Walt Disney Company (The) (DIS)

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The Walt Disney Company (DIS)

F2Q09 Earnings Call

May 5, 2009 4:30 pm ET


Lowell Singer - Senior Vice President, Investor Relations

Robert A. Iger - President and Chief Executive Officer

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


Spencer Wang - Credit Suisse

Doug Mitchelson - Deutsche Bank

Michael Nathanson - Sanford C. Bernstein

Imran Khan - J.P. Morgan

Anthony DiClemente - Barclays Capital

Jessica Reif-Cohen - Merrill Lynch

Tuna Amobi - Standard & Poor’s

Benjamin Swinburne - Morgan Stanley

Jason Bazinet - Citigroup

David Bank - RBC Capital Markets

Michael Morris - UBS

Jason Helfstein - Oppenheimer



Good day, ladies and gentlemen, and welcome to the Walt Disney second quarter 2009 earnings conference call. My name is Michelle and I will be your coordinator for today. (Operator Instructions) I would now like to turn the presentation over to your host for today’s conference, Mr. Lowell Singer, Senior Vice President of Investor Relations for Walt Disney Company. Please proceed.

Lowell Singer

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

Joining me for today’s call in New York 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 relatively brief remarks today and then we will leave plenty of time to answer your questions.

So with that, let me turn the call over to Bob.

Robert A. Iger

Thank you, Lowell and good afternoon. Our second quarter performance reflected the weak global economy as well as disappointing results at our movie studio. While we are now seeing some signs the economic downturn is stabilized, it is too early to make predictions about the timing and pace of the recovery.

On our last earnings call, I spoke about how the cyclical economic downturn and the secular changes facing certain of our businesses were causing us to take a hard look at what we do and how we do it. Since then, we’ve taken significant steps to pare costs and to organize our businesses to be better positioned in an environment where people are consuming a growing amount of content online even as they continue to enjoy traditional media.

What hasn’t changed, however, is our overall business strategy with its emphasis on creativity, technology, and international growth, as a means of driving shareholder returns. We remain committed to making great creative content and to making sure that content is delivered to consumers the world over in the best ways possible. This approach is exemplified by the recent announcement that we are joining Hulu as an equity partner and programming provider. Like ABC.com, Hulu is proving to be a great experience for the consumer and we believe that broader distribution of our content makes sense given the ongoing growth in online viewing.

Joining Hulu also allows us to expand the relevance and popularity of our brands and content. It helps combat piracy by offering a better alternative to consumers and we believe it will allow us to expand and diversify revenues over time without fundamentally undermining traditional business relationships, models, and windows.

As we look ahead, we see a blend of new and traditional media and business models utilizing both established and new distribution and marketing platforms. The movie theater isn’t going away, neither is broadcast television, but the same can also be said of new media. It isn’t going away and we expect it to grow in size and significance to people’s lives.

For that reason, we absolutely must be where our consumers are going. We believe that by providing consumers tangible value in new ways, we will ultimately be fairly compensated for it and thus create greater value for our company.

Turning back to the quarter, our media networks posted a notable performance, led by ESPN and the Disney Channel, which continued to build their brand strength through differentiated and engaging programming. The segment held up remarkably well given the challenging economic environment. ABC is in the process of consolidating its network and studio operations and we are pleased by the strong mix of programs which form the core of its primetime schedule.

We do, however, recognize the importance of adding successful new shows to ABC’s lineup. After posting strong results last year, studio performance was disappointing, something they’d be the first to admit. But we are enthusiastic about several upcoming films, including UP, which in a great validation of Pixar’s artistry, has been chosen as the first animated film to open the Cannes Film Festival. Princess and the Frog, an innovative take on the classic Disney Fairy Tale musical, and next year’s Toy Story 3, which brings back characters beloved by an entire generation.

On the live action front, we’ve got an exciting slate of movies coming up, including The Proposal, G-Force, A Christmas Carol, Prince of Persia, Sorcerer’s Apprentice, and Alice in Wonderland.

At our parks and resorts, we made a conscious decision to put in place promotions that would drive attendance. This strategy has had a predictable impact on margins but its also had the intended effect of bringing people to our parks, underscoring the tremendous affinity consumers have for the Disney brand.

Throughout, we have maintained our focus on quality, believing that we can derive long-term value by offering our guests an exceptional experience at affordable prices in this difficult economic environment. We expect these visits will keep guests coming back for more and telling others about the great time they had.

Read the rest of this transcript for free on seekingalpha.com