00:05You were strong in parks, you were strong in streaming,
00:07but there was some weakness in films and TV.
00:09Talk us through how you rate yourself.
00:11Yeah, actually, I thought it was a good quarter overall.
00:14And frankly, versus Wall Street, we beat expectations by six cents.
00:18So as you noted, the Experiences business did very, very well.
00:23Six percent revenue growth, 13 percent OI growth was terrific.
00:27Sports did very strongly.
00:29While we were launching the new DTC product, which is off to a great start.
00:34And then in terms of the entertainment business,
00:37it was largely just the overlap of the film slate that drove the numbers.
00:43I know the linear business looked a little bit soft,
00:46but that's primarily due to the fact that we had India in the numbers last year
00:50where we made 84 million bucks and wasn't in the numbers this year.
00:54Take that out.
00:55Apple-to-apples basis.
00:56Overall, I thought the quarter was good.
00:59And it actually allows us to end the year with a lot of momentum.
01:02As we think about where we are right now, we grew EPS 19 percent for the year
01:08and 19 percent CAGR for the last three years.
01:11And that's why we both guided to double-digit EPS growth in 26.
01:16And on top of that, doubled the share of purchase and increased the dividend by 50 percent.
01:20Hugh, good morning.
01:21On that momentum, the focus for a lot is streaming, right?
01:25And you have the confidence to say streaming is going to continue to be profitable through 2026.
01:32What are the factors behind that?
01:34What allows you to have the confidence to have such visibility into how that streaming business is going?
01:40Well, of course, streaming always begins with the quality of the content that we have and the quality of the slate that we have going forward.
01:48So if you think about the film slate we have right now, number one, we obviously have Zootopia 2, followed by Avatar, followed by The Devil Wears Prada 2, followed by Toy Story 5, Moana.
02:03And then we've got an Avengers movie as well.
02:06So if I look at all of that playing its way into the streaming service, certainly feel good about those tentpole events.
02:13In addition to that, our TV side continues to perform very strongly.
02:18The ratings are great.
02:19The number of hit shows are great.
02:21And then on top of that, we're investing in the product in a significant way, creating a unified app.
02:27And in addition to that, improving our recommendation engines and improving the navigation within the DTC app, put all of that together.
02:38And what we really see is just a huge opportunity for growth.
02:41We aspire to grow that business double digits along with the double digit margins we expect to achieve this coming year.
02:48And as a result, I think we're going to continue to see that business do really well and be a real growth driver for Disney.
02:54But the profitability, Hugh, streaming operating income for the first quarter of 2026, you got to be $375 million.
03:00That's a lot less than the street was anticipating.
03:03Why is that?
03:04I think it's primarily due to the fact that we're investing in product in the business and we're investing in bundling.
03:11So we all know that bundling ultimately is a very profitable thing to invest in.
03:25But initially, when you do bundling, you're making an investment.
03:27On top of that, the things I was talking about related to recommendation engines and the like, all of that requires some investment in the early part of the year.
03:37But the paybacks on that are going to be tremendous.
03:40So we certainly feel great about it.
03:42And for the full year, the double digit margin we got it to is very much in line with what we had indicated a year ago.
03:49So, Hugh, how close are Disney and YouTube TV to a resolution?
03:54And what do you plan to do that kind of gives our audience right now a sense of what your strategy for distribution is and how you resolve that?
04:03Well, in terms of where we are right now, it's an active negotiation.
04:07So that's obviously going to be driven by both sides.
04:11We don't control that.
04:13What I can tell you is we put a very attractive deal on the table, very much in line with and in a few areas perhaps better than what we're doing with others.
04:23And we feel like we're making the right proposal to value the content that we create and to give consumers access to this great content on YouTube.
04:35That said, if YouTube chooses not to engage with us on that front, obviously that content is available elsewhere.
04:44And our expectation is that at some point consumers will shift to other opportunities.
04:49Well, consumers want ESPN and consumers could get ESPN, the streaming app, performing.
04:56At the moment, how do you measure your own success there?
04:59Yeah, it's early days, obviously.
05:01The product's only been in the market as of the end of the quarter, about five weeks.
05:06So far off to a great start.
05:08And we think about it from two perspectives.
05:10Number one, the perspective of are we getting engagement?
05:14And the answer is yes.
05:15People love the SportsCenter For You capability.
05:18They love the Discover Sports capability that we have.
05:24In addition to that, in terms of the subscriptions that we're getting, 80% of those are bundled subscriptions.
05:32So it's not just benefiting ESPN.
05:35It's benefiting the entirety of the Disney Plus ecosystem.
05:38So we feel great about it from both perspectives.
05:40It's off to a great start.
05:42And what we've seen is engagement goes up when people do subscribe to the service.
05:47Hugh, is this the last earnings report and quarter before Disney's board names a successor to Bob Iger as CEO?
05:55That's a great question.
05:57So what the board has previously indicated, and I will say the board has been about as transparent as any CEO succession I have ever seen in my long career.
06:07What the board has indicated is that will take place sometime during the first calendar quarter of 26.
06:14We report in next February whether that will be before or after will be up to the board.
06:21But we should have it done by the end of March.
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