Walt Disney Company (The) (DIS)

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The Walt Disney Company (DIS)

F1Q13 Earnings Conference Call

February 5, 2013 5:00 p.m. ET


Lowell Singer - Senior Vice President of Investor Relations

Robert A. Iger - Chairman, Chief Executive Officer, President and Member of Executive Committee

James A. Rasulo - Chief Financial Officer and Senior Executive Vice President


Benjamin Swinburne – Morgan Stanley

Michael Nathanson - Nomura Securities

Alexia Quadrani - JPMorgan

Jessica Reif-Cohen – Bank of America Merrill Lynch

Douglas Mitchelson – Deutsche Bank

Todd Juenger - Sanford C. Bernstein

Anthony DiClemente – Barclays

Tuna Amobi – S&P Capital IQ

David Miller - B. Riley Caris

Jason Bazinet – Citigroup
David Bank – RBC Capital Markets

Marci Ryvicker - Wells Fargo



Welcome to The Walt Disney Company's First Quarter 2013 Earnings Conference Call. My name is Ellen and I will be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded. I will now turn the call over to Mr. Lowell Singer, Senior Vice President, Investor Relations. Mr. Singer, you may begin.

Lowell Singer

Thanks, Ellen, and good afternoon, everyone. Welcome to the Walt Disney Company's First Quarter 2013 Earnings Call. Our press release was issued about 45 minutes ago. It’s available on our website at www.disney.com/investors. Today's call is being webcast and we will post the webcast and a transcript also to our website.

Joining me in Burbank for today’s call are Bob Iger, Disney's Chairman and Chief Executive Officer, and Jay Rasulo, Senior Executive Vice President and Chief Financial Officer. Bob will lead off followed by Jay and then of course we'll leave plenty of time for your questions. So with that I'll turn it over to Bob and we'll get started.

Robert Iger

Thank you, Lowell and good afternoon everyone. Coming off a record year in 2012, we had a solid first quarter and we are enthusiastic about the year ahead. Now that Lucasfilm is officially part of the Walt Disney Company, we are moving forward with the extraordinary Star Wars franchise across our portfolio of businesses and we are excited about the tremendous potential ahead starting with the Star Wars Episode 7 which we expect will be in theaters in the summer of 2015. We are pleased to have J.J. Abrams directing our first feature film in that franchise. And we have had a long and very successful with J.J., working with him on two popular ABC series, Alias, and the global phenomenon Lost. We are proud to be working with him again to take Star Wars franchise saga forward.

I would also like to confirm that we are in developed on a few standalone films that are not part of the Star Wars saga. Lawrence Kasdan who wrote Empire Strike Back and Return of the Jedi is working on one. And Simon Kinberg is working on another. And Lucasfilm will have details about these projects at a later date.

Turning to media networks. In the media networks we have now closed seven of our ten major affiliate agreements for our cable networks. Multi-channel operators clearly recognize the significant value created by our array of brands and programming from the number one sports brand ESPN, to our powerhouse portfolio of kids entertainment including Disney Channel, Disney XD, and Disney Junior, plus ABC and ABC Family.

Last year Disney channel took the top spot among kids two to 11 for the first time and continued its long winning streak as the number one network among kids and tweens in the U.S. Disney Junior programming is also doing extremely well among pre-schoolers and their families. We made Doc McStuffins, Jake and the Never Land Pirates, and Mickey Mouse Club House, top three cable shows for kids two to five. Disney Junior’s animated movie Sofia The First, Once Upon a Mattress was 2012s highest rated telecast among those young viewers and is now a new and very popular series as well.

Anchoring the Disney Junior channel that we launched last March, these shows drive the growing popularity of Disney Junior as well as extremely high consumer demand at retail. On the sports side, ESPN is the number one sports brand and undisputed market place leader. With a 33 head start on the competition, unprecedented sports coverage, and constant innovation in both programming and distribution, ESPN delivers incomparable value to multichannel operators as well as consumers. And with long-term sports rights now locked in, we expect ESPN to remain the must have brand for sports fans.

ESPN serves sports fans nationwide with almost 30,000 hours of live events, news and original programming across all of its networks and services each year. In every week, more than 113 million of the estimated 230 million sports fans in America interact with ESPN for sports coverage and sports information. By contrast, emerging regional sports networks serve fans of local teams with limited programming. RSNs may compete for local market share but ESPN offers an entirely different value proposition to sports fans and multi-channel operators.

ESPN delivers almost twice the audience of all RSNs combined and among the key sports demo of men 18 to 34, on average, ESPN’s audience is more than four times the size of the audience of all RSNs put together. ESPN leads in the mobile sports space as well, with sports fans spending far more time with ESPN than any other sports site and ESPN’s minute share is more than three times that of the nearest competitor. Additionally, the authenticated mobile service, Watch ESPN is now in 46 million homes and that number jumps to 55 million next month when new affiliate agreements take effect.

Moving on to our parks and resorts, I was at Walt Disney World last week to see the progress of our expansion and I had the chance to try out our optional MyMagic Plus which will empower our guests to get more out of their time with us and enjoy more of what we have to offer. As we roll out this new program over the next several months, Disney World guests who want more seamless vacation experience, will have the ability to plan the details of their visit ahead of time so that you just have fun with the whole family while they’re with us. The product I tested was impressive and is a stunning example of how we’re using technology to make our products and experiences more accessible and more compelling.

Also in Florida, our ongoing expansion of Fantasy Land has been extremely well received which is something we’re quite happy about. We’re well into the process of doubling its size with spectacular new attractions based on the Little Mermaid and Beauty and the Beast and we’ll finish the Fantasy Land expansion in 2014.

Profitability at Disney Interactive has been a goal of ours in 2013 and the solid results this quarter are certainly noteworthy. We know we have more work to do and Disney Infinity remains a big swing factor for the year, but we’ve been extremely pleased by the overwhelmingly positive reaction to our announcement of this ambitious video game initiative. With Infinity, we’ve created a whole new universe where players have the freedom to create stories and adventures with some of Disney and Pixar’s most beloved characters for the first time ever. Our goal is to deliver a riveting platform that can live for years to come, continually introducing new games play sets based on our tremendous portfolio of creative content.

On the studio side, we’re pleased with the success of Disney Animation’s Wreck-It Ralph which has been a hit at the box office and has been recognized with Critic’s Choice award and the award from the Producers Guild of America for excellence in animation. Wreck-It Ralph is one of three Disney movies to earn Golden Globe and Oscar nominations for Best Animated film of the year, along with Frankenweenie and Pixar’s Brave which took home the Golden Globe.

We’ve got a lot of great movies coming up this year. Next month we’ll release Disney’s fantastical Oz the Great and Powerful, followed by Marvel’s highly anticipated Iron Man III in May. This summer we’re looking forward to Disney Pixar’s Monsters University in June as well as the Lone Ranger, an extraordinary action adventure starring Johnny Depp which opens in July. In November, we’ve got Marvel’s Thor, the Dark World as well as Disney Animations’ next adventure, Frozen and we’ll close out the year with Saving Mr. Banks, the story behind one of our most beloved classics, Mary Poppins with Tom Hanks as Walt Disney. It’s a strong diverse slate of movies that we are very excited about.

So overall we feel good about what we’ve achieved in Q1. We’re confident about the year ahead as well as our ability to create continued long term growth.

And now I’m going to ask Jay to review the details of our Q1 performance and then we’ll take your questions. Thank you.
James Rasulo

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