Walt Disney Company (The) (DIS)

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The Walt Disney Company (DIS)

F1Q09 Earnings Call

February 3, 2009 4:30 pm ET


Lowell Singer - Senior Vice President, Investor Relations

Robert A. Iger - President, Chief Executive Officer, Director

Thomas O. Staggs - Chief Financial Officer, Senior Executive Vice President


Jessica Reif-Cohen - BAS-ML

Benjamin Swinburne - Morgan Stanley

Spencer Wang - Credit Suisse

Douglas Mitchelson - Deutsche Bank Securities

Imran Khan - J.P. Morgan

Michael Nathanson - Sanford C. Bernstein

Mark Wienkes - Goldman Sachs

Michael Morris - UBS

Richard Greenfield - Pali Research

Alan Gould - Natixis Bleichroeder

David Miller - Caris & Company



Good day, ladies and gentlemen, and welcome to the first quarter Walt Disney earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Mr. Lowell Singer, Senior Vice President of Investor Relations of Walt Disney.

Lowell Singer

Good afternoon, everyone and welcome to the Walt Disney Company’s first quarter 2009 earnings call. Our press release was issued a few minutes ago. It’s now available on our website at www.disney.com/investors. Today’s call is also being webcast and the webcast can be accessed via our website. After the call a replay and the transcript of today’s remarks will also be available on our website.

Joining me in Burbank today for the call are Bob Iger, Disney’s President and Chief Executive Officer, and Tom Staggs, Senior Executive Vice President and Chief Financial Officer. Bob and Tom are going to lead off with some comments. We will of course turn it over to you for your questions.

So with that, let me turn the call over to Bob and we will get started.

Robert A. Iger

Disney had a challenging first quarter with all of our lines of business to various degrees by what is likely to be the weakest economy in our lifetime. Consumers and companies both are scaling back expenditure, emphasizing savings over spending, and it is unclear when this will change.

At the same time, certain of our businesses are experiencing signs of secular change as competition for people’s time is increasing and the abundance of choices allowing consumers to be more selective. This clearly has had an impact on broadcast television and may have a long-term potential impact on the DVD business. In essence, we don’t believe the changes we are seeing in consumer behavior can all be attributed to a weak economy and we feel it is important for us to address them as more than just cyclical issues.

The combination of these changes with the severe economic downturn has caused us to examine much of what we do, guided by privatism and an appreciation of the advantages afforded to us by the strength of our creativity, our brands, our assets, and the integrated way we manage our businesses.

Fundamentally, we remain in a great competitive position but circumstances require us to be even smarter in day-to-day management. We believe we have a real opportunity to strengthen our brands and to make our businesses even more efficient. With respect to the downturn we are taking numerous steps to mitigate its impact. These efforts are company-wide but each business segment is adjusting according to its own conditions and needs.

We continue to look for ways to adjust our cost base to changes in demand, provided that these actions do not compromise the quality of our products or the guest experience we offer. Cost savings are only part of what we are aiming to accomplish. We are also addressing the challenges created by the secular changes I mentioned earlier.

On the broadcast side, we are more focused than ever on creating great entertainment that we own and can distribute across multiple platforms in multiple territories. The consolidation of ABC Entertainment and ABC Studios creates a more sustainable cost structure, increases accountability, and underscores our commitment to this content-creation strategy.

On the local broadcasting front, audience fragmentation and a weakened advertising environment is making the business much tougher. Our local television businesses have been extremely disciplined on the cost front and while it might be tempting to reduce expenses even more, we will not do so at the expense of our local news brands, which we have concluded are the single most valuable assets of these stations and where we believe additional reductions would have a long-term negative impact. Our position as a market leader in local news provides us an opportunity to increase the value of these assets, even as competitors cut back.

In our film business we started taking measures three years ago to focus primarily on Disney-branded movies, allowing us to trim our output and expenses, to leverage the Disney name, and to create opportunities for other Disney businesses, thus aiming to improve returns.

Today our focus is only intensifying as we address the changes affecting the DVD market. To that end we plan to reduce production, marketing, and distribution expenses at our home video business and to implement strategies that enhance the price-to-value relationship of our products. We believe the unique nature of our brand and the quality of our movies helps us to stand out in this environment but we must also innovate in order to generate attractive returns.

Consumer affinity for the Disney parks remains extraordinary in this tough economy. The strength of the best experience we offer combined with new marketing and pricing strategies has enabled us to do reasonably well in terms of attendance and advance bookings. Although we can cut some costs to compensate for somewhat lower revenue levels, we are determined to protect quality.

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