Good afternoon, and welcome to The Walt Disney Company Fiscal Full Year and Q4 2023 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Alexia Quadrani, Executive Vice President, Investor Relations. Please go ahead.

Good afternoon. It's my pleasure to welcome everybody to The Walt Disney Company's fourth quarter 2023 earnings call. Our press release was issued about 25 minutes ago and is available on our website at www.disney.com/investors. Today's call is being webcast and a replay and transcript, as well as the fourth quarter earnings presentation will all be made available on our website after the call. Joining me for today's call are Bob Iger, Disney's Chief Executive Officer; and Kevin Lansberry, Interim Chief Financial Officer. Following comments from Bob and Kevin, we will be happy to take some of your questions. So with that, let me turn the call over to Bob to get started.

Thanks, Alexia, and good afternoon, everyone. Before we begin, this week we announced that Hugh Johnston will be joining the Walt Disney Company as Senior Executive Vice President and Chief Financial Officer after 34 years with PepsiCo. It's great to have Hugh joining Disney at this important moment for our company. I'd also like to thank Kevin Lansberry, who stepped into the CFO role on an interim basis earlier this year and has provided strong leadership in the month since. Kevin is returning to his role as CFO of our Disney Experiences segment and you'll hear more from him in just a bit. Now let's turn to the quarter. Our results this quarter speak volumes about the underlying strength of our company and the remarkable amount of work we have accomplished this past year. Q4 adjusted earnings per share nearly tripled over the prior year. And all three of our businesses, Entertainment, Experiences, and Sports, saw significant increases in fourth quarter operating income compared to Q4 of fiscal 2022. The thorough restructuring of our company has enabled tremendous efficiencies and we're on track to achieve roughly $7.5 billion in cost reductions, which is approximately $2 billion more than we targeted earlier this year. Our new structure also enabled us to greatly enhance our effectiveness, particularly in streaming, where we've created a more unified, cohesive and highly coordinated approach to marketing, pricing, and programming. This has helped us to improve operating results of our combined streaming businesses by approximately $1.4 billion from fiscal 2022 to fiscal 2023. And we remain confident that we will achieve profitability in Q4 of fiscal 2024. Most importantly, our new structure has restored creativity to the center of our company and we certainly know from our now 100-year history that nothing is more important or critical to our success. Indeed, our strong creative accomplishments helped drive impressive growth in core Disney+ subscribers, with nearly 7 million added in the quarter. This reflects the success of numerous popular titles to hit the platform, including 'Guardians of the Galaxy Vol. 3', 'The Little Mermaid', and 'Elemental', continuing the trend of our theatrical releases being some of the most watched content on Disney+. Key originals also performed incredibly well across all our platforms, including 'Ahsoka' on Disney+, 'The Kardashians', which is now our most viewed unscripted Hulu original series ever, and the spectacular Korean original series, 'Moving', which has become a breakout hit. As I reflect on our achievements this past year, I'm mindful of the fact that a lot of time and effort was spent on fixing, both contending with certain decisions made in the recent past and addressing the numerous challenges brought on by disruption and the pandemic. While we still have work to do to continue improving results, our progress has allowed us to move beyond this period of fixing and begin building our businesses again. As we look forward, we are focusing on four key building opportunities that will be central to our success. They are: achieving significant and sustained profitability in our streaming business; building ESPN into the pre-eminent digital sports platform; improving the output and economics of our film studios; and turbocharging growth in our Experiences business. We have already made considerable progress on these four opportunities and we will continue to move forward with a sense of purpose and urgency. I've articulated many of my thoughts about our strategic initiative. So today, I want to discuss in more detail these four building opportunities as we enter this next phase. First, turning streaming into a profitable growth business, and I'm pleased to say our recent performance solidifies that we're on that path. In the four years since we launched Disney+, which generated roughly 10 million sign-ups in the first 24 hours alone, core Disney+ subscribers have now reached over 112 million as of this end of fiscal 2023, including the nearly 7 million we gained this quarter. What's more, our ad-supported Disney+ product grew by approximately 2 million subscriptions in Q4 to a total of 5.2 million. In fact, more than 50% of Q4 new U.S. subscribers chose an ad-supported Disney+ product. Over the past six months, these subscribers spent 34% more time watching the service. We have the best advertiser technology in the streaming business globally and we have just introduced new tools that will make this an even more attractive platform for advertisers, much as we've done with Hulu. Speaking of Hulu, we were pleased to announce last week that we will acquire the remaining stake in Hulu held by Comcast, which will further Disney's streaming objectives. We remain on track to rollout a more unified one-app experience domestically, making extensive general entertainment content available to bundle subscribers via Disney+. That includes critical and audience favorites like Hulu's 'Only Murders in the Building', 'The Bear', 'Abbott Elementary', as well as titles from our extensive content library built over a decade, including adult animation stand-up like 'Family Guy' and long-running hit series like '911', which is moving to ABC for Season 7. We expect that Hulu and Disney+ will result in increased engagement, greater advertising opportunities, lower churn, and reduced customer acquisition costs, thereby increasing our overall margins. We will launch a beta version for bundle subscribers in December, giving parents time to set up profiles and parental controls that work best for their families ahead of the official launch in early spring 2024. Also, we have additional opportunities for improvement in our streaming business that will come from implementing stronger standards around account sharing, although given the timing of our planned rollout, we don't expect a meaningful impact until 2025. Now that we have realigned our pricing and marketing strategies focused aggressively on getting the technology right, merged our creative and distribution teams, and restored creative excellence as our singular motivating priority with the content we create, we are bullish about the future of our streaming business. As you consider the components in the future of that business, just imagine the opportunities that the further combined Disney+, Hulu, and ESPN streaming experience could offer us as a company and our consumers. Another core building opportunity is taking ESPN, which is already the world's leading sports brand, and turning it into the pre-eminent digital sports platform, allowing us to reach fans in compelling new ways and fully integrating key features into our primary ESPN offering. We're already moving quickly down this path, and we are exploring strategic partnerships to help advance our efforts through marketing, technology, distribution, and additional content. As we continue to develop our streaming business, the continued strength of ESPN relative to the backdrop of notable linear industry declines demonstrates the value of sports and the power of the ESPN brand. Overall, our domestic ESPN business grew in revenue and operating income in both fiscal 2022 and fiscal 2023. This fiscal year also saw the network deliver its best overall viewership in four years and its highest viewership in the key 18 to 49 demographic in the same time period. ESPN viewership was up in each of the four quarters as well, maintaining steady success throughout the entire year. Across ESPN networks, the company increased its already industry-leading share of sports viewership in fiscal 2023 and we continue to see stability in ad sales, despite challenges facing the broader media industry. ESPN BET will launch next week through our agreement with Penn Entertainment and we're excited to bring sports fans this compelling new experience. Regarding our broader linear business, we continue to evaluate options for each of our linear networks with the goal of identifying the best strategic path for the company and maximizing shareholder value. However, our review of the business thus far has uncovered significant long-term cost opportunities which we are implementing while continuing to deliver high-quality content. Speaking of which, I'd like to acknowledge the world-class journalists and producers at ABC News. Over the past few months, many have risked their lives to keep our audiences informed during relentless news cycles and made ABC number one in network news for the 11th consecutive year. Next is the need to strengthen the creative output of our film studio, which generates value throughout the entire company. To achieve this, we are focusing heavily on the core brands and franchises that fuel all of our businesses and reducing output overall to enable us to concentrate on fewer projects and improve quality while continuing our effort around the creation of fresh and compelling original IP. I'm devoting considerably more of my time to this with the goal of improving returns, always seeking to exceed the level of creative excellence audiences expect from Disney. Meanwhile, we have four of the top 10 highest grossing films at the global box office this year, including Pixar's 'Elemental', which has grossed nearly $0.5 billion worldwide in addition to being the most viewed film released this year on Disney+. We have more new releases still to come in calendar year 2023 including 'The Marvels' from Marvel Studios, which will be released this Friday, and 'Wish', our newest film from Walt Disney Animation Studios, which marks our company's 100th Anniversary and will be in theaters beginning November 22nd. We're also looking forward to our strong theatrical slate in 2024 with several films tied to popular franchises like 'Deadpool 3', featuring Wolverine, 'Kingdom of the Planet of the Apes', and 'Inside Out 2'. Additionally, 'Mufasa: The Lion King' and sequels from our 'Toy Story', 'Frozen', 'Zootopia', and 'Avatar' franchises are all in the works. Finally, we have an opportunity to build Disney Experiences into an even bigger and more successful cash flow generation business. Parks and Experiences overall remain a growth story and we are managing our portfolio exceptionally well. Even in the case of Walt Disney World, where we have a tough comparison to the prior year when you look at this year's numbers compared to pre-pandemic levels in fiscal 2019, we've seen growth in revenue and operating income of over 25% and 30%, respectively. Over the last five years, return on invested capital has nearly doubled in our domestic parks, and we have seen sizable increases over that same timeframe across the total Experiences portfolio as well. Not to mention the improved guest experience ratings we're now seeing at every one of our parks. As we announced in September, we plan to turbocharge growth in our Experiences business through strategic investments over the next decade. Given our wealth of IP, innovative technology, buildable land, unmatched creativity, and strong returns on invested capital, we're confident about the potential from our new investments. Looking at the company as a whole, today, we are focused on driving profitable growth and value creation as we move from a period of fixing to a new era of building. We have a strong balance sheet and we expect free cash flow to significantly improve in fiscal 2024, approaching pre-COVID levels. Disney's Experiences business with its expansive offerings around the world is a key differentiator and remains a powerful growth engine, expanding operating margins by nearly 300 basis points over the past five years. As we transition ESPN to a streaming future and more fully integrate general entertainment content into Disney+, we will have a DTC offering unlike any other in the industry. Disney's leadership and workforce around the world are second to none. When you combine all of that with our unrivaled portfolio of valuable businesses, brands, and assets, and the way we manage them together, Disney has a strong hand that differentiates us from others in the industry. Our results this quarter are a testament to the work we've done across the company this past year and I'm bullish about the opportunities we have to create lasting growth and shareholder value and to strengthen Disney's position as the world's leading entertainment company. And with that, I will turn things over to Kevin.

Thank you, Bob. I appreciate your kind words at the outset of the call. It's been an honor serving as Interim CFO these past few months. We are excited to welcome Hugh to the Walt Disney Company and I look forward to working with both of you on all of this ahead. Now to dive into this quarter's results. Diluted earnings per share, excluding certain items, increased versus the prior year to $0.82 in the fiscal fourth quarter, and $3.76 for the full fiscal year. This past year has been marked by both transformation and execution. We are pleased with the momentum we are building and the results we've realized, including meeting our guide of high single-digit percentage growth in both revenue and operating income for fiscal 2023. Total company revenues for the year increased 7% and segment operating income grew by 8%, excluding the impact of accelerated depreciation from the Galactic Starcruiser. Free cash flow for the year increased substantially, totaling close to $5 billion, driven by the work we've been doing on the cost efficiency front and by improvement in our underlying financial results. A few weeks ago, we published our recast financials aligned to our newly reorganized segment structure. Today, I'll be walking through the fourth quarter's financial results for each of our three segments: Entertainment; Sports; and Experiences. And I'll also provide some color for the year ahead. Starting off with Entertainment. Q4 operating income grew by over $800 million versus the prior year quarter, driven by improvement in our direct-to-consumer business. We continue to make headway on our path to profitability in streaming with fourth quarter operating losses at our Entertainment D2C services improving by nearly $1 billion versus the prior year or $85 million sequentially to $420 million. Note that our Entertainment direct-to-consumer results exclude ESPN+. Including ESPN+, our combined streaming businesses had an operating loss in the fourth quarter of $387 million, a year-over-year improvement of a little over $1 billion and a sequential improvement of $125 million. As Bob noted earlier, we added nearly 7 million Disney+ core subscribers over the past quarter, reflecting strong content performance and our global summer promotion. Disney+ core ARPU increased sequentially by $0.12, driven by pricing increases and higher advertising revenue, partially offset by the impact of the summer promotion. The Disney+ ad tier added approximately 2 million subscribers during the fourth quarter and ended the fiscal year with 5.2 million subscribers. We anticipate core Disney+ subscribers in fiscal Q1 will decline slightly versus Q4 due to the expected temporary uptick in churn from the recent U.S. price increases, as well as from the end of the summer promotion. However, we expect to see subscriber growth rebound later in the fiscal year. Growth in Entertainment D2C advertising revenue of 4% in Q4 versus the prior year partially offset linear ad declines. The growth reflects an increase at Disney+ while Hulu results declined due to lower political and technology category advertising. We continue to expect to reach profitability at our combined streaming businesses in Q4 of fiscal 2024. Although as we have mentioned in the past, we don't expect linear progress from quarter to quarter. While we expect Entertainment D2C operating losses in Q1 to be generally in line with Q4 due to higher sports rights costs at ESPN+ aligned with the start of the NHL season, we anticipate a modest sequential decline in Q1 for the combined streaming business. As we have also said previously, we anticipate upward momentum later in the fiscal year to be driven by realizing the full impact of price increases, the launch of the ad tier internationally, and subscriber growth. At linear networks, which now excludes our sports channels, fourth quarter operating income was flat to the prior year, reflecting lower advertising and affiliate revenues which were generally offset by a decrease in marketing, programming, and production costs. Advertising revenue declines were driven by our domestic business, primarily at ABC and our own TV stations. Domestic entertainment affiliate revenue decreased by 4% in the fourth quarter versus the prior year due to a 6-point decline from fewer subscribers and a 1.5-point adverse impact from the Charter blackout, partially offset by roughly a 4-point impact from higher rates. As Bob mentioned, we remain focused on driving additional cost efficiencies in this business over the long term. Content sales, licensing, and other lower operating results versus the prior year were due to lower theatrical results, partially offset by higher home entertainment results. We currently expect that first-quarter operating income will be roughly breakeven and comparable to the prior year. Moving to our Sports segment. Q4 operating income increased by 14% versus the prior year. Results were driven by our domestic ESPN business from lower programming and production costs. Growth in subscription revenue at ESPN+ due to both pricing and subscriber growth and lower marketing costs, partially offset by lower affiliate revenue. The decrease in programming and production costs reflects the absence of the Big 10. Domestic ESPN linear advertising revenue increased by 1% in the fourth quarter versus the prior year, despite the absence of the Big 10, the Charter blackout, and a highly competitive marketplace. Domestic affiliate revenue decreased by a little less than 5% in Q4 versus the prior year as 5.5 points of growth from higher rates were offset by adverse impacts of approximately 7.5 points from fewer subscribers and 2 points from the Charter blackout. As Bob referenced earlier, it's worth noting that ESPN's domestic business grew in revenue and operating income in each of the last two years. These results give us confidence in our belief that sports has the power to drive value for the company even in the face of challenging industry headwinds. Finally, at Experiences. Fourth quarter operating results increased by over 30% versus the prior year quarter and 27% versus fiscal 2019. Operating margins at the segment were 22% in Q4, an increase of three percentage points versus the prior year. Our international operations continued their strong performance trend in the quarter with significant growth across all sites versus the prior year. Disney Cruise Line, Disney Vacation Club, and Disneyland Resort also all saw strong year-over-year growth in both revenue and operating income, while Disney World operating results decreased, driven by the accelerated depreciation from the closure of the Galactic Starcruiser along with inflationary impacts and the continued comparison to the 50th Anniversary celebration in the prior year. Looking towards fiscal 2024, we anticipate robust annual operating income growth at Experiences to reflect continued strong performance at our International Parks and Disney Cruise Line. While domestic Parks and Experiences is expecting solid growth for the full year, that growth will be heavily back-end loaded due to continued challenging comparisons in the first half of the year from the 50th Anniversary at Walt Disney World in addition to wage inflation. We continue to be bullish on the long-term positioning of our Experiences business. As evidenced by our recent announcement, on significant investments we plan to make over the next 10 years to turbocharge growth in this area. We expect those investments to ramp up towards the back half of that 10-year period with more gradual increases in the first few years. As has been the case historically, CapEx for the parks are largely effectively self-funded, given the strong returns these investments generate over time and I would also note that a portion of the investments in our theme parks in Shanghai and Hong Kong are funded out of joint venture cash flows. Before we conclude and move to Q&A, there are a number of additional items I'd like to share for context on the year ahead. First on capital expenditures, fiscal 2023 CapEx totaled approximately $5 billion, roughly comparable to the prior year and in line with our most recent guidance. We expect CapEx in fiscal 2024 to total $6 billion, an increase of approximately $1 billion versus fiscal 2023, driven by higher spend at Experiences. CapEx at Experiences in fiscal 2024 will look more comparable to fiscal 2019 levels and includes spend at our Cruise business ahead of the launch of three new ships in fiscal 2025 and 2026. Our enterprise-wide content spend in fiscal 2023 was $27 billion, in line with our guidance and about $3 billion below the prior year as we significantly reduced our spend on entertainment content. As a result of our continued work to be more efficient in our content spend, in addition to impacts from the strikes and the timing of sports payments, we expect total content spend in fiscal 2024 to be approximately $25 billion, which is a decrease of $2 billion versus 2023. Note that sports rights now account for over 40% of our enterprise-wide content spend. Our annualized entertainment cash content spend reduction target is now $4.5 billion, excluding strike impacts and sports rights versus $3 billion previously. We expect this to be realized on a cash basis in fiscal 2024, although it will take a few years for the bulk of these savings to be reflected in the P&L due to the timing of amortization. On the topic of cost-savings and streamlining our operations, we have eliminated over 8,000 roles, and while we are not currently planning to make further large-scale reductions to our workforce, we are taking significant concrete steps to continue addressing the cost basis of the overall company. We have increased our annualized efficiency target for total company SG&A and other operating expenses to $3 billion versus $2.5 billion previously, excluding the strike impacts. Approximately $2 billion of these efficiencies were achieved in fiscal 2023. Naturally, we also saw inflation and volume-related cost increases throughout the year, including higher content amortization and costs related to expanded operations at International Parks and Cruise, which were impacted by closures and limited operating capacity in the prior year. The remainder of these savings are expected to be achieved by the end of fiscal 2024. Our expense base in fiscal 2024 is expected to only increase slightly versus the prior year as these efficiencies and strike savings will mostly offset the year's planned volume-related growth and inflation. Adding the new $4.5 billion cash content spend reduction target to the $3 billion expense target brings our total annualized target to $7.5 billion as Bob announced earlier. All of these factors, in addition to continued growth and improvement across our underlying businesses, are expected to come together over the coming fiscal year to result in free cash flow generation of roughly $8 billion, a significant year-over-year increase and approaching levels we last achieved pre-pandemic. This continued robust free cash flow growth alongside our strong balance sheet will position us well to address our investment and shareholder returns goals for the year and going forward. To that end, we will be recommending to the Board that they declared a dividend by the end of this calendar year. While this will be just the starting point, we do see ample opportunity to continue to increase shareholder returns in the future as our earnings and free cash flow grow in the form of increased dividends or share buybacks, and we look forward to sharing more as we move ahead. And with that, I will turn the call back to Alexia for Q&A.

Thanks, Kevin. As we transition to Q&A, we ask that you please try to limit yourself to one question in order to help us get to as many analysts as possible today. And with that operator, we're ready for the first questions.

The first question will come from Michael Nathanson with Moffett Nathanson. You may now go ahead.

Thanks. Hey, Bob, I have two quick ones for you. This is your first earnings call post the Charter-Disney Agreement. So stepping back, what are the most important impacts to Disney after that agreement? And then how would you imagine the company differently now that that is kind of the template going forward for new deals? And secondly, on the film studio, you first said you had the most amazing content cycle on film we've ever seen. So I wonder, what do you think is ailing the film slate this time around and what are your priorities to fixing this as you lay out one of your top three priorities? But what are you doing in particular to fix the film slate going forward? Thanks.

Thanks, Michael. Regarding Charter, first of all, as we said when we did the deal, we think it's a great deal for us. Also, I think it's a great deal for Charter. It doesn't really change things much in terms of our strategy, because when you look at the deal, it actually ended up reflecting exactly what our strategic priorities are, that is streaming, and the distribution agreement for Disney+ as part of the overall Charter deal does just that. So it leans into our streaming priorities, and that strategy doesn't change things much. Having the opportunity to consolidate a bit on the channel side is, I think, a good thing at this point. In terms of the studio, nice of you to mention just our great run. First of all, let's put things in perspective. Recently, we did have four really strong titles and four of the top 10 in the past year led by 'Avatar', of course. But there were other successes, too. That said, as I've looked at our overall output, meaning, the studio, it's clear that the pandemic created a lot of challenges creatively for everybody, including for us. In addition, at the time the pandemic hit, we were leaning into a huge increase in how much we were making. I've always felt that quantity can be actually a negative when it comes to quality. I think that's exactly what happened. We lost some focus. Working with the talented team at the studio, we're looking to consolidate, meaning, make less, focus more on quality. We're all rolling up our sleeves, including myself to do just that. We have obviously great assets, great stories to tell from the assets that we either have or that we purchased. I feel really optimistic about the slate going forward, which is going to be a balance between some really strong sequels to some very, very popular titles as well as some good original content, starting with 'Wish', which comes out Thanksgiving weekend. So I feel good about the direction we're headed, but I'm mindful of the fact that our performance from a quality perspective wasn't really up to the standards that we set for ourselves.

Thank you. Next question, please.

Our next question will come from Steven Cahall with Wells Fargo. You may now go ahead.

Thank you. So first on DTC, I mean, pricing is about to step up. You announced the cost-cutting program, some of which might be at DTC or Hulu. And Bob, I think for a couple of quarters you've just been talking about how confident you are in streaming profitability. So I'm not asking for guidance, but is there any way for us to just frame what DTC can look like beyond breakeven, since that's really the biggest driver of earnings growth and value creation? Then on the ESPN side, just as we think about that, preeminent sports platform that you're looking to build, so many folks have already voted with their feet to be outside of the bundle. How do you think about putting something into the market more quickly, maybe at a high price point that doesn't disrupt the bundle, just to see if the cord cutters or cord nevers have some demand? Thank you.

I'll take the second part first. Our plan when we bring ESPN direct-to-consumer, which is inevitable, which is going to happen, and we're planning for it, is to have what I'll call a soft landing, which is continue to make it available as part of the bundle for those people that want to remain in the bundle or people who feel that the bundle still has value to them, and at the same time to make it available on a true direct-to-consumer basis. So it is our hope that it will serve the consumer in two ways, in the traditional way and in a new way. We'll obviously see in terms of where we end up the blend of consumers that stay in the bundle and those that leave. We're not concerned about it. As we model ESPN into the future, we see that in some cases it will continue to be sold as part of the bundle. The first question, the trajectory of DTC, we're not going to get specific and we're not giving any guidance beyond our guidance about becoming profitable at the end of 2024. But the building blocks are in place to turn this into a real growth business for us. The recent announcement about purchasing the remaining stake in Hulu is just one of those building blocks. On the pricing side, we did take Disney+ prices up for the premium service, the non-advertiser supported by about 27%. It's still really early to tell, but we had taken those prices up significantly a year earlier and churn was minimal. So we felt we have the room, particularly as we improve quality on the Disney+ service, where overall our strategy regarding pricing is more sophisticated, more coordinated across the world than it had been before. As we look at growing that business, a smarter approach to pricing is one, bundling is another. I'm going to come back to the bundle between Disney+ and Hulu and then the opportunity to bundle ESPN. Clearly, we've got technology improvements in the works, whether it comes to account sharing, or whether it comes to lowering customer acquisition costs and churn, and lowering marketing expenses and growing margins. That's part of it. Advertising is a strong component of that. We did not take pricing up for Disney+ advertiser-supported services, and the difference between the advertiser-supported and the premium services is wider, because we like the ARPU that we get from both sides. We feel really good about the potential of this business. If you think about the portfolio of streaming assets that we will have, Hulu, Disney+, and ESPN, that's a very strong hand. In December, we launched a beta version of Hulu and Disney+ combined. We feel really good about that. I saw some demos of that just yesterday as a matter of fact. We are basically putting it in beta to prepare parents largely to implement parental controls, because you'll be able to access Hulu programming on the same app. In late March, we'll launch it in full form. I think we have opportunities in terms of upsell capabilities, increasing engagement. We found that where we bundle, we lower churn. Again, these steps are all taken to ultimately turn this into a great business. Lastly, in terms of cost reductions, we created a one-world approach to streaming. We had multiple organizations before. We now have one run globally by Dana Walden and Alan Bergman. They have created a new senior management team around the globe to manage these assets. We’re doing so much more cohesively, including balancing spending in markets, local spending, and what I'll call global spending. Recently, we really came to appreciate the performance of our big title films, the so-called Pay 1 window films on the service. 'Elemental' is one, 'Guardians of the Galaxy 3' was another, and 'Little Mermaid' is third. The numbers are huge. That's a differentiator for us when it comes to competing with Netflix, which is the gold standard. By leaning more into some of those films and while improving their quality, we can dial back spending and investment in series. That blend of spending between films and series, we believe, gives us the opportunity to increase our margins and grow the business.

All right. Next question, please.

Our next question will come from Ben Swinburne with Morgan Stanley. You may now go ahead.

Thanks. Good afternoon. I want to come back to the free cash flow commentary because that's pretty interesting and new. I also want to ask you, Bob, about your U.S. sports business and ESPN. So on cash flow, $8 billion of free cash flow, $6 billion of CapEx, getting to $14 billion of cash from operations. You haven't done a number like that, I think, since 2018. I'm trying to understand if you think you can sustain and grow your company at that level of cash content spent. I think Kevin said 2025, because that certainly allows you to really grow free cash flow from a base that's already higher than people were expecting in 2024. Hopefully, that made sense. Then on the sports side, Bob, people think about ESPN as a network facing cord cutting, etc. You clearly have a vision there that you think can grow over time. Can you talk a little bit about how you think about growing the sports business? Do you think you can, between linear and digital and other ancillary services, sort of grow your sports business over time? Because that would be another area where you'd certainly outperform expectations. Thanks so much.

I'll take the question about ESPN first. Interesting, I just saw statistics. ESPN is the number one brand on TikTok. Not the number one sports brand, not the number one media brand, the number one brand with about 44 million followers, which is an incredible statistic. ESPN is a very popular, high-demand product in the United States, and we believe leaning into it is the smart thing to do because of its unique quality, popularity, and profitability. We believe we have an opportunity there as we bring it direct-to-consumer. To strengthen our hand when we do that by partnering with either tech companies that can provide us with marketing technology support, customer acquisition help, or sports leagues that can provide us with more content. It's that simple. We're quite bullish about it. Frankly, if we were to just sit back and leave ESPN alone, as part of the linear bundle, we know ultimately where that would bring us. It certainly wouldn't bring us in a growth direction because of the continued decrease in multichannel subscribers. This approach will enable us to buck that trend, continue to allow it to be part of the multichannel bundle, but also make it available on a direct-to-consumer basis. Regarding cash flow, Kevin?

With respect to cash flow, we do feel good about where we are ending up in 2024 from a content spend perspective. When you take a look at how we're getting to that year-over-year, lower content spend is clearly part of it. But continued growth and improvement of our underlying business is also a huge component of that, as is the annualized efficiency targets that we have all implemented. So those things are driving a significant amount of year-over-year improvement in our cash flow.

All right. Operator, next question, please.

Our next question will come from Jessica Reif Ehrlich with BofA Securities. You may now go ahead.

Yes, thank you. Excuse me. Thank you. Bob, I was wondering if you could give us your sort of holistic view on advertising and what's going on. I mean, we know money is going into retail, media networks, and things like that, but how much can you as a company make up on AVOD versus what's going on with linear? Maybe you can give us your view on what is going on with linear for you. And then on India, it’s been a notably challenging market, a consistent money loser. Can you talk about how your view of where that winds up? Do you own it? Do you joint venture it? Do you exit the market?

Jessica, first of all, in India, our linear business actually does quite well. It's making money. But we know that other parts of that business are challenged for us and for others, and we are looking, I'll call it expansively. I know I've said this before, and it always gets me in trouble, but we're considering our options there. We have an opportunity to strengthen our hand. It is, I think, now maybe the most populous country in the world or maybe just still second to China and about to pass them. We'd like to stay in that market. But we are also looking to see whether we can strengthen our hand and obviously improve the bottom line. In terms of advertising, we are actually finding that linear is a little bit stronger than we had expected it would be. It's not back as much as we would like. It's still challenged, but it's not as bad as it had been. So we've seen some slight improvement. The tech sector is still somewhat weak. Overall, advertising has improved. We're finding great demand for addressable advertising. I noted in an interview I did earlier that we've implemented tools on Disney+ to provide advertisers with better targeting. They're starting to work. In general, sports has been very strong. As we look at the advertising marketplace right now, while it's not as strong as we would like it to be, it's certainly not as bad as some people think it is, and it's working for us. On AVOD, it's very, very clear that the tools that the new platforms provide to advertisers are exactly what the advertisers are looking for. Those platforms are an advertiser's dream. We know that the more data, detail, context, and targeting we can provide, the better off we'll be. Hulu had an extremely robust advertising engine. We’ve got one of the best in the business, if not the best. So the combination of Hulu and Disney+ with the tools we've put in place, is going to give us the ability to have a blended CPM, grow engagement, and grow advertising. We're quite bullish about our position, media-wise, in the advertising marketplace.

Operator, next question, please.

Our next question will come from John Hodulik with UBS. You may now go ahead.

Thank you. I would like to follow up on Ben's question. Is there a chance for ESPN to acquire local sports rights considering the changes in the RSN model, or to potentially acquire sports rights for distribution outside the U.S.? That's my first question. Secondly, Warner Brothers recently made headlines by licensing their major content, specifically the DC Universe, to Netflix. Is this an opportunity for Disney to pursue more aggressively without harming the Disney brand or hindering the growth of Disney+? Thank you.

Good questions, John. Thank you. We've actually been licensing content to Netflix and are going to continue to. We're actually in discussion with them now about some opportunities, but I wouldn't expect that we will license our core brands to them. Those are real competitive advantages for us and differentiators, such as Disney, Pixar, Marvel, and Star Wars, all doing very well on our platform. I don't see why we should pursue that just to chase dollars when they are really important building blocks to the current and future of our streaming business. Regarding local sports, the technology we will have for ESPN DTC will give us the ability to provide local sports in a pretty robust way, similar to what the RSNs are doing. But we're not really aiming to do so by taking on significant risk. If we can find the right kind of business arrangements and partnerships, I think we'll look very seriously at providing local sports as part of that platform, but again, not if it results in us taking on too much risk.

All right. Thank you. Operator, we have time for one more question.

Our final question will come from Phil Cusick with J.P. Morgan. You may now go ahead.

Hi, guys. Thank you. Bob, first follow up on ESPN, clearly a big priority. Can you give us some update on types of potential ESPN partners and what the hurdles might be to get those partnerships announced? And then second, maybe if you could dig into the recent trends of Parks. There's been some noise on pricing, but what have you seen from consumer demand, both in Orlando and around the country? And how do you think that Walt Disney World is doing versus the overall Orlando market? Thanks very much.

The first question was on the conversation regarding ESPN partnerships. What we've been saying and exploring is that, as we prepare to take ESPN in the direct-to-consumer direction, we believe we have opportunities to strengthen our hand with entities that either provide us with technology or marketing support or companies that can provide us with more content. We feel we have an excellent hand and could do it without that, but why not explore strengthening our hand? Since I noted that we were interested in this back in July, we've engaged with several entities. I can say that there's significant interest out there. There are complexities to it, but not hurdles that are too high that we can't jump over. We're going to continue to explore it. I imagine we'll have more to say about this in the coming months. But again, there’s serious interest, and I think there’s a path to deals, but we're working through them. And obviously, as soon as they're completed, we'll let everybody know. You want to take the consumer demand question?

Yep. So with respect to the Parks, I think we've talked about it in our prepared remarks regarding Walt Disney World. So we're going to continue to have a little bit of that lapping effect that will continue for a little as we go through Q1. But as I look out at the other domestic businesses, especially Disneyland continues to look exceptionally strong, as does Disney Cruise Line. Bookings at all of those continue to be very, very strong going forward. So domestically, we feel good, and internationally we feel pretty good, too. So we're not really seeing anything in terms of an economic hangover.

Okay, thanks for the question. I want to thank everyone for joining us today. Note that a reconciliation of our non-GAAP measures that were referred to on this call to the equivalent GAAP measures can be found on our Investor Relations website. Let me also remind you that certain statements on this call, including financial estimates or statements about our plans, guidance, or expectations, and other statements that are not historical in nature may constitute forward-looking statements under the securities laws. We make these statements on the basis of our views and assumptions regarding future events and business performance at the time we make them. We do not undertake any obligation to update these statements. Forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results expressed or implied in light of a variety of factors. These factors include, among others, economic or industry conditions, competition and execution risks, including in connection with our business plans, organizational structure and operating changes, cost savings, future financial performance, including expectations and drivers of growth and our DTC content and how it has made available on our platforms, subscriber, advertising and revenue growth and profitability. In particular, our expectations regarding DTC profitability are built on certain assumptions around subscriber additions based on the availability and attractiveness of our future content, which is subject to additional risks related to recent work stoppages, return expectations, the financial impact of Disney+ ad tier and price increases, and our ability to quickly execute on cost rationalization while preserving revenue and macroeconomic conditions. All of which, while based on extensive internal analysis as well as recent experience, provides a layer of uncertainty in our outlook. For more information about key risk factors, please refer to our Investor Relations website, the press release issued today, the risks and uncertainties described in our Form 10-K, Form 10-Q, and other filings with the Securities and Exchange Commission. We want to thank you for joining us and wish everyone a good rest of the day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.