.

It was an enthusiasm for the service, but we had a good sense about how people were using it and what people were using it the demographics were far broader than a lot of people expected them to be this is well beyond kids and family.

Clearly, where this is it for cross quadrant product with adult men and women as well as kids and families.

Watching we're using the service. We also saw the People's interest in the product itself was very very broad meeting across all the brands wasn't a specific and that also bose bodes very well and we learned that some of the features including the the four carry the HDR served.

Movies were very very popular the fact that you could have four concurrent live streams also very popular the personalization.

It was also quite popular and most importantly, the ability to download without restriction was very very popular.

Hi, Thank you very much lexia. Thanks for the questions. Operator next question. Please.

Thank you. Our next question comes from Michael Nathanson Moffettnathanson. Your line is now open.

Thanks, Bob a couple on Hulu I guess what are your scripted comments today, you refer to maybe Fox searchlight.

Product the movies going to who I wonder does that represent you were all the appeal and movies go from this point on is that a strategic shift for Fox a studio in a film side of the second question is you also in the comments mentioned international and who opt to internationally. So what's is there an update on the who international side.

His comments that you made before.

On the international side, we will have more to say after the first of the year, we're working through the formulation of a strategy.

Forms of what markets when.

It's complicated in terms of our need to make sure that we have the right product in all the markets that we launches and to be assessed locally relevant and locally compliance in terms of some of the rules and regulations. So I don't have much more to say there obviously, we have opportunities and we're going to.

We're going to pursue them I mentioned searchlight briefly in the call searchlight is actually developing some original content for Julio.

The search light and the Fox movie Studios had an output deal with HBIO that runs for a few more years I think eventually is likely that the output would move to Lulu, but it's premature right now to speculate what I, mostly talked about on the call. As you know Michael is the fact that we're creating a huge effort.

Next presence.

On cooler and what that means is that FX is producing original programming for whom original exclusive programming. We're also moving FX library, some 40 series and over 1600 episodes onto Julio and we're making available current shows that air on FX.

Available on Hulu within hours after there as we do with traditional network shows.

Thanks, Bob.

Thanks, Michael Operator next question please.

Thank you. Our next question comes from Doug Mitchelson with Credit Suisse. Your line is now open your line.

Oh, thanks, so much.

Because obviously be funded no Bob what you pick for Disney plus subs in the office pool, but.

For for something you might be willing to comment on I'm curious on sports you mentioned inevitability of change to sports need to change it's viewed live the bundled deliver sports well monetize it well, obviously, you're pursuing SBM plus so I would love any learnings on SP, plus and how it fits in the future sports and and what you think there and Christine.

Just curious for Dizzy plus disclosures are you going to give us U.S. sub suffer from international in the future and then I'm just curious on Fox execution.

That Fox solution might scaled during the year or does it sort of improve linearly during the year or is it sort of a more of a step function improvement in fiscal 2001. Thanks. So much.

Doug.

So the answer your first question is I'm not aware that there is an office pool and if there is an office pool not participating in it and I.

I don't intend to on the sports side.

As I look at it.

FPN plus is teaching us is that the opportunity for the company with sports is probably multi platform. What I mean by that is as you continue to see expand available through essentially the multipack multichannel bundle on cable and satellite platforms, you'll see it available on a direct to consumer.

Her basis on the SPM loss, which we intend to grow both in terms of the product that is on and obviously in terms of the subs I think you're likely to see more sports on a b C. As the value of live grows on the live basically linear channels. So as we look long term it's for US we look at basically making space.

That's available to the consumer on alive traditional network on Dsps and on the SPM plus we think that will be a good way not only to reach more consumers, but to monetize cost estimate the acquisition of.

Of course of sports programming rights and the best possible way.

So your question on subs and what will be disclosing on a go forward basis, as we said at Investor day in and I'll live conversations we've had with analysts and investors. Since then we intend to be very transparent as it relates to our DTC business and the sub counts are going to be something we know people will be.

Interested in so we will be providing by the different platforms.

By those platforms and because we'll be launching domestically, obviously, we expect Disney plus domestically to have a head start on any of the international markets, but as we go into the international markets.

Recognizing that it's not a big Bang approach to launching all at the same time will be a rollout there, but we'll we'll give you enough guidance. So you can.

Look at the success of the rollout.

Okay. Thanks, Doug.

Thanks.

Sorry, Doug.

And then on the block dilution the pacing during the year or is it a step function improvement into fiscal 2001 or is there sort of a linear improvement in fox solution throughout fiscal 2000.

Well, what we said about Fox dilution is we are reiterating that we will be accretive in fiscal 2021, and we havent gone into any more specifics in that.

Alright. Thanks, so much. Thanks, operator next question please.

Thank you. Our next question comes from Jusco Rice Airless with Bank of America Merrill Lynch. Your line is now open hi.

A couple of questions onto the present one more question.

Can you talk about your plans and.

I'm, sorry, I can't speak today your plans for for the third party distribution.

You have Davidson anything that pay TV operators and what are the key tradeoff.

With these third parties, but their billing, but you with access to the data.

Well the subs come into your apps you have the data and then on the parks.

Well that in your press release, lower attendance at Disneyland, which seemed a little surprising our consumers waiting for the second detraction, the second Star Wars attraction.

And your price increases in the past year have been on the high end of the historic range can you talk about the outlook for pricing in the next year or two.

Thanks.

All right I'll take that I'll take the second part of your question first.

Price increases at the parks really we don't look at just as increases we look is an overall strategy as Christine said in her comments is designed to.

Basically grow yield in yield management, we're trying to basically increase the the park experienced by spreading demand out and by making the parks more affordable during periods of time that basically lower lower peak periods, and obviously more expensive during peak periods to limit the number of people that go in there.

I was we believe that.

There were some delayed visited there was some delayed visitation to galaxies edge, both at Disneyland added Disney World.

People waiting for the second you ticket attraction to open it opens.

Less than a month and Disneyworld and it will open in January at Disneyland and so we sensed that there are people that have just waiting for the whole thing to be open which is fine in the meantime, those two ads have been far more successful than been reported they've had a significant lift on for caps and merchandise and in food and beverage as it for instance, just to give.

Q1 Crazy Stat. The millennium Falcon attraction is carried over 1.7 million people already since they've opened across both places so and the guest experience guest satisfaction very very high end right availability, we're traction availability in the high Ninetys that basically means that it's very very.

Complex technological attraction is running really well.

The first part of your question regarding Disney plus.

The we're certainly apps will be made available in most traditional apps selling.

Okay stores were flat platforms.

I don't have comment on access to.

On an access to consumer data if MVP deezer.

Our.

Distributing it or selling it we do have access to some data obviously following both the law.

Some of the other platforms, including Verizon as if for instance, but I just don't have the answer to the question if it's sold on.

But by and MPC.

As you know we did announce today that would deal with Amazon and they are added to a long list of other distributors, including Apple and Samsung and Google and Microsoft and.

Now let Jay.

And others.

Thank you.

Jessica Thanks for the questions. Operator next question. Please.

Thank you. Our next question comes from John Hodulik would you be US your line is now open.

Great. Thanks, maybe first on the horizon deal.

It looks like Bob we're going to have.

Access to about 20 million households are just under 20 million households that have eligibility for to.

Disney plus for free.

Anything you can tell us about the wholesale arrangement you have with Verizon.

And T mobile with its distribution Netflix or for you get about 50% penetration or you guys ready for the.

That kind of scale in with Disney plus soon after launch and then.

If I could just one more follow up question you talked about.

Putting more sports on a b C. Just any thoughts that you have on potentially.

Bidding for maybe the extra NFL deal and putting that on the broadcast number. Thanks.

We are your first question.

We believe that we're confident that were really ready for scale that bamtech platform has been tested.

Under under pretty interesting circumstance, excluding this past Saturday night, when you have hundreds of thousands of people signing up for pay per view of that in a very very short concentrated period of time, we believe that the people who were signing up for Disney plus will not sign up and is concentrated away now there will be many more of them, we certainly hope.

But we feel that the platform is robust enough and that all the elements that needs to be in place to manage that kind of scale are there.

The second part of your question was.

Just anything on the wholesale agreements and yes.

Yes, Oh, the wholesale agreement, we're not prepared to give you any any more information about that but I can't say the deal is positive for us from an economic perspective, because it's just not being given away and other we're not just giving it away we're getting paid a certain amount for it but I won't get into specifics regarding that.

The last part I think we have an interesting opportunity here to use our wells our platforms.

On them in a variety of different ways, including would live sports and not just take a sort of a one platform approach or two platform, but to really look it's a different ways. This company can now reach consumers and we've done that with simultaneous coverage of say the NFL draft would probably be a great example of that we have a very unique reach.

As a company right now in terms of these multiple platforms.

In some respects is unrivaled that launch of Disney plus went a long way to us reaching more customers in a different way when you add that to SPM and if it's channels and you add that APC. That's an opportunity I think you'd have to also look at the opportunities we have for our other programming as well the Fox acquisition.

And brought with it some great creative talent and some very very successful television studios or production entities, which gives us the ability to produce more and on more of our programming. When we then take that programming and put it on a b C and our other live linear channels like free form FX Disney Channel and then we move it.

To assist them that ultimately ends up on SBO D oar, Lulu or Disney plus for that matter, that's an extraordinary way to reach more consumers and to monetize our investment in this product in a much more effective way and it does give us a competitive advantage of sorts to other companies were competing with who don't have as many flat.

Form who has many ways to both monetize product or reach consumers.

Great. Thanks.

Hey, John Thanks for the questions. Operator next question. Please.

Thank you. Our next question comes from Jason Bazinet with Citi. Your line is now open.

Thanks, I just had a question for Ms Stryker.

Maybe the most common question, we get from investors is how.

Consumers are going to navigate a world with so many apps out in the marketplace and so I just wanted to.

Run a hypothesis by you and see if it resonates with how youre thinking about the world.

Do you think it's a reasonable that there will be.

Three or four for lack of a better word broadcast apps, meaning for sort of broad based in their offering they sort of serve the masses.

And then they will be there will be dozens of I'll call them niche apps, which are more like cable networks that sort of super serve a customer with a narrow interest.

So that's my question do you agree with that and if that's true.

It is who knew sort of your broadcast App and SPM, plus and Disney plus.

Position does niche apps.

I heard your comment about the four quadrants, but.

If you could just react to that that would be helpful.

Well the second part of your question I don't think any of these Mitch apps necessarily and I think what we're trying to do as a company is not to look at the apps as entities unto themselves, but look at the apps as part of a broader production creativity distribution monetization play what I mean by that.

As if you look at Disney with Disney plus you, obviously films that are monetized and two windows first one of the theatrical window, then what I'll call. The home video window and then they move onto this SVR de platform.

And it's also which is also places monetizing the vast library same thing can be said for television programming that we're creating although a lot of it for Disney plus we'll be original or exclusive to Disney plus so there's nothing to be although it has nothing to keep us from that putting some of it on maybe a Disney channel down the road, but we're not looking at it.

Any of these isolated way I talking about Lulu, but I also talked about it in the context of APC of FX and a freeform interestingly enough. If you look at current viewing patterns or some of our hit shows on a b C. Grey's anatomy is a good dr. would be two examples there ought APC lives. They go through that live plus three life.

Seven or let's say cycle ultimately they end up on Hulu by the end of the run of show. After after one month often these shows have tripled in terms of their consumption. Once they are made available on Hulu and that's only a month. It does it could be on Hulu for years to come so again.

I think through the second part of your question, Jason I guess, we're not looking at any of them an isolated form right now.

As it relates to your first question, which I will I guess is sort of consumer choice consumer confusion I think a lot about it as it relates to the website consumption patterns and even the current app patterns, where no. Two people use the same web sites are the same set of apps the popular Oh, there's obviously a lot of.

Overlap with the most popular ones and then there's a lot of fragmentation I think you're going to see that in the so called video centric or prop program centric apps, where theyre going to be Hanson and lesser has.

There are going to be a lot of them available in the of varying levels of consumption and the viewer or the consumer will be able to navigate basically relatively easily because they are easily too easy to find hopefully they'll be easy to buy or use and there will be easy essentially to place on.

On mobile devices and on desktops, and I actually think that would you thinking about just these TV and movie apps or where we want to describe them, they're probably going to be fewer of them than there are apps for games and apps for everything else that you're going to currently use so I know, it's not a concern.

Okay, I do believe though I do believe though that brands will matter as we've been saying as a company for a long time and if youre in a list of choice for sports and your VSP add on as your name or for other kind of product and assist Disney or the other brands I think that immediately rises to the top of a list in terms of.

Consumers interested in record because of the recognition factor and they trust they have in these brands.

That makes sense. Thank you very much thanks, Jason Operator next question. Please.

Thank you. Our next question comes from Dan Salmon with BMO capital markets. Your line is now open.

Great Good afternoon, everyone.

Bob I recognize obviously a lot of focused on the DTC business of late but.

The media networks business also working through a number of major renewals, we'd love to maybe just here a little bit of an update on your near and medium term outlook for for linear subscribers, both at the traditional storage and and the VNB Pts and then maybe just more broadly how just the conversations with the MVP. These are evolving is your as you are DTC story emerge.

Yes.

And then just a quick one for Christine maybe just an update on your conversations with the agencies.

Excuse me the ratings agencies to be clear, how they're viewing your leverage and maybe the potential to resume a buyback at some point. Thanks.

Dan before I answer your question I, just wanted to clarify two things.

My number on the number of people or carries Rubin carried on the millennium talking attraction was way low usually I find myself on being right with statistics is 5 million that 1.7 million and secondly, we will have access to significant amount of user data when people use our apps that have been purchase.

Through Nvidia.

To your your question about.

MPPD renewals.

And say that Weve reached the deal in principle.

With a TNT and we're in the process of.

Tapering that which is significant in terms of our progress.

We've been candid and transparent about.

Sub trends as Christine mentioned is updating that today. There has been sort of continued erosion abated somewhat last year, it's grown a bit.

Now we can we can't predict where that goes we just feel that as a company. The MPPD platform is still very important to us and very valuable to us and I think quite viable as well.

But I believe long term that people will be interested in lesser China less channels. It doesn't mean that they don't subscribe at all to multichannel services, but I think the trend will be in the direction of fewer channels, rather than as many or certainly more and that's where the app business could benefit because I think people will buy into the app side of it.

And maintain some channel relationship, but I don't know what the floor is nor do I think the floor is anything anything close to being in sight, but we're looking again holistically across all of our businesses and the platforms with an eye toward the broadest for monetization and consumption.

So Dan on the rating agencies.

We do have an active dialogue with the agencies at the combination of me the IR team and our Treasury team.

And we keep them very up to date on our plans as well as our performance.

We have a schedule or we go in and see them a couple times year, we're planning on that.

Shortly we'll go back in and see them.

But we I think people saw that we had a significant bond offering an August 7 billion dollar bond offering.

The ratings were affirmed at that time.

Across all three agencies as mid single play and if you look at our leverage at the end of this quarter even.

You can calculate it comes at around two seven on a gross and about a 0.3 turn less on a net.

Basis, and although the agencies make some adjustments to those calculations suffice it to say that even when they calculate using their adjustments the agencies are still well below three times.

Thank you both key Dan. Thanks, operator, we have time for one more question.

Thank you. Our final question comes from Steven Cahall with Wells Fargo. Your line is now open.

Yes, thanks, very much I was wondering first off just how you think about the right amount of content spending for who maybe cash basis of both total and original then do you think you'll need to do things like lock up some of the FX show runners like some of your peers have done and then maybe just Christine one on the park side of thing how do you get comfortable.

That you're not seeing any underlying weakening demand and it's all just deferrals and and since you think that is the case is there a point in the year, where you think that you might start to see some acceleration in the attendance at the domestic parks. Thanks.

Steven were facing what is obviously, an extraordinarily competitive marketplace for talent and television AD and films. That's just not just creative and we're producing in writing and directing talent, but acting talent as well. It's a good time to be on that side of the business.

We're making deals selectively.

Based on both the.

You know the.

The talented people involved but also the cost we're trying to be mindful of the need both to fuel our platforms with well enough high quality talent, while the same time managing the bottom line, we're not changing our guidance in terms of when we believe that these DTC businesses will achieve.

Ability and Thats based on what we think is a reasonable amount of original content that will be made for these platforms at a cost at least today's world and we think is deliverable.

Steve on domestic parks.

We still feel very good about the demand for our domestic park product.

We do a lot of research.

In our parks business guest satisfaction is something that we track when people come in their intent to return and also we have metrics that look out year over year, what the booking trends are and as I mentioned in my prepared comments are booked rates that are domestic hotels are currently pacing up 5% versus.

Prior year, so given everything that we've talked about previously, especially as it relates to star Wars galaxies edge and and the complete opening of that land in both world and Disneyland, we feel really good about the momentum we have going into 19 domestic parks.

Thank you.

Okay. Thanks, Steven Thanks, again, everyone for joining us today. Please note that a.

Reconciliation of non-GAAP measures that referred to on this call to equivalent GAAP measures can be found on our Investor Relations website.

In our remarks, we provided estimates the performance of certain 21 CF businesses in periods of the prior year. These estimates are based on an analysis of 21 CF records, but our nonetheless unaudited estimates and are not precise measures of historical results before the acquisition. Let me also remind you that certain statements on this call including finance.

All statements 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 are forward looking statements are subject to a number of risks and uncertainties and actual results may differ material.

Lee from the results expressed or implied in light of variety of factors, including factors contained in our annual report on Form 10-K quarterly reports on Form 10-Q and in our other filings with the Securities and Exchange Commission. This concludes today's call have a good evening everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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