There is clarity.
You say you've got visibility for the Walt Disney Company.
You've got earnings growth out to 2027, double-digit profit increases for
2026 and 2027. What gives you that confidence?
Well, it's really a couple of things.

If you look at the major investments
that we've been making in the business over the last couple of years.
Number one is in the streaming business. And number two, obviously, is in the
experiences business, so parks and cruises and the like.
And as you've seen in the numbers

through 2024, you know, it really marked
a pivot for the Walt Disney Company. The creativity is certainly very much
back. Back-to-back billion-dollar movies and a terrific slate for 2025.
In addition to that fantastic work out of the TV studios with 60 Emmys.
And that obviously feeds the flywheel of

the Walt Disney Company, whether it's
streaming or whether it's experiences, including parks, consumer products and,
of course, the cruise ship. So given those investments that we've
been making and given that we now have good financial visibility into the
returns on those investments, we felt

like it was important to inform
investors not just on how we were investing, but what they should expect
in terms of the returns on those. And with that visibility, we're
confident that we can actually deliver it.
Here across the media sector, your

industry is getting better at being
profitable in streaming. So that's where I want to go.
Is this something that is kind of industry-wide macro level factors
supporting you, or is this something that you've done in the last year
specifically?

And it's kind of cracked the formula for
streaming at Disney? I think it's a combination of both.
Streaming is certainly very much a scaled business.
So as everyone gains more scale, obviously that helps the
industry overall.

For us in particular, I think the
combination of the terrific IP that we're putting into the service, the
product improvements that we're making and that we are intending to make with
with the new with the new leader that we have on product.
Adam Smith, who came over to us from

YouTube,
we see see obviously a terrific future in terms of where streaming is going.
You know, it's important to think about what do what do additional subscribers
mean in terms of a streaming business. In many ways, streaming has the
characteristics of a software business

where the incremental value of an
additional subscriber is very high because the incremental cost of that
incremental subscriber is very low. So we feel optimistic about as the
industry is coming together, we're going to continue to both add subscribers.
And in addition to that, because of the

value we're delivering with the great IP
and the great product that we're putting into this service, we'll be able to take
pricing as well. And that combined with good cost
management that that we have in place in terms of good disciplines on that
business.

We feel very optimistic about where
streaming is going for us. You're also curbing password sharing.
How much of an impact will that make? Do you think?
It'll be a positive, It'll be gradual over time and strengthen from quarter to
quarter, but we do think it'll be a

positive impact on subscribers.
I'm interested in the film studio and what bonus you're going to get from one
or two, what bonus you're going to be getting from Mufasa, The Lion King.
How important has the investment been there?
Well, I think it's quite important in

many ways to talk about that.
We ought to dial back a little bit to where we were a few years ago.
You know, as we launch streaming and it's important to remember, we've only
been in the streaming business five years.
This is a relatively nascent business for

us in many ways, even though it's going
to be quite profitable for us or is quite profitable now, it'll be more
profitable in the future. But as we think about where we were a
few years ago, we were very much focused

on creating a lot of quantity in order
to fill the service with content. And as is often the case, when you when
you push hard on quantity, sometimes quality isn't quite up to where you
would like it to be. When Bob Iger came back a couple of
years ago, he talked about restoring

creativity to the center of the company
and reducing quantity and focusing on raising the bar on quality.
Now, we've been talking about that for really a year, year and a half.
But you saw that the impact of that, I think very much in 2024 with Inside Out,
too, and Deadpool and Wolverine back to

back billion dollar movies, it's never
been done before. And then on the TV side with Abbott
Elementary and The Bear and of course Shogun, we had 60 Emmys.
So I think that focus on quality is not

something that's kind of a one-time
random thing, but in fact is a sustaining impact on the company.
So as we think forward to the slate in 2025, whether it's one moment or two or more
like the Force of the Lion King or Lilo and

Stitch or Avatar or Captain America,
we're very optimistic that those movies are going to be big, big hits as well.
We couldn't be more excited about them. Q You've talked about the linear TV or
live TV business, almost like a hedge.

I know you want to keep that audience.
It's important to particularly the older demographic, but like many sports fans,
I'm interested in the D to C launch on ESPN.
How do you think that that will kind of change your audience and customers' 
attitudes in how they pay for sports by

sports?
Well, the important thing I think about the ESPN flagship launch, flagship is the
project name that we use on on that. I think the thing to think about it is
it's not just another distribution channel, so it's not basically taking
ESPN alone as it exists and just putting

it into streaming.
It will have all of that content to be clear.
But in addition to that, it's really going to be a true digital experience in
so many ways. So the ability to do e-commerce, the
ability to track fantasy, the ability to

to shape some, some of the ESPN broadcast
products to your liking, the ability to do online betting as a part of, of the
product. It's a much more interactive, much more
digital product. And that's where I think the big
reshaping will come from.

Consumers will choose whether they want
to go through traditional cable networks or whether they want to go through the
newer digital networks. And that's something that we're there
for everyone everywhere. That that's really the goal of ESPN is
we want to be where the sport is.

It's man wants to be.
But we do intend to bring a lot of value in that product.
And I think sports fans will come to it relatively quickly.
Q Why is the movie business performing so much better this year than last year?
It really goes back to what I was

talking about before.
I think it was the focus on raising the bar on quality, not not finishing a
movie until we were satisfied. It wasn't just good or great, but truly
excellent. And that's really the model that's
coming through the entire entertainment

organization led by Dana Walden and Alan
Bergman. They are focused on delivering excellent
content, and that's why the movie businesses, as well as the TV businesses
are doing so well. But the TV businesses are seeing
declines in revenue, whether or not

they're not actually falls.
But we're seeing certainly a fall from year on year.
What do you do about that? How do you stop revenue and operating
income being under pressure? Well, I tend to think of them more in a
combined way.

So I think of linear and I think of
streaming basically as in essence, two different sides of the same coin.
If a consumer chooses to move from one to the other as Disney, we're perfectly
fine with that. I do refer to it as a natural hedge.
If people decide to stay with linear,

we're obviously perfectly fine with that
as well. We're here to deliver to meet the
consumer where they want to be met in terms of the impact on profitability.
You know, right now the streaming service growth in profitability is more
than making up for the linear decline in

profitability.
So that natural hedge is working exactly as I would hope it would.
Well, it's interesting in terms of you have a natural hedge by having a parks
business, by having an in-real-life and an at-home consumption and in the
movies.

Let's just go to the parks for a moment,
because you did have one-off events with Paris Olympics being the competition
there. You got an exposure to a China consumer.
You've got an exposure to a US consumer that is hurting on the bottom end.
So what makes you so confident for 2025?

Well, we certainly feel good about the
investments that we're making in the experiences business and the returns we
expect to get. Next Tuesday will be christening the
treasure. So we'll be adding another ship to our
to our cruise portfolio.

And those ships typically pay back very,
very quickly. In addition to that, it's important to
point out that we actually had growth in the domestic parks business in
the fourth quarter of this year. So from that perspective, our consumer
is still willing to come to the parks

where attendance was flat and we saw
some benefit from pricing and guest spend.
And our expectation is that given all of the value that we're putting into those
parks, we expect to certainly continue to see attendance growing over the
course of the year.

We expect the consumer to continue to
strengthen much as we're seeing consumer strength in the streaming
business where obviously consumers are coming to us at a at a pretty rapid
rate. He.
I'll give it to you. Only nine days out from the US election.
You're an experienced CFO.

How are you modeling the changes in
economic policy? You just gave us a three year forecast,
so there must be something in your numbers.
Right. Right now, our
Our assumption is things largely stay as is.
So we're not assuming any changes in tax

rates.
We're not assuming any any significant changes in in fiscal support.
The consumer one way or the other, obviously, as a company will react to
that. But as you noted, nine days in, I think
it's a little bit early to be thinking

about what what might be the case.
I think maybe we ought to at least give time for the administration to take
over before we start modeling through much.
Does your view on M&A change? No, I think the portfolio we have right
now is quite good.

If you think about it in many ways, a
lot of the conversation in media is about sort of creating consolidation and
combinations. We really did that back in 2017 with
with the combination of the acquisition of Fox.
And if you think about a lot of the

assets that we got, a third of Hulu came
with Fox. So now we own two thirds of Hulu and so
shortly will own the balance of Hulu. The Fox Studios came with with Hulu or
start with the Fox acquisition and a lot

of the Emmys that we had gotten into
on the TV side actually came out of that acquisition.
So, and a lot of what I think other companies are looking at the team here
took advantage of a good six, seven years ago and already built very, very
strong media business.

Hugh, I'd like to end by talking about
video games. It's the first opportunity I've had to ask you about Epic.
And on the partnership you explained, you've kind of modeled in the coming
years the impact of that partnership, but I don't think we've ever really
discussed the point of taking the stake.

And when you start to see returns on the
financial investment that company made in Epic.
Yeah. So, we obviously on a percentage of that,
that gets relatively small in the overall scheme of things, and it was
intended to be a part of building out

basically a Disney universe inside of
Epic, or, and to sort of work with to coincide with Fortnite.
So, in many ways as the product goes out the door, that's when we expect to see
significant returns. It does take time to build these
products.

In many ways, it's it's similar to the
movie business. It's not something that you turn around
in a couple of months. It's it's a couple of years.
But I do expect to see terrific returns. If you think about younger demographics,
video games are an important part of how

they entertain themselves.
And we think with Epic, we have a great partner to build out terrific products
that will bring Disney to people in yet another form.

Disney CFO Says Movies and Streaming Are Booming

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Bloomberg Technology

Confidence in Disney's future growth and profitability

Visibility for earnings growth until 2027, with double-digit profit increases projected for 2026 and 2027.

Major investments in streaming and experiences (parks, cruises).

Successful pivot marked by back-to-back billion-dollar movies and a strong 2025 slate.

Good financial visibility into the returns on investments.

Confidence in delivering expected returns to investors.

Disney's streaming profitability and strategy

Industry-wide factors and Disney's specific actions contribute to streaming profitability.

Strong IP, product improvements, and a new product leader contribute to future streaming success.

High incremental value of additional subscribers due to low incremental cost.

Optimism about subscriber growth, pricing increases, and cost management.

Curbing password sharing will have a positive, gradual impact on subscribers.

The evolution of Disney's film studio and content strategy

Initial focus on quantity over quality in streaming's early years.

Shift to prioritizing quality over quantity, restoring creativity to the company's core.

Impact of quality focus seen in 2024's successful movies and TV shows (60 Emmys).

Optimism for future movie releases (Lion King, Lilo & Stitch, Avatar, Captain America).

Disney's approach to the ESPN direct-to-consumer (DTC) launch

ESPN DTC launch as a true digital experience, not just a content migration.

Interactive features: e-commerce, fantasy tracking, personalized broadcasts, online betting.

Meeting consumers where they are, whether traditional cable or digital networks.

Focus on high-quality content as a key driver of success.

Addressing revenue declines in the linear TV business

Viewing linear and streaming as two sides of the same coin, a natural hedge.

Streaming profitability offsets linear decline.

Outlook for Disney's parks business in 2025

Positive outlook driven by investments and expected returns, including a new cruise ship.

Domestic parks business growth in Q4 2024, driven by pricing and guest spending.

Expectation of continued attendance growth due to park improvements.

Consumer strength in streaming mirroring expectations for parks.

Modeling economic policy changes and M&A strategy

Current models assume no significant changes in tax rates or fiscal support.

It's too early to model potential impacts of upcoming US election.

Current media portfolio is strong, with past acquisitions (Fox) already creating significant value.

Disney's investment in Epic Games and the video game market

Investment in Epic Games aims to build a Disney universe within Epic's platforms (Fortnite).

Significant returns expected as products develop; this is a longer-term investment.

Video games are important for younger demographics, making Epic a valuable partner.

Building great products to bring Disney to audiences in a new way.