Q4 2024 The Walt Disney Co Earnings Call - Q&A

November 14, 2024

Good day, everybody and welcome to the Walt Disney Company fourth quarter, and full year 2024 financial results Conference call.

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Speaker Change: Please note today's event is being recorded.

Speaker Change: I would now like to turn the conference over to Carlos Gomez Executive Vice President Treasurer, and head of Investor Relations. Please go ahead.

Carlos Gomez: Good morning, It's my pleasure to welcome everyone to the Walt Disney Company's fourth quarter 2024 earnings call.

Carlos Gomez: Our press release Form 10-K, and management's posted prepared remarks were issued earlier. This morning and are available on our website at www Dot Disney Dot com forward slash investors.

Carlos Gomez: Today's call is being webcast and a replay and transcript as well as the fourth quarter earnings presentation will be made available on our website after the call.

Carlos Gomez: Before we begin please take a note of our cautionary statement regarding forward looking statements on our Investor Relations website.

Carlos Gomez: Certain statements on this call, including financial estimates or statements about our plans guidance or expectations in drivers such as future revenues profitability earnings subscribers.

Carlos Gomez: Demand investment content offerings, and acceptance cash position cost structure and capital allocation and other statements that are not historical in nature may constitute forward looking statements under securities laws.

Carlos Gomez: 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.

Carlos Gomez: Forward looking statements are subject to a variety of risks and uncertainties and actual results may differ materially from the results expressed or implied in light of a variety of factors.

Carlos Gomez: These factors include among others economic or industry condition.

Competition execution.

Execution risks, including in connection with our business plan.

Carlos Gomez: Potential strategic transactions and our content.

Carlos Gomez: Cost savings the market for advertising, our future financial performance and legal and regulatory developments.

Carlos Gomez: For more information about key risk factors. Please refer to our Investor Relations website. The press release issued today and the risks and uncertainties described in our Form 10-K Form 10-Q, and other filings with the Securities and Exchange Commission.

Carlos Gomez: Also note that when discussing our results and outlook, we will refer to non-GAAP measures.

Carlos Gomez: A reconciliation of non-GAAP measures that are referred to on this call to the most comparable GAAP measures can be found on our Investor Relations website.

Speaker Change: Joining me. This morning are Bob Iger, Disney's Chief Executive Officer, and Hugh Johnston, Senior Executive Vice President and Chief Financial Officer.

Speaker Change: Following introductory remarks from Bob we will be happy to take your questions.

So with that I will now turn the call over to Bob.

Bob Iger: Good morning, as I reflect on the two years since I returned to the company I am incredibly proud of how much progress we've made.

Bob Iger: We've emerged for a period of considerable challenges and disruption.

Bob Iger: Well positioned for growth.

Bob Iger: We put in place specific strategies to generate growth across our businesses and our solid results. This quarter are a clear indication we've been successful.

Bob Iger: Given the momentum we see we believe we can continue to drive healthy growth beyond this year, including our expectation of high single digit adjusted EPS growth in fiscal 2025 <unk>.

Bob Iger: Accelerating to double digit adjusted EPS growth in fiscal 2026 and 27.

Bob Iger: I am, especially grateful to my leadership team and everyone at Disney who has played a role in setting us on this path for a new era of growth.

Bob Iger: On the creative front, our renewed strength as a result of the extensive work we began two years ago to restore creativity to the center of the company.

Bob Iger: And TV and our branded series and General Entertainment programming are performing exceptionally well, drawing new audiences and winning an unprecedented number of accolades, including a record breaking 60 Emmy Awards.

Bob Iger: And film we're extremely proud of our performance at the summer box office fueled by the top two movies of the year to date inside out too and Deadpool and Wolverine.

We're excited to close out the year with two other highly anticipated titles, we wanted to and Mufasa the Lion King.

Bob Iger: Looking to 2025, we've been extremely promising content slate, including Captain America, Brave, New World Leila and stitch the fantastic four first steps.

Bob Iger: Zootopia, too and avatar fire in ash.

Bob Iger: Worth, noting that a successful Disney movie today drives more value than it ever has in the past.

Bob Iger: With our increased number of consumer touch points, extending the reach and impact of our world class storytelling from streaming to parks and resorts cruise ships consumer products and games.

Bob Iger: This multiplier effect means that the system economics of our movie business has never been stronger.

Bob Iger: Disney's experiences segment continues to be the gold standard for the industry and we have an investment strategy that is highly targeted in terms of projects locations and IP and is designed to drive operating income growth and attractive returns.

Bob Iger: This all comes at a time when the footprint of our parks and experiences is growing with six locations that attract guests from across the world. We have multiple exciting expansions currently in the works.

Bob Iger: After we unveiled the Disney Treasurer next week Disney Cruise line's fleet will grow to a total of six ships with seven additional ships currently in development.

Bob Iger: Plus our collaboration with epic games will allow us to integrate our popular brands and franchises and a transformational new games and entertainment universe.

Bob Iger: Meanwhile, we ended the quarter with $174 million, Disney plus core and Hulu subscription and.

Bob Iger: And in five short years, we've built Disney plus into a streaming destination. Unlike any other with more than $120 million core subscribers.

Bob Iger: And with the addition of Hulu on Disney plus is the ultimate collection of high quality content for every member of the household.

Bob Iger: Our extensive library of branded in General Entertainment titles to news and live events.

Bob Iger: We've invested to make our already profitable streaming business a significant growth driver for the company and were strengthening that streaming offering even more on December 4th with the introduction of an ESPN tile on Disney plus.

Bob Iger: This is the beginning of an exciting new era for ESPN, we have secured rights to many of the most popular sports for years to come at a time when the value of live sports is undeniable contributing to an industry leading portfolio of sports programming for Disney.

Bob Iger: And this integrated streaming experience moves us one step closer to bringing a full sports offering to Disney plus in the U S. As repair for the launch of Espn's flagship DTC offering in early fall of 2025.

Bob Iger: Taken as a whole we have a lot to be proud of both from a creative and a financial standpoint, and as we look to fiscal 'twenty five and beyond we are confident in our continued ability to drive sustained growth and create shareholder value through our world class portfolio of assets and now we'll be happy to take your <unk>.

Bob Iger: Questions.

Bob Iger: Thanks, Bob.

Speaker Change: As we transition to Q&A, we ask that you. Please try to limit yourselves to one question in order to help get us through as many questions as possible today.

Speaker Change: And with that operator, we are ready to take the first question.

Speaker Change: Thank you Sir.

Speaker Change: Minder. It is star one to join the question queue. Today's first question comes from Ben Swinburne with Morgan Stanley. Please go ahead.

Speaker Change: Good morning, and thank you for all the detailed disclosure in the documents this morning and for filing the K along with our earnings I appreciate it.

Bob I feel like the ESPN flagship launch is in many ways sort of the.

Speaker Change: The last big strategic pivot of your content assets excuse me to streaming.

Speaker Change: After you've already accomplished that on the entertainment side and it was interesting you guys are guiding to support the Oi growth in 2006, which will be the first year of that product. You also have the NBA cost to absorb.

Speaker Change: <unk> talked a little bit about it in the prepared release. This morning, but can you give us a sense for what you think that product is going to do for sports fans for ESPN vans.

Speaker Change: And how it sort of moves the ball forward sorry for the bad pun.

Speaker Change: The customer experience and ultimately drives that segment.

Speaker Change: As you look out beyond 25, because obviously the linear challenges are well known on the ESPN side and I don't know if I could just get you to give us some color on the acceleration in experiences <unk> is expecting in 'twenty five and what we're seeing right now that would be certainly helpful. Thanks a lot.

Speaker Change: Thanks, Ben I'll address the ESPN question that you that you asked I think when you look at flagship you have to consider that it is USPS like it has never appeared before for the consumer meaning it will have not only basically the basic ESPN services, which was coverage of live sports and studio shows.

Speaker Change: <unk> commentary.

Speaker Change: But it will have many many other features like betting fully integrated but I think one of the things that is.

Speaker Change: It hasnt been appreciated yet is that when you apply technology to the presentation of sports almost anything is possible so imagine.

Speaker Change: AI driven personalized sports center as a feature for instance.

Speaker Change: Imagine essentially being able to tailor your sports experience not just watching sports center, but in the thoroughly personalized way I think essentially it will be designed to serve the consumer and the most compelling way ESPN has ever serve the consumer the other thing I think you have to look at it just in terms of being optimist.

Speaker Change: About the migration is that live is extremely extremely attractive to advertisers today and live sports in particular, so if you look at what's going on today, not just with ratings, but with interest from advertisers and then you look at the Ed technology that we've already built and then where can.

Speaker Change: <unk> to improve and you consider what that can do it.

Speaker Change: Then app based world not just in a linear world the value we can deliver not just to our viewers our customers, but also to our advertisers.

Speaker Change: We will be very compelling so highly customized.

Speaker Change: Highly mobile fully integrated with all kinds of features.

Speaker Change: And in my opinion.

Speaker Change: The best product, the consumer has ever seen and sports.

Speaker Change: Yeah, Hey, Dan and into <unk>.

Speaker Change: Obviously for experiences of why we guided to six to eight for the year.

Speaker Change: Q1 will be negatively impacted of course by the combination of the two hurricanes.

Speaker Change: As well as the prelaunch cost for the for the treasure. So Q1 will be negative as we move through the course of the year, we'll move to positive in Q2, and then see further strengthening over the course of the year the drivers on that our number one obviously the treasurer is coming in and we will continue.

Speaker Change: Continued strengthening from that.

Speaker Change: Number two are we overlap our Q4.

Speaker Change: Labor costs in Disneyland resort, so that'll be a positive from a lapsed perspective, and then number three.

Speaker Change: We do expect the consumer to gradually strengthen through the course of the year.

Speaker Change: We also know that the bookings that we have in the back half of the year are positive right now so we're optimistic about how.

Speaker Change: How bookings are looking as we get into the back half of next year. So hopefully that's helpful.

Speaker Change: Thanks, Ben Operator next question. Please yes, Sir and our next question comes from Jessica Reif Ehrlich with Bofa Securities. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Can you.

Speaker Change: And outlook on consolidated advertising growth in coming years.

Speaker Change: So many calls and useful chat like AD tech capabilities as you mentioned, Bob but on one hand, you have the linear challenge.

Speaker Change: Played opposite Dan Jim. Please go ahead.

Speaker Change: Entertainment and sports and streaming and then secondly could you give us some color on Capex next year from what looks like free cash flow will be modestly down.

Speaker Change: I spoke with Redifer, who runs global AD sales for the company yesterday, just to get some up to the minute flavor or color on what's going on in the market. One of the things that you said by the way is that linear is very strong right now one of the reasons for that by the way is live and also because it provides.

Speaker Change: <unk> provides a differentiated audience than than streaming.

Speaker Change: And the way, we integrate those businesses not just from a programming perspective or technology perspective, but from an advertising perspective gives us interesting leverage in the business and enables us to offer advertisers a much broader even deeper.

Speaker Change: Offering in terms of <unk>.

Basically the combination of both is working for US. We're also programming them an integrated way. So if you look at the fact that ESP.

Speaker Change: Users ABC too.

Speaker Change: Program the NFL on Monday nights on our simulcast way significant amount of college football Youll note. When the season opens an NBA will continue to have great presence on ABC. So you are not only offering the customer the advertiser differentiated audience and live but you are also offering the consumer.

<unk> that meaning.

Speaker Change: The ability to watch sports on multiple platforms Bottomline, it's working.

Speaker Change: Youre on mute you.

Speaker Change: Okay.

Speaker Change: Sorry, so, yes, Jessica I'll add to that as well as you know in 2020 for advertising grew 3%, we expect to be at or stronger than that as we as we enter 2025.

Speaker Change: Bob mentioned in particular, the AD Tech stack that we put together our ability to deliver the right ads more effectively to consumers, particularly in the streaming business is a competitive advantage that we built and its owned and is proprietary to Disney. So we certainly feel optimistic about our ability to gain share in <unk>.

Speaker Change: <unk> based on that.

Thanks by the way.

One thing I don't think is appreciated is that we're also working well.

Speaker Change: Selling inventory with Google.

Speaker Change: And Youtube basically offering advertisers to buy those platforms are differentiated audience through a trade desk mechanism at our Ed Tech, obviously enables us to do that.

Thanks, Jessica Operator next question please.

Speaker Change: And our next question today comes from Robert Fishman with Moffett Nathanson. Please go ahead.

Speaker Change: Great. Thank you, Bob and tiring, Adam Smith from Youtube anything you can share about his priorities and how that can impact that Disney plus or the other streaming product.

And then Hugh.

Speaker Change: Can you maybe just share your confidence in achieving the strong double digit margins beyond 10% and DTC in fiscal 'twenty six and because of that guidance doesn't include Hulu live maybe just help us think about the future of that product. Please. Thank you.

Speaker Change: Thanks for the question Adam is already hard at work and making progress.

Speaker Change: <unk>.

Proving the technology across all of our streaming businesses and he has got a number of priorities. One obviously as flagship another as we noted in our comments earlier that we're launching and ESPN tile on Disney plus on December 4th. So he is working on that in addition to that.

Speaker Change: Personalization customization.

Speaker Change: <unk> initially to improve engagement.

Speaker Change: Basically by adding stronger recommendation engine capabilities on the homepage is we're already seeing increased engagement in a very short period of time. He is going after password sharing.

Speaker Change: Launched in Latam, just this week and we now are.

Speaker Change: We have password sharing or add to it.

Speaker Change: Password sharing initiatives I think it over approximately 130 countries. So that's also on his list, we're unifying tech stacks, including media serving in our entire AD stack across Disney plus and Hulu and basically a lot more.

Speaker Change: Obviously, what we're doing here is designed not only to create a better customer experience, but to increase engagement and reduce churn.

Speaker Change: Yes, and Robert in terms of your answer on confidence around achieving the double digit margins, it's probably best to sort of go back to the building blocks as to how we get there.

Speaker Change: Number one we're looking to continue to grow subscribers as we have in the thing I'd remind you up in that regard.

Speaker Change: Given the point that we're at in many ways. The DTP DTC business shares a lot of the characteristics of our software business, where an incremental subscriber has very very high margins attached to them because it was relatively low incremental cost so continuing to grow subscribers number one number two we certainly look to continue to increase pricing in line with the value.

Speaker Change: We are providing to consumers and a lot of the growth that we're seeing right now is because of the exceptional content that's coming out of both the movie and the television studios.

Speaker Change: That's obviously our proprietary content so that will that will certainly enable us to increase pricing over time.

Speaker Change: Number three as Bob mentioned, a lot of items priorities around product updates and features that will increase engagement and reduce churn, including improving the recommendation engine is certainly going to be a benefit to our growth.

Speaker Change: Increasing our AD monetization as I was just discussing with the AD Tech that we built and then of course international is continues to be a significant opportunity. So add all of that together, we wouldn't have given you the guidance that we did if we didn't have confidence in delivering.

Speaker Change: Thanks, Robert Operator next question. Please yes, Sir and our next question comes from Steven <unk> with Wells Fargo. Please go ahead.

Speaker Change: Thank you.

Speaker Change: No.

Speaker Change: Your guide is really impressive and it's helpful. Since theres. So many moving pieces at the segment.

Speaker Change: Over the last five years, or so I think Disney investor experience with guidance.

Speaker Change: Times and mix under under prior management. So just wondering how we should think about the ideological approach here to the guidance as it relates to some of the conservatism that you've baked in.

Speaker Change: And in broad terms is the acceleration in EPS growth from fiscal 'twenty five fiscal 'twenty does that is that basically just comping the flagship launches in the hurricanes and that's.

Speaker Change: Alright. Thanks.

Speaker Change: And then just just on flagship.

Speaker Change: How do we think about maybe what the <unk> launch costs are what the RP, where that product could be and when do you think you might be able to get to breakeven on that product. Thank you.

Speaker Change: Sure.

Speaker Change: Why don't I handle the guide.

Speaker Change: In terms of the way that we're thinking about it it's really driven by a couple of things number one is obviously the significant improvement in DTC, where we've invested.

Speaker Change: A considerable amount of money in building that product and number two it's in light of the significant investments that we've made and are going to continue to make.

In parks and cruise ships and in even in consumer products.

As we thought about those investments, we've obviously talked about the results that we've seen and we feel very very positively about those results, but we thought it was also very fair to give to investors not just operational.

Speaker Change: But an expectation as to what we expect these investments to return, hence the guidance rather than just focus it on the narrow pieces. Although we've given you I think good segment detail. We thought it was also important to give you a picture of the overall company. So philosophically because we've invested we do feel like it's appropriate for us to give you.

Speaker Change: A multiyear look because these investments are obviously multi year in nature.

In terms of our confidence in delivering it obviously, we've got confidence in an otherwise we wouldn't do it.

Speaker Change: We know it's important to deliver the guidance that we gave and that's why we've given and so.

Speaker Change: As it relates to the flagship I think it's a bit early to be talking about our <unk> flagship.

Speaker Change: We do think that product will be additive to us in 2026.

Speaker Change: And yes, there'll be an investment then that's part of the 2025 guidance.

That investment we're looking to pay back relatively quickly in 2006.

Speaker Change: And to add to that we have we have considerable visibility on our content pipeline as well and one of the things that we've seen lately that is heartening is that when we have success in a.

Speaker Change: Feature film or even when there is expected success the consumption of basically.

Speaker Change: Prior films movies that have been made prior to the one that's coming out.

Speaker Change: Up spikes significantly on the platform. So if you were to look at the numbers for inside out one as inside out twos trailer hit or what's happening with the first moana film or what's happening with a number of Marvel properties since Deadpool and Wolverine came out and I could go on and on it's quite interesting for us in terms of raising.

Speaker Change: So as we look ahead I noted some of the films in 25, which is going to end with Zootopia, an avatar and then you look at 2006 when you consider that we've got a star Wars film Amanda Lorean and Avengers film a live action version of Moana.

Speaker Change: And on and on we feel that one more confident in our ability to execute those films in a way that will serve us well both quality qualitatively and commercially and two we have a strong sense that theyre going to enable us to strengthen our streaming.

Our streaming performance significantly as well as we're currently seeing with the films that were putting out.

Speaker Change: Thanks, Steve Operator next question please.

Speaker Change: Thank you and our next question today comes from John Hodulik.

Speaker Change: UBS. Please go ahead.

John Hodulik: Great. Thanks, two if I could first of all Bob It looks like Comcast is going to move ahead with the spin off of the cable networks and I know you guys have looked at something similar in the past maybe on the linear entertainment side.

Is that something that you guys could revisit either as part of sort of this sort of more industry move.

John Hodulik: And then maybe more broadly just the change in the.

John Hodulik: The administration does that change your view on sort of opportunity.

John Hodulik: Hard to M&A.

Speaker Change: Then secondly, maybe for Hugh and I know you guys get this question every quarter, but.

Speaker Change: Just give us an update on sort of your view on the impact that the launch of the epic universe is going to have it looks like that's going to hit early summer.

Speaker Change: Sort of just as Youre expecting in <unk>.

Speaker Change: Acceleration in the parks business, just how you expect that to impact sort of midyear and that acceleration and experiences.

Speaker Change: John you and I will both take the question as it relates to divestitures or consolidation I'll start on the consolidation front.

Speaker Change: In 2007 late 2017, when we announced initially that were acquiring assets from 20th century Fox.

Speaker Change: We specifically mentioned that we were doing so through the lens of streaming we saw a world where streaming was going to proliferate and we knew we needed not only more content with more distribution and with that came just a tremendous amount of content. We've talked about it when we talk about when you talk about 60 <unk>. So much of that came from that acquisition.

Speaker Change: Or when we talk about avatar as a for instance that came from that acquisition I could go on and on in addition to that people forget that came with control of Hulu and ultimately ownership with Hulu that distribution packaged well integrated well with Disney plus has enabled us to achieve the numbers, we have achieved which is approximately one.

Speaker Change: Wondered 74 million global subscribers and an ability to really see into the future of streaming with through a very optimistic lens. So in a way we've already consolidated and while I think we will always look opportunistically at opportunities as we've proven in the past, we certainly don't shy away from those.

Speaker Change: In many respects are already consolidated we don't really need more assets right now either from a distribution or from a content perspective to thrive in basically a disruptive media world.

Speaker Change: Got it.

John I'll answer the divestiture piece as well as your question on epic.

Divestitures, one of the first things I did when I came in as CFO Pepsico was to take a look at whether there was an opportunity here to create value through divestitures.

Speaker Change: And candidly I just didn't see one and I spent a considerable amount of time studying it.

Speaker Change: First from a financial perspective.

Speaker Change: It's always easy to sort of play with spreadsheets and sort of make the math look like theres value creation, but at the end of the day. There's two things to consider number one is what are the prices you would get and then number two whats the frictional cost operationally separating those assets and as I went through the math on both it was pretty clear to me.

Speaker Change: That there wasn't a value creating opportunity for Disney I can't speak to other companies and what opportunities they have with the assets they have but I absolutely did not see that for Disney.

Speaker Change: Epic, we did model that into our expectations for the experiences outlook.

Speaker Change: As I mentioned earlier the early bookings that we have.

Speaker Change: Next summer or actually positive. So that's certainly a positive indicator. We also looked at the history of other attractions opening up in other parks opening up in Florida, and it's generally been beneficial to us. So that is all very much captured in the in the guide that we provided.

Speaker Change: Thanks, John I think operator next question please.

Speaker Change: Thank you and our next question comes from Michael Morris with Guggenheim. Please go ahead.

Speaker Change: Alright. Thank you good morning, guys a couple questions first.

Speaker Change: With respect to content production, you've been focused on quality over quantity have you been is <unk> been strengthening the core of the business. How are you thinking about.

Speaker Change: Growth in spend into that pipeline going forward.

Speaker Change: Both in 'twenty, five and maybe just sort of the pace of content growth beyond that.

Speaker Change: And then secondly.

Speaker Change: Appreciate the listing of the new projects that you have on the experiences side you have a number of footprint expansion, especially in the U S. So when you think about the longer term return on these investments how much of that is driven by really expanding capacity and accommodating more guests maybe versus driving the pricing power at the parks because you have these great neutral.

Thank you.

Speaker Change: I'll take the content production side.

Speaker Change: We feel we have a great hand, but as we look to grow our streaming business. We believe there will be opportunities than even the need for us to do some selective investing outside the United States, notably in EMEA and in APAC, we've slowed down our investment in those markets and in fact.

Speaker Change: We're being careful about our overall investment until we get the technology.

Right until we improve the technology, because clearly if we can use technology to reduce churn, which we're already doing that in reality. What we're doing is we're increasing return on our investment in content and we don't so we don't want to spend on the content side until we're confident that we can get the necessary returns on those investments, but we.

Speaker Change: No as we look to grow our streaming business that prioritizing markets outside the United States with specific content in those markets will be part of that strategy.

Speaker Change: I don't think you should consider those investments to be enormous in nature by any stretch of the imagination, because we know that we're making content that has global application. If you look at just the movies that I mentioned as a for instance that work not in all markets, but.

Speaker Change: In most markets that we don't have to spend as much as some of our competitors and as those movies.

Speaker Change: Just the franchise value as they become more successful.

Speaker Change: Obviously, they drive more value as well.

Speaker Change: Yes.

Speaker Change: And just to add to Bob's comments on that we have modeled in some incremental growth in content spend but not enough to be.

Speaker Change: Significantly disruptive to the overall cash flow or algorithm for the company, but we have absolutely modeled that because we do view international as a terrific opportunity.

Speaker Change: Regarding your question on experiences and particularly the park.

Speaker Change: Pricing versus versus attendance.

Speaker Change: What we projected and as a balance of both so I don't want to get into specific numbers on it.

Speaker Change: But we're not assuming it's going to be just price or it's just going to be attended.

Speaker Change: Will be balance of both and frankly, we'll have the ability to flex that is as we learn our way into it but I think we've got it modeled reasonably conservatively.

Speaker Change: Thanks, Mike next question please.

Speaker Change: Absolutely and our next question today comes from David Karnofsky with Jpmorgan. Please go ahead.

Thank you for the question and Thor commentary.

Speaker Change: One area that understandably received less focus on the outlook with linear networks.

Speaker Change: I'm interested to understand better how you built the multiyear forecast I can talk about managing that business over the next several years and then just relatedly.

Speaker Change: First of all post Directv agreement can you speak to any important impacts of Disney how we should think about deal structure the template going forward versus some other deals you've done in the recent past like charter.

Speaker Change: I'll handle that one David.

Speaker Change: Regarding linear.

Speaker Change: We model that it would continue to decline.

The beauty of the position we find ourselves in right now with roughly $175 million streaming consumers is we have a bit of a natural hedge in the way that our portfolio operate so to the degree that people leave linear and choose to go the streaming route generally speaking theyre going to be coming our way and we have.

Speaker Change: Obviously, a terrific ways to monetize those so.

Speaker Change: As that evolves based on consumer choice I think we're well positioned if they decided to stay in linear for longer I think we're well positioned if they decide to move over to the streaming side and frankly with with what we've put on the service and what the plans that we have to put more things on the service I think in many ways, we're sort of a must have platform.

Speaker Change: Inside of most households.

Speaker Change: Regarding Directv like all of these deals they are basically uniquely crafted to the situation of that particular partner. So I wouldn't try to read through any of that into any other deals I think it's a good deal for us I think it's a good deal for them and we both feel feel good about where we've gone, but I think.

Speaker Change: These things are generally going to be somewhat bespoke.

Speaker Change: Thanks, David Operator next question. Please yes, Sir and our next question today comes from Brian <unk>.

Speaker Change: With Bernstein. Please go ahead.

Speaker Change: Thank you for taking the question.

Speaker Change: Great.

Continuing momentum in screening and the margin expansion story.

Speaker Change: Certainly very promising.

Speaker Change: Building on your comments around the building block of that.

Speaker Change: Gross.

Speaker Change: Could you provide some color on how much of that growth.

Speaker Change: Subscriber growth versus pricing in the foreseeable future and of course.

Speaker Change: Five fiscal years.

Speaker Change: Taylor.

Speaker Change: And on a related question.

Speaker Change: Local language content in Paramount to a very important to increase engagement and local market and your competitors expanding local content, perhaps more than what we see on any platform.

Speaker Change: Plans to be more aggressive.

Speaker Change: International expansion with more locally tailored content. Thank you.

Speaker Change: Sure happy to address those.

Speaker Change: Regarding streaming we expect our.

Speaker Change: Our growth to come from a balance of pricing as well as sub growth it may tilt slightly towards pricing.

And again, we're going to read the market and we can react to it as.

Speaker Change: Plays out, but our expectation right now is it will be both subs and pricing.

Speaker Change: Bit more tilted towards pricing rigor.

Speaker Change: Regarding local content I'm not sure I have much more to add to what Bob had already mentioned, which is we do see it is valuable we actually do a reasonable amount of that already.

Speaker Change: Particularly in APAC with some of the Korean dramas that we do and we also do some in Latin America, but as Bob mentioned, we don't want to invest too heavily there until we feel like we're comfortable with with the products that we will have the churn operating at right level. So.

Speaker Change: That's my expectation.

Speaker Change: Ill add to that we had $2 billion movies. So far this year actually the only two in the industry. The box office. Those movies garnered came from all over the world. So those movies resonate in those markets and if you look at some of our competitors don't have.

Speaker Change: Movies.

Speaker Change: Basically that quality or that level of success.

Speaker Change: They have to spend more in local content because they don't have that the other thing I would just wanted to say about pricing is it's not just about raising pricing, it's about moving consumers to the advertiser supported side of the streaming platform. So right now in the United States about 60% of all new subs are going to.

Speaker Change: Buying our streaming services advertiser supported or Eva I think right now I think it's 37% of total subs in the U S. Our <unk> subs and a 37% in the U S and 30% globally. So the pricing that we.

Speaker Change: Recently put into place, which is increased pricing was actually designed to move more people and the Eva direction, because we know that the <unk> an interest in it from advertisers and streaming has grown.

Speaker Change: Thanks, Lauren Operator next question please.

Speaker Change: Thank you and our next question today comes from Tim Nolan with Macquarie. Please go ahead.

Speaker Change: Yes.

Speaker Change: Alright, thanks, very much could you. Please address the topic of divestitures in India. I think you mentioned in the guidance a few lines that incorporate those I just wonder if there's anything more to add two adjustments, we should make for the sale of the assets in India and then Relatedly what are the.

Speaker Change: What does the business when it looked like for you in India, you can retain a stake with reliance just talk a little bit about your presence in India post the divestiture.

Speaker Change: Partial sale please.

Speaker Change: Yes happy to address that.

We're very very excited about about the deal with reliance obviously, there were a terrific company and have huge presence in India.

Speaker Change: Going forward, we will have a percentage ownership and posted the <unk> numbers.

Speaker Change: Okay.

We will have we will have a percentage ownership in the in the high Thirty's.

Speaker Change: And obviously that the alliance people with their share of ownership will be managing the business.

Speaker Change: In terms of the specific implications on Disney's financials.

Speaker Change: We did anticipate closing we've got it included in the guidance.

Speaker Change: Agree that you have more detailed questions around that I'm sure. The Investor Relations team can help you model that out.

Speaker Change: Thanks, Tim Operator, we have time for one last question.

Speaker Change: And today's final question will come from Bryan Kraft with Deutsche Bank. Please go ahead.

Speaker Change: Thank you good morning, I wanted to ask just one on parks and Disney plus some parks is the softness in domestic behind you at this point it seems like performance there was better than you expected. When you reported back in August and on the international side. It seems like there was some new softness that showed up in <unk>.

Speaker Change: And the international parks, so in light of that I just wanted to ask how we should think about international growth going forward and then my question on Disney plus really has to do with the sub growth in the quarter, which was strong in the international core subs was there anything chunky in the quarter like a wholesale relationship coming online or is this seasonality I know there was a similar jump in <unk> 'twenty three or.

Is it some other factor thank you.

Speaker Change: Sure happy to take those Brian.

Speaker Change: Youre right in domestic we certainly feel like the consumer is strengthening as as I mentioned earlier.

Speaker Change: We obviously saw growth in domestic parks and certainly feel very positively about that so.

That's our expectation going forward is a gradual strengthening in the consumer regarding international two factors number one the Olympics in Paris.

Speaker Change: Whenever there is an olympics in the city that we have a park.

Speaker Change: You typically see in attendance it and Thats exactly what we saw and we saw that coming which is why we ended the indicated that youre back on the Q3 call in terms of our expectation.

In addition to that we saw some consumer softness in Shanghai.

Speaker Change: We expect that to be.

Speaker Change: Temporary and we expect that to bounce back as well, but.

It was nothing.

Speaker Change: Nothing that should be concerning for the long term regarding the parks.

Guarding international subs no nothing chunky. This was this was good solid additions to the subscriber base and international so.

Speaker Change: We came off of Q3 and obviously.

Speaker Change: <unk> had considerable.

Speaker Change: Success in adding subs in Q4.

Speaker Change: Thanks, Brian and thanks to everyone for your questions. We want to thank you again for joining us and wish everyone. A good rest of the debt.

Speaker Change: Thank you. This concludes today's conference call and we thank you all for attending today's presentation.

Speaker Change: May now disconnect your lines and have a wonderful day.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Good day, everybody and welcome to the Walt Disney Company fourth quarter, and full year 2024 financial results Conference call.

Speaker Change: All participants will be almost not only mode.

Speaker Change: Should you need assistance. Please signal a conference specialist by pressing the star followed by zero.

After todays presentation, there will be an opportunity to ask questions.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: So we're trying a question. Please press star then two.

Speaker Change: Please note today's event is being recorded.

Speaker Change: I would now like to turn the conference over to Carlos Gomez Executive Vice President Treasurer, and head of Investor Relations. Please go ahead.

Speaker Change: Good morning, It's my pleasure to welcome everyone to the Walt Disney Company's fourth quarter 2024 earnings call.

Our press release Form 10-K, and management's posted prepared remarks were issued earlier. This morning and are available on our website at www Dot Disney Dot com forward slash investors.

Today's call is being webcast and a replay and transcript as well as the fourth quarter earnings presentation. We will all be made available on our website after the call.

Speaker Change: Before we begin please take a note of our cautionary statement regarding forward looking statements on our Investor Relations website.

Speaker Change: Certain statements on this call, including financial estimates or statements about our planned guidance or expectations in drivers such as future revenues profitability earnings subscribers demand investment content offerings and accepting cash position cost structure.

Speaker Change: And capital allocation and other statements that are not historical in nature may constitute forward looking statements under securities laws.

Speaker Change: 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.

Speaker Change: Forward looking statements are subject to a variety of risks and uncertainties and actual results may differ materially from the results expressed or implied in light of a variety of factors.

Speaker Change: These factors include among others economic or industry condition.

Speaker Change: Competition.

Speaker Change: Execution risks, including in connection with our business plan potential strategic transaction and our content.

Speaker Change: Cost savings the market for advertising, our future financial performance.

Speaker Change: And legal and regulatory development.

For more information about key risk factors. Please refer to our Investor Relations website. The press release issued today and the risks and uncertainties described in our Form 10-K Form 10-Q, and other filings with the Securities and Exchange Commission.

Speaker Change: Also note that when discussing our results and outlook, we will refer to non-GAAP measures.

A reconciliation of non-GAAP measures that are referred to on this call to the most comparable GAAP measures can be found on our Investor Relations website.

Speaker Change: Joining me. This morning are Bob Iger, Disney's Chief Executive Officer, and Hugh Johnston, Senior Executive Vice President and Chief Financial Officer.

Speaker Change: Following introductory remarks from Bob we will be happy to take your questions.

Speaker Change: So with that I will now turn the call over to Bob.

Bob Iger: Good morning, as I reflect on the two years since I returned to the company I'm incredibly proud of how much progress we've made.

We've emerged for a period of considerable challenges and disruption you were well positioned for growth.

Bob Iger: We put in place specific strategies to generate growth across our businesses and our solid results. This quarter are a clear indication they've been successful.

Bob Iger: Given the momentum we see we believe we can continue to drive healthy growth beyond this year, including our expectation of high single digit adjusted EPS growth in fiscal 2025 accelerating to double digit adjusted EPS growth in fiscal 2026 and 27.

Bob Iger: I'm, especially grateful to my leadership team and everyone at Disney who has played a role in setting us on this path for a new era of growth.

Bob Iger: On the creative front, our renewed strength as a result of the extensive work we began two years ago to restore creativity to the center of the company.

Bob Iger: And TV are branded series and general Entertainment programming are performing exceptionally well, drawing new audiences and winning an unprecedented number of accolades, including a record breaking 60 Emmy Awards.

Bob Iger: And film we're extremely proud of our performance at the summer box office fueled by the top two movies of the year to date inside out too and Deadpool and Wolverine.

Bob Iger: We're excited to close out the year with two other highly anticipated titles, we wanted to and Mufasa the Lion King.

Bob Iger: Looking to 2025, we have an extremely promising content slate, including Captain America, Brave New World Leila and stitch the fantastic four first steps.

Bob Iger: Zootopia, too and avatar buyer in ash.

Bob Iger: Worth, noting that a successful Disney movie today drives more value than it ever has in the past with.

This multiplier effect means that the system economics of our movie business has never been stronger.

Bob Iger: This all comes at a time when the footprint of our parks and experiences is growing with fixed locations that attract guests from across the world. We have multiple exciting expansions currently in the works.

Bob Iger: After we unveiled the Disney Treasurer next week Disney Cruise line's fleet will grow to a total of six ships with seven additional ships currently in development.

Bob Iger: Plus our collaboration with epic games will allow us to integrate our popular brands and franchises and a transformational new games and entertainment universe.

Bob Iger: Meanwhile, we ended the quarter with $174 million Disney plus core and Hulu subscription.

Bob Iger: And in five short years, we've built Disney plus into a streaming destination. Unlike any other with more than $120 million core subscribers.

Bob Iger: And with the addition of Hulu on Disney plus is the ultimate collection of high quality content for every member of the household.

Bob Iger: Our extensive library of branded and General Entertainment titles to news and live events.

And this integrated streaming experience moves us one step closer to bringing a full sports offering to Disney plus in the U S. As repair for the launch of Espn's flagship DTC offering in early fall of 2025.

Bob Iger: Questions.

Bob Iger: Thanks, Bob.

Speaker Change: As we transition to Q&A, we ask that you. Please try to limit yourselves to one question in order to help get us through as many questions as possible today.

Speaker Change: And with that operator, we are ready to take the first question.

Speaker Change: Thank you Sir.

Speaker Change: To start with and want to join the question queue. Today's first question comes from Ben Swinburne with Morgan Stanley. Please go ahead.

Speaker Change: Good morning, and thank you for all the detailed disclosure in the documents this morning and for filing the K along with the earnings I appreciate it.

Speaker Change: Bob I feel like the ESPN flagship launch is in many ways sort of the.

Speaker Change: The last big strategic pivot your content assets excuse me its a streaming.

Speaker Change: After you've already accomplished that on the entertainment side and it was interesting you guys are guiding to sports AOI growth in 2006, which will be the first year of that product. You also have the NBA costs to absorb.

Speaker Change: <unk> talked a little bit about it in the prepared released this morning, but can you give us a sense for what you think that product is going to do for sports fans for ESPN and <unk>.

Speaker Change: And how it sort of moves the ball forward sorry for the bad pun.

Speaker Change: The customer experience and ultimately drives that segment.

Speaker Change: As you look out beyond 25, because obviously the linear challenges are well known on the ESPN side and I don't know if I could just get you to give us some color on the acceleration in experiences ally is expecting in 'twenty five and what we're seeing right now that would be certainly helpful. Thanks a lot.

Speaker Change: Thanks, Ben I'll address the ESPN question that you that you asked I think as you look at flagship you have to consider that it is yes pn like it has never appeared before for the consumer meaning it will have not only basically the basic ESPN services, which is coverage of live sports and studio shows.

Speaker Change: <unk> commentary.

Speaker Change: It will have many many other features like betting fully integrated but I think one of the things that is.

Speaker Change: Yes.

Speaker Change: Hasn't been appreciated yet is that when you apply technology to the presentation of sports almost anything is possible so imagine.

Speaker Change: AI driven personalized sports center as a feature for instance.

Speaker Change: Imagine essentially being able to tailor your sports experience not just watching sports center, but in a thoroughly personalised way I think essentially it will be designed to serve the consumer and the most compelling way ESPN has ever serve the consumer the other thing I think you have to look at it just in terms of being optimistic.

Speaker Change: About the migration is that.

<unk> is extremely extremely attractive to advertisers today and live sports in particular, so if you look at what's going on today and that's just with ratings, but with interest from advertisers and then you look at the AD technology that we've already built and then we're continuing to improve and you consider what that can.

Speaker Change: Do it.

Speaker Change: On an app based world not just in a linear world the value we can deliver not just to our our viewers our customers, but also to our advertisers.

Speaker Change: We will be very compelling so highly customized.

Speaker Change: Highly mobile fully integrated with all kinds of features.

Speaker Change: And in my.

Speaker Change: Opinion.

Speaker Change: The best product, the consumer has ever seen and sports.

Speaker Change: Yeah, Hey benefited too.

Speaker Change: Obviously for experiences of why we guided to six to eight for the year.

Speaker Change: Q1 will be negatively impacted of course by the combination of the two hurricanes.

From that.

Number two are we overlap our Q4 labor cost and Disneyland resort, so that'll be a positive from a lapsed perspective, and then number three we do expect the consumer to gradually strengthen through the course of the year. We also know that the bookings that we have in the back half of the year.

Speaker Change: <unk> are positive right now so we're optimistic about.

Speaker Change: How bookings are looking as we get into the back half of next year. So hopefully that's helpful.

Speaker Change: Thanks, Ben Operator next question. Please yes, Sir and our next question comes from Jessica Reif Ehrlich with Bofa Securities. Please go ahead.

Speaker Change: Thank you and can you provide an outlook on consolidated advertising costs in coming years.

Speaker Change: So many TV Youtube channel like AD.

Bob Iger: Mantech capabilities as you mentioned Bob.

Bob Iger: One hand, you have the linear challenge and the complete opposite.

Speaker Change: Hi, Andy.

Speaker Change: Containment and sports and streaming and then secondly could you give us some color on Capex next year from what looks like free cash flow will be modestly down.

Speaker Change: Yes.

Hi.

Speaker Change: I spoke with Reid of Ferro, who runs global AD sales for the company yesterday, just to get some up to the minute flavor or color on what's going on in the market. One of the things that you said by the way is that linear is very strong right now one of the reasons for that by the way is live and also because it provides linear provides a differentiated audience.

Speaker Change: And then streaming and the way we integrate those businesses not just from a programming perspective or technology perspective, but from an advertising perspective gives us interesting leverage in the business and enables us to offer advertisers a much broader even deeper.

Speaker Change: <unk> in terms of <unk> <unk>.

Speaker Change: Basically the combination of both is working for US. We're also programming them an integrated way. So if you look at the fact that ESP.

Speaker Change: Users ABC too.

Speaker Change: Program the NFL on Monday nights in a simulcast way significant amount of college football Youll note. When the season opens an NBA will continue to have a great presence on ABC. So you are not only offering the customer the advertiser differentiated audience and live but you are also offering the <unk>.

Speaker Change #100: Sumer that meaning.

Speaker Change #100: The ability to watch sports on multiple platforms Bottomline, it's working.

Speaker Change #100: Youre on mute you.

Youre correct sorry.

Speaker Change #100: Alright.

Speaker Change #101: Yes, Jessica I'll add to that as well as you know in 2020 for advertising grew 3%, we expect to be at or stronger than that as we as we enter 2025.

Speaker Change #101: As Bob mentioned in particular, the AD Tech stack that we put together our ability to deliver the right ads more effectively to consumers, particularly in the streaming business is a competitive advantage that we've built and its owned and as proprietary that Disney. So we certainly feel optimistic about our ability to gain share.

Speaker Change #101: And advertising based on that.

Speaker Change #102: Thanks by the way.

One thing I don't think is appreciated is that we're also working well.

Speaker Change #102: <unk> inventory with Google and Youtube basically offering advertisers to buy those platforms are differentiated audience through a trade desk mechanism at our Ed Tech, obviously enables us to do that.

Speaker Change #103: Thanks, Jessica Operator next question. Please yes, Sir and our next question today comes from Robert Fishman with Moffat Nathanson. Please go ahead.

Speaker Change #104: Alright, thank you.

Since hiring Adam Smith from Youtube and anything you can share about his priority is and how that can impact the future of Disney plus or the other streaming product.

And then Hugh.

Can you maybe just share your confidence in achieving the strong double digit margins beyond 10% and DTC in fiscal 'twenty six and because of that guidance doesn't include Hulu live maybe just help us think about the future of that product. Please. Thank you.

Speaker Change #105: Thanks for the question Adam is already hard at work and making progress.

<unk>.

Speaker Change #105: Proving the technology across all of our streaming businesses and he has got a number of priorities. One obviously as flagship another as we noted in our comments earlier that we are launching an ESPN tile on Disney plus on December 4th. So he is working on that in addition to that.

Speaker Change #105: Personalization customization.

Speaker Change #105: Designed initially to improve engagement, just basically by adding stronger recommendation engine capabilities on the homepage is we're already seeing increased engagement in a very short period of time. He is going after password sharing we launched in Latam just this week and we now are.

Speaker Change #105: We have password sharing.

Speaker Change #105: Password sharing initiatives I think it over approximately 130 countries. So that's also on his list, we're unifying tech stacks, including media serving in our entire AD stack across Disney plus and Hulu and basically a lot more.

Speaker Change #105: Obviously, what we're doing here is designed not only to create a better customer experience, but to increase engagement and reduce churn.

Speaker Change #106: Yes, and Robert in terms of your answer on confidence around achieving the double digit margins, it's probably best to sort of go back to the building blocks as to how we get there.

Speaker Change #106: Number one we're looking to continue to grow subscribers as we have in the thing I'd remind you of in that regard.

Given the point that we're at in many ways. The DTP DTC business shares a lot of the characteristics of our software business, where an incremental subscriber has very very high margins attached to them because it is relatively low incremental cost so continuing to grow subscribers number one number two we certainly look to continue to increase pricing in line with the valley.

They were providing to consumers and a lot of the growth that we're seeing right now is because of the exceptional content that's coming out of both the movie and the television studios. That's obviously our proprietary content. So that will that will certainly enable us to increase pricing over time.

Number three as Bob mentioned, a lot of the items priorities around product updates and features that will increase engagement and reduce churn, including improving the recommendation engine is certainly going to be a benefit to our growth.

Speaker Change #106: Increasing our AD monetization as I was discussing with the AD Tech that we built and then of course international is continues to be a significant opportunity. So add all of that together, we wouldn't have given you the guidance that we did if we didn't have confidence in delivering.

Speaker Change #107: Thanks, Robert Operator next question. Please yes, Sir and our next question comes from Steven Kay Hall with Wells Fargo. Please go ahead.

Speaker Change #108: Thank you.

Speaker Change #108: No.

Speaker Change #109: Your guide is really impressive and it's helpful. Since theres. So many moving pieces at the segment.

Speaker Change #110: Over the last five years, or so I think Disney investor experience with guidance.

Speaker Change #111: The mix under under prior management. So just wondering how we should think about the ideological approach here to guidance as it relates to some of the conservatism that you've baked in.

Speaker Change #112: And in broad terms is the acceleration in EPS growth from fiscal 'twenty five fiscal 'twenty does that is that basically just comping the flagship launches in the hurricane and that sort of thing.

Speaker Change #112: And then just just on flagship just how do we think about maybe what the <unk> launch costs are what the RP with that product to be and when do you think you might be able to get to breakeven on that product. Thank you.

Speaker Change #112: Sure.

Speaker Change #112: <unk> handle the guide.

In terms of the way that we're thinking about it it's really driven by a couple of things number one is obviously the significant improvement in DTC, where we've invested.

Speaker Change #112: A considerable amount of money in building that product and number two it's in light of the significant investments that we've made and are going to continue to make in <unk>.

Speaker Change #112: Parks and cruise ships and in even in consumer products. So as we thought about those investments. We've obviously talked about the results that we've seen and we feel very very positively about those results, but we thought it was also a very fair to give to investors not just operational.

Speaker Change #112: Results, but an expectation as to what we expect these investments to return, hence the guidance rather than just focusing on the narrow pieces. Although we've given you I think good segment detail. We thought it was also important to give you a picture of the overall company. So philosophically because we've invested we do feel like it's appropriate for us to give you.

Speaker Change #112: A multi year look because these investments are obviously multi year in nature.

Speaker Change #112: In terms of our confidence in delivering it obviously, we've got confidence in an otherwise we wouldn't do it.

Speaker Change #112: We know it's important to deliver the guidance that we gave and that's why we've given and so.

Speaker Change #112: As it relates to flagship I think it's a bit early to be talking about our <unk> flagship, we do think that product will be additive to us in 2026.

Speaker Change #112: Yes, there'll be an investment then that's part of the 2025 guide.

Speaker Change #112: But that investment we're looking to pay back relatively quickly in 2006.

Speaker Change #112: To add to that we have we have considerable visibility on our content pipeline as well and one of the things that we've seen lately that is heartening is that when we have success.

Speaker Change #112: A feature film or even when there is expected success.

Speaker Change #112: The consumption of basically.

Speaker Change #112: Prior films movies that have been made prior to the one that's coming out goes up spiked significantly on the platform. So if you were to look at the numbers for inside out one as inside out twos trailer hit or what's happening with the first moana film or what's happening with a number of Marvel properties since Deadpool and Wolverine came out and I could go.

Speaker Change #112: On and on it's quite interesting for us in terms of raising consumption. So as we look ahead I noted some of the films in 25, which is going to end with Zootopia, an avatar and then you look at 'twenty six when you consider that we've got a star Wars film Amanda Lorean and Avengers film a live action version of Moana.

Speaker Change #112: And on and on.

Speaker Change #112: We feel that one more confident in our ability to execute those films in a way that will serve us well both quality qualitatively and commercially and two we have a strong sense that theyre going to enable us to strengthen our streaming.

Speaker Change #112: Our streaming performance significantly as well as we're currently seeing with the films that were putting out.

Speaker Change #113: Thanks, Steve Operator next question please.

Speaker Change #114: And our next question today comes from John Hodulik with UBS. Please go ahead.

John Hodulik: Great. Thanks, two if I could.

Bob Iger: Bob It looks like Comcast is going to move ahead with a spin off of the cable networks and I know you guys have looked at something similar in the past maybe on the linear entertainment side.

Is that something that you guys could revisit either as part of sort of this sort of more industry move.

Bob Iger: And then maybe more broadly just the change in the.

Bob Iger: The administration does that change your view on sort of the opportunity with regard to M&A and then secondly, maybe for you and I know you guys get this question every quarter, but.

Bob Iger: Just give us an update on sort of your view on the impact that the launch of the epic universe.

Bob Iger: It's going to have it looks like that's going to hit early summer.

Bob Iger: Sort of just as Youre expecting.

Bob Iger: An acceleration in the parks business, just how you expect that to impact sort of midyear and that acceleration and experiences.

Speaker Change #115: John you and I will both take the question as it relates to divestitures or consolidation I'll start on the consolidation front.

Speaker Change #116: In 2007 late 2017, when we announced initially that were acquiring assets from 20th century Fox.

Speaker Change #116: We specifically mentioned that we were doing so through the lens of streaming we saw a world where streaming was going to proliferate and we knew we needed not only more content with more distribution and with that came just a tremendous amount of content. We've talked about it when we talk about when you talk about 60 <unk>. So much of that came from that acquisition.

Speaker Change #116: Or when we talk about avatar as a for instance.

Speaker Change #116: That came from that acquisition I could go on and on in addition to that people forget that came with control of Hulu and ultimately ownership of Hulu that distribution packaged well integrated well with Disney plus has enabled us to achieve the numbers. We have achieved which is approximately 174 million global subscribers and <unk>.

Speaker Change #116: Ability to really see into the future of streaming with through a very optimistic lens. So in a way we've already consolidated and while I think we will always look opportunistically at opportunities as we've proven in the past, we certainly don't shy away from those.

Speaker Change #116: In many respects are already consolidated we don't really need more assets right now either from a distribution or from a content perspective to thrive in basically a disruptive media world.

Speaker Change #117: Got it and then John I'll answer the divestiture piece as well as your question on an epic regarding divestitures one of the first things I did when I came in as CFO Pepsico was to take a look at whether there was an opportunity here to create value through divestitures and candidly I just didn't.

Speaker Change #117: <unk> and I spent a considerable amount of time studying it.

Speaker Change #117: First from a financial perspective.

Speaker Change #117: It's always easy to sort of play with spreadsheets and sort of make the math look like theres value creation, but at the end of the day. There's two things to consider number one is what are the prices you would get and then number two whats the frictional cost operationally separating those assets and as I went through the math on both it was pretty clear.

To me that there wasn't a value creating opportunity for Disney I can't speak to other companies and what opportunities they have with the assets they have but I absolutely did not see that for Disney.

Speaker Change #117: Regarding epic, we did model that into our expectations for the experiences outlook.

Speaker Change #117: As I mentioned earlier the early bookings that we have next summer or actually positive. So that's certainly a positive indicator. We also looked at the history of other.

Speaker Change #117: Traction is opening up in other parks opening up in Florida, and it's generally been beneficial to us. So that is all very much captured in the in the guide that we provided.

Speaker Change #118: Thanks, John Operator next question please.

Thank you and our next question comes from Michael Morris with Guggenheim. Please go ahead.

Michael Morris: Alright. Thank you good morning, guys a couple questions first.

Michael Morris: With respect to content production.

Michael Morris: Focused on quality over quantity have you been.

<unk> been strengthening the core of the business how are you thinking about.

Michael Morris: Growth in spend into that pipeline going forward.

Michael Morris: Both in 'twenty, five and maybe just sort of the pace of content growth beyond that.

Michael Morris: And then secondly, I appreciate the listing of the new projects that you have on the experiences side you have a number of footprint expansions, especially in the U S. So when you think about the longer term return on these investments how much of that is driven by really expanding capacity and accommodating more guests maybe versus driving the pricing power.

Michael Morris: At the parks because you have these great new attraction. Thank you.

Speaker Change #120: I'll take the content production side.

Speaker Change #121: We feel we have a great hand, but as we look to grow our streaming business. We believe there will be opportunities than even the need for us to do some selective investing outside the United States, notably in EMEA and in APAC.

Speaker Change #121: Slowed down our investment in those markets and in fact, we're being careful about our overall investment until we get the technology right until we improve the technology because clearly if we can use technology to reduce churn, which we're already doing that in reality. What we're doing is we're increasing return.

Speaker Change #121: Our investment in content and we don't so we don't want to spend on the content side until we're confident that we can get the necessary returns on those investments, but we know as we look to grow our streaming business that prioritizing markets outside the United States with specific content in those markets will be part of that.

Speaker Change #121: Strategy.

Speaker Change #121: I don't think you should consider those investments to be enormous in nature by any stretch of the imagination, because we know that we're making content that has global application. If you look at just the movies that I mentioned as a for instance that work not in all markets, but.

Speaker Change #121: In most markets that we don't have to spend as much as some of our competitors and as those movies and that's not just the franchise value as they become more successful.

Speaker Change #121: Obviously, they drive more value as well.

Speaker Change #121: Yes.

Speaker Change #122: And just to add to Bob's comments on that we have modeled in some incremental growth in content spend.

Speaker Change #122: Not enough to be significantly.

Speaker Change #122: Significantly disruptive to the overall cash flow or algorithm for the company, but we have absolutely modeled that because we do view international as a terrific opportunity.

Speaker Change #122: Regarding your question on experiences and particularly the park.

Speaker Change #122: Pricing versus versus attendance.

Speaker Change #122: What we projected and as a balance of both so I don't want to get into specific numbers on it.

Speaker Change #122: But we're not assuming it's going to be just price or it's just going to be attended.

B balance of both and frankly, we'll have the ability to flex that is as we learn our way into it but I think we've got it modeled reasonably conservatively.

Thanks, Mike next question please.

Absolutely and our next question today comes from David Karnofsky with Jpmorgan. Please go ahead.

Speaker Change #123: Thank you for the question and Thor commentary.

Speaker Change #124: One area that understandably received less focus on the outlook with linear networks.

Speaker Change #125: I'm interested to understand better how you built the multiyear forecast I can talk about managing that business over the next several years and then just relatedly.

Speaker Change #125: First of all post Directv agreement.

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