CEO Bob Iger Reveals Four Building Opportunities in Disney’s 4th Quarter 2023 Earnings Call
“Our progress has allowed us to move beyond this period of fixing and begin building our businesses again.”
That was the message that Disney’s Chief Executive Officer Bob Iger had for investors and consumers after The Walt Disney Company (NYSE: DIS) reported its fiscal full year and fourth quarter earnings on Wednesday.
Iger—who returned to the position of CEO roughly a year ago—struck a tone of optimism regarding the company’s future.
“Our results this quarter speak volumes about the underlying strength of our company, and the remarkable amount of work we have accomplished this past year.”
Iger continued by saying “as we look forward, we are focusing on four key building opportunities that will be central to our success.”
Those are:
- Achieving significant and sustained profitability in our streaming business
- Building ESPN into the preeminent digital sports platform
- Improving the output and economics of our film studios
- Turbocharging growth in our Experiences business
“We have already made considerable progress on these four opportunities, and we will continue to move forward with a sense of purpose and urgency,” Iger noted.
A Path to Achieving Significant and Sustained Profitability in Streaming
First, Iger noted that more than 50% of new U.S. subscribers in the fourth quarter chose the ad-supported Disney+ product.
“We have the best advertiser technology in the streaming business globally, and we have just introduced new tools that will make this an even more attractive platform for advertisers, much as we’ve done with Hulu,” he said.
Speaking of Hulu, Iger said the company remains “on track to roll out a more unified one-app experience domestically, making extensive general entertainment content available to bundle subscribers via Disney+.”
He mentioned that the company will launch a beta version for bundle subscribers in December, to give “parents time to set up profiles and parental controls that work best for their families ahead of the official launch in early spring 2024.”
“Now that we have realigned our pricing and marketing strategies, focused aggressively on getting the technology right, merged our creative and distribution teams, and restored creative excellence as our singular motivating priority with the content we create, we are bullish about the future of our streaming business,” Iger said. “And as you consider the components and the future of that business, just imagine the opportunities that a further combined Disney+, Hulu, and ESPN streaming experience could offer us as a company and our consumers.”
ESPN Evolution
Another core building opportunity for Disney is “taking ESPN, which is already the world’s leading sports brand, and turning it into the preeminent digital sports platform, allowing us to reach fans in compelling new ways and fully integrating key features into our primary ESPN offering.”
“We are already moving quickly down this path, and we are exploring strategic partnerships to help advance our efforts through marketing, technology, distribution, and additional content,” Iger said. “As we continue to develop our streaming business, the continued strength of ESPN, relative to the backdrop of notable linear industry declines, demonstrates the value of sports and the power of the ESPN brand.”
Improving Output and Economics at Studios
Next, according to Iger, is “the need to strengthen the creative output of our film studio, which generates value throughout the entire company.”
Iger pointed out that the company has four of the top 10 highest grossing films of the year at the global box office and mentioned more new releases are still to come.
That includes The Marvels from Marvel Studios, which hits theaters on Friday, and Wish, Disney’s newest animated film, which will be in theaters on November 22nd.
Turbocharging Growth at Parks and Experiences
Finally, Iger spoke about Disney’s Experiences segment and how the company has an opportunity to build it “into an even bigger and more successful cash-flow generation business.”
“Parks and Experiences overall remains a growth story, and we are managing our portfolio exceptionally well,” Iger said.
He added, “even in the case of Walt Disney World, where we have a tough comparison to the prior year, when you look at this year’s numbers compared to pre-pandemic levels in fiscal ’19, we have seen growth in revenue and operating income of over 25 and 30%, respectively.”
He noted that “Over the last five years, return on invested capital has nearly doubled in our domestic parks, and we have seen sizeable increases over that same timeframe across the total Experiences portfolio as well. Not to mention, the improved guest experience ratings we’re now seeing at every one of our parks.”
“As we announced in September, we plan to turbocharge growth in our Experiences business through strategic investments over the next decade,” Iger added. “Given our wealth of IP, innovative technology, buildable land, unmatched creativity, and strong returns on invested capital, we’re confident about the potential from our new investments.”
Iger wrapped up his remarks by saying that “looking at the company as a whole, today we are focused on driving profitable growth and value creation as we move from a period of fixing to a new era of building.”
Iger continued by saying that “When you combine all of that with our unrivaled portfolio of valuable businesses, brands, and assets – and the way we manage them together – Disney has a strong hand that differentiates us from others in our industry.”
“Our results this quarter are testament to the work we have done across the company this past year, and I am bullish about the opportunities we have to create lasting growth and shareholder value, and to strengthen Disney’s position as the world’s leading entertainment company,” he said.
The information above should be read together with the full Q4 FY 23 Disney Earnings Report and earnings call (both available here), which discuss additional information, including additional challenges and risks the company’s businesses face and additional information about Q4 FY23 performance.
Forward-Looking Statements
Certain statements in this communication may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business or financial prospects, trends or outlook; earnings expectations and expected drivers; business plans or opportunities; demand pipeline; financial or performance estimates or expectations (including operating income, operating results, programming and production costs and cash content spend, capital expenditures, profitability and any guidance); future performance and growth; organizational structure and leadership decisions; plans or expectations for direct-to-consumer profitability, advertising and revenue growth, subscriber levels, pricing, product acceptance and enhancements, expansion, subscription offerings, churn, engagement and margins; estimates of the financial impact of certain items, accounting treatment, events or circumstances; future free cash flow and funding sources; anticipated demand, timing, availability, pricing, utilization or nature of our offerings (including experiences and business openings, content within our products and services and content releases and distribution channel); business recovery; capital allocation; consumer and advertiser sentiment, behavior or demand; expected growth and drivers of performance or growth; cost reductions and source; available efficiencies; strategies and strategic priorities and opportunities; value of our intellectual property, content offerings, businesses and assets, including franchises and brands; and other statements that are not historical in nature. Any information that is not historical in nature included in this call is subject to change. These statements are made on the basis of management’s views and assumptions regarding future events and business performance as of the time the statements are made. Management does not undertake any obligation to update these statements.
Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by the company, including restructuring or strategic initiatives (including capital investments, asset acquisitions or dispositions, new or expanded business lines or cessation of certain operations), our execution of our business plans (including the content we create and IP we invest in, our pricing decisions, our cost structure and our management and other personnel decisions), our ability to quickly execute on cost rationalization while preserving revenue, the discovery of additional information or other business decisions, as well as from developments beyond the company’s control, including:
- the occurrence of subsequent events;
- further deterioration in domestic and global economic conditions or a failure of conditions to improve as anticipated;
- deterioration in or pressures from competitive conditions, including competition to create or acquire content, competition for talent and competition for advertising revenue;
- consumer preferences and acceptance of our content, offerings, pricing model and price increases, and corresponding subscriber additions and churn, and the market for advertising sales on our DTC services and linear networks;
- health concerns and their impact on our businesses and productions;
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Such developments may further affect entertainment, travel and leisure businesses generally and may, among other things, affect (or further affect, as applicable):
- our operations, business plans or profitability, including direct-to-consumer profitability;
- demand for our products and services;
- the performance of the company’s content;
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- income tax expense; and
- performance of some or all company businesses either directly or through their impact on those who distribute our products.
Additional factors are set forth in the company’s Annual Report on Form 10-K for the year ended October 1, 2022, including under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” quarterly reports on Form 10-Q, including under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and subsequent filings with the Securities and Exchange Commission.
The terms “company,” “we,” and “our” are used above to refer collectively to The Walt Disney Company and the subsidiaries through which our various businesses are actually conducted.
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