Disney FY 1Q17 Earnings Call Notes

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Robert Iger

Have good visibility into film pipeline into early part of next decade

“Well, I think if you look at the record, Alexia, since we bought Pixar, which was a decade ago, we’ve made about 30 films under Pixar and Disney Animation because John Lasseter and Ed Catmull took over that, and then Marvel and then Star Wars or Lucasfilm. And those films have averaged about $900 million in global box office. So we’re not – I’m sorry, about $800 million in global box office. So we don’t think that there’s a coincidence to this, and while obviously because we’re dealing in a creative business there’s risk associated. We think that we’ve done a really great job of de-risking the business. Then that’s a combination of the franchises we have and obviously the stories that we’re mining, but also the talent that we have at the company or that we are attracting to the company to make those films. And we have a lot of visibility into the early part of the next decade of the film slate. And we feel great about the projects that have been chosen and the progress that has been made on them.”

Could extend stay if needed

“while I’m confident that my successor is going to be chosen on a timely basis and chosen well, if it’s in the best interest of the company for me to extend my term, I’m open to that. But there’s nothing specific to announce at this point. We have a good, strong succession process underway.”

Seems like we’re on the cusp of significant growth in over the top

“my confidence in ESPN is due to a number of things, but clearly the deals that we have done with new platform owners, mostly over-the-top, have already yielded some nice gains from those services in subs, but they’re not right now being counted fully by Nielsen. We’ve also done a deal with Hulu. And we have done a deal with another entity that has not been announced, and we’re in discussions with others. So it seems like we’re on the cusp of some significant growth for new entrants in the multi-channel marketplace. And what we like about them is they are mobile friendly or mobile first, their user interfaces tend to be very strong, and their pricing is priced substantially lower than the expanded basic bundle that most of the MVPDs are offering. And that obviously we think gives us a chance to both attract consumers that may not sign-up for multi-channel service or hold consumers into multi-channel subscriptions. And then lastly, what’s really important is the deals that we’ve negotiated for distribution, particularly for ESPN, are to be in all subs or all households launched. And so these are light packages that offer us 100% penetration from those packages. And so we think that this wave that we’re seeing is really a signal of what is to come and what the future will be”

We’re also excited about BAMTech

“I also want to say one other thing, Jessica. I mentioned it in my remarks, but I was at BAMTech a couple of weeks ago and the quality of that technology has just blown us away and the potential that we believe that has for us is enormous. As you know, we’ve invested so that we own a third, we have a path to control, we are extremely excited about the prospects of what BAM is going to be doing near-term. We will be launching a direct-to-consumer sports service sometime in probably calendar 2017, but we’re also very excited about what the potential of this is long-term, both for the company and for third-parties who can use the product because the technological side of it is so strong in ways that are value enhancing for them as well.”

Kids viewing less linear TV

“Todd, first question on kids programming, you’re right, we’ve seen a decline ratings-wise in kids viewing overall on linear channels. I don’t want to speak for the industry, but I’ll speak for Disney. And I think that’s the result of a couple of things. One, I’ll call it a bit of an off cycle in terms of programming; and two, a proliferation of kids programming in a variety of other places.”

Christine McCarthy

Merchandise sales lower despite strong hits

“At Consumer Products and Interactive Media, as anticipated, operating income was down meaningfully in the first quarter, given the record-breaking quarter the segment delivered last year. The decline in operating income was driven by lower results at our merchandise licensing business, as sales of Rogue One, Finding Dory, and Moana merchandise were more than offset by very strong sales of Star Wars and Frozen merchandise in Q1 last year. The strength of Star Wars last year also created a tough comp in our games businesses during Q1, given the success of Star Wars: Battlefront last year and no comparable title this year.”