The Walt Disney Company (DIS) 2024 Q3 Earnings Call Summary

Optimistic Highlights

• Strong Revenue Growth: Disney reported a 2% revenue growth in Q3, driven by strong IP in parks attracting audiences despite slight moderation in demand.
• Successful Upfront Advertising: Advertising grew 8% for the quarter, with ESPN up 17% and DTC streaming up 20%, showcasing a healthy ad market.
• Content Success: Disney highlighted significant creative success, with 183 Emmy Nominations and a strong movie lineup, including Moana 2 and Mufasa, driving streaming value.
• Streaming Platform Growth: Disney+ is broadening with new additions like news and sports, supporting subscriber growth and pricing power.
• Investments in Experiences: Investments in cruise ships and parks are expected to accelerate growth, with new ships expected to pay back quickly.

Pessimistic Highlights

• Moderation in Park Demand: Disney expects a mid-single-digit decline in fiscal Q4 and a few quarters of similar results due to a slight moderation in park demand.
• Challenges in International Parks: Disneyland Paris faced challenges due to the Olympics, impacting attendance.

Company Outlook

• Positive on Streaming and Entertainment: Disney is bullish about the future of its streaming business, expecting growth in fiscal 2025, driven by a strong content slate and technological improvements.
• Parks to Recover: Despite current softness, investments in parks and cruise ships are expected to drive long-term growth.
• Advertising Market Remains Strong: Despite macro pressures, Disney sees a healthy advertising market, especially in live sports and streaming services.

Q & A Highlights

• Q: Can you provide color on global park demand and the impact of cruise ships? And on the NBA rights and profitability? (Jessica Reif Ehrlich, from Bank of America)

  A: Parks saw flat attendance and slight per cap increases, with a few quarters expected to show similar results. The NBA deal secures valuable sports rights and includes WNBA growth, with international rights adding revenue. (Hugh Johnston and Robert Iger)

• Q: What's the outlook for Disney+ in terms of product direction and earnings contribution? (Benjamin Swinburne, from Morgan Stanley)

  A: Disney+ is expanding with more content and features, supporting subscriber growth and pricing power. The platform is expected to grow nicely in fiscal 2025. (Robert Iger)

• Q: How do you balance investment between sports, scripted TV, and movies? And can you update on free cash flow expectations? (Robert Fishman, from MoffettNathanson)

  A: Disney invests across all areas due to their value and potential. Free cash flow guidance remains at $8 billion, with no material change. (Robert Iger and Hugh Johnston)

• Q: Can you update us on DTC margins and the impact of cruise ship pre-opening costs? (Steven Cahall, from Wells Fargo)

  A: DTC is on track for double-digit margins, with password sharing and pricing increases aiding growth. Cruise ship pre-opening costs are factored into projections, with costs doubling next year but expected to pay back quickly. (Hugh Johnston)

• Q: Can you update on strategic partner conversations for ESPN and expand on cost management? (David Karnovsky, from JPMorgan)

  A: Conversations about strategic partnerships for ESPN continue, focusing on content. Cost management efforts are ongoing, with the aim to drive productivity and invest back into the business. (Robert Iger and Hugh Johnston)

• Q: Can you detail the softening in parks and expectations for Venu's impact on the linear business? (John Hodulik, from UBS)

  A: Parks are expected to see continued trends from Q3, with international parks recovering post-Olympics. No specific update on Venu's impact was provided. (Hugh Johnston)

• Q: What's driving the slip in domestic Disney+ ARPU and how does advanced booking visibility in parks impact projections? (Michael Morris, from Guggenheim)

  A: ARPU was affected by bundling and a shift to the ad-supported model, with no significant impact on profitability. Advanced bookings provide good visibility, supporting confident projections for parks. (Hugh Johnston)

• Q: How is the advertising demand currently, and is there a trend towards increasing content licensing to third parties? (Bryan Kraft, from Deutsche Bank)

  A: Advertising demand remains strong across platforms, with no significant change in content licensing strategy. Success at the box office is driving licensing numbers. (Hugh Johnston)

• Q: What growth impact do you expect from investments in theme parks and cruise ships over the next few years? (Kannan Venkateshwar, from Barclays)

  A: Investments are expected to accelerate growth in the Experiences business, with cruise ships paying back quickly. Details on the impact of deconsolidating India will be shared post-deal closure. (Hugh Johnston)