Disney teases new streaming service and password sharing crackdown to investors after 40% year over year earnings growth

This standout performance, coupled with impressive cruise and park stats and historic ratings at ESPN, has reinforced Disney’s position as a leader in the entertainment industry. The results put CEO Bob Iger’s massive pay package into perspective.

Disney is also rolling out a series of technological enhancements for Disney+ over the next 12 months. These include measures to address password sharing (an unpopular move embraced by many streamers lately) and the development of a more dynamic home screen to increase user engagement. The company is also preparing to launch ESPN Flagship, a comprehensive sports streaming service, in fall 2025. The move aims to capitalize on the evolving sports media landscape and cater to a new generation of consumers. Despite these ambitious plans, Disney has trimmed its content budget from $24 billion to $23 billion for the year, demonstrating a focus on efficiency alongside growth.

See key takeaways below, followed by the full earnings transcript.

• Disney forecasts a robust year with exciting new theatrical releases boosting IP engagement.
• Experiences segment projects 6-8% growth due to strong Q1 performance.
• Disney+ and Hulu subscriptions grew for the quarter in spite of price increases.
• Additional content-driven subscriber growth is anticipated, aligning with overall positive revenue projections.

Operator: Good day, and welcome to The Walt Disney Company’s First Quarter 2025 Financial Results Conference Call. [Operator Instructions]

Please note, this event is being recorded.

I would now like to turn the conference over to Carlos Gomez, Executive Vice President, Treasurer and Head of Investor Relations. Please go ahead, sir.

Carlos A. Gomez, Executive Vice President of Corporate Finance & Treasurer: Good morning. It’s my pleasure to welcome everyone to The Walt Disney Company’s First Quarter 2025 Earnings Call.

Our press release, Form 10-Q and management’s posted prepared remarks were issued earlier this morning and are available on our website at www.disney.com/investors.

Today’s call is being webcast, and a replay and transcript will be made available on our website after the call.

Before we begin, please take note of our cautionary statement regarding forward-looking statements on our Investor Relations website. Certain statements on this call, including those regarding our expectations, beliefs, plans, financial estimates and prospects, trends, outlook and guidance and other statements that are not historical may be forward-looking statements under the securities laws.

We make these statements on the basis of our assumptions regarding the future at the time we make them, and do not undertake any obligation to provide updates.

Forward-looking statements are subject to risks and uncertainties. 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, execution risks, the market for advertising, our future financial performance and legal and regulatory developments.

Refer to our IR website, the press release issued today and the risks and uncertainties described in our Form 10-K, Form 10-Q and other filings with the SEC for more information about key risk factors.

A reconciliation of certain non-GAAP measures referred to on this call to most comparable GAAP measures can be found on our IR website.

Joining me this morning are Bob Iger, Disney’s Chief Executive Officer; and Hugh Johnston, Senior Executive Vice President and Chief Financial Officer. Following introductory remarks from Bob, we will be happy to take your questions.

So with that, I will now turn the call over to Bob.

Robert A. Iger, CEO & Director: Good morning. Before we turn to our results this quarter, I want to take a moment to express our continued sympathies to all those affected by the devastating wildfires across Southern California, including our own employees, creative partners and so many others that we know and love.

Our company’s roots run deep in Los Angeles, and we feel a strong sense of obligation to support the community that has helped make this company what it is today. I’m proud of the many ways our employees have stepped up to assist their neighbors in need, and Disney remains committed to helping with recovery efforts while our community rebuilds from this tragedy.

Moving on to the quarter. Our results in Q1 demonstrate our creative and financial strength and they reflect the success of our strategic initiatives that we set in motion over the past 2 years.

Clearly, one of the great highlights of the quarter was the performance of our film studios. We had the top 3 movies of 2024 at the global box office, and I want to thank and congratulate our creative teams on such an incredible year. Looking at the rest of the calendar year, we have a lot more to come with an exciting slate of theatrical releases tied to some of our most popular IP.

On top of our studio’s outstanding performance, we saw growth in streaming profitability, historic ratings at ESPN and the strong and enduring appeal of Disney’s Experiences business. Overall, we’re very encouraged by our results this quarter, and we’ll be happy to take your questions.

Gomez: Thanks, Bob. [Operator Instructions]. And with that, operator, we are ready to take the first question.

Operator: [Operator Instructions] Our first question today comes from Ben Swinburne with Morgan Stanley.

Benjamin Daniel Swinburne: You guys have a lot going on in terms of platform enhancements this year at Disney+. I’m wondering, as Adam builds out his team, you work on password sharing, bundling ESPN in, what do you think will be the most impactful to driving that business? And what’s realistic for investors to sort of — in terms of time line to expect kind of tangible results playing out in what we see in your reported numbers?

And then I thought I would at least ask Hugh, if you could comment on the outlook for Experiences and Parks, in particular, around the opening of Epic, there’s probably no other question I get more than your ability to deliver on your guidance on the domestic parks front for the year. So any update there would be greatly appreciated.

Iger: Thanks for your question, Ben. Regarding the timing of the different technological advances that Adam and his team are working on, they’re actually starting to roll out already and will continue to throughout the next 12 months, but we’re not going to obviously stop at the end of the year.

I wouldn’t really call out any one of them in terms of — one of them having a greater impact than the others because it’s a collection of them. You mentioned paid sharing, that’s certainly one. Using technology more and more for personalization and essentially upping our game from an algorithm perspective, getting less out of our control or curation and more basically into the business of serving the consumer what the consumer wants.

We’ve got some work to do internationally, particularly on the ad tier. AdTech is also something that we’re working on, a variety of different AI initiatives going on. And these — we’re also developing flagship.

I’d say that of all of them, one of the things that we are very, very mindful of is that home screen or front screen or the first experience that consumers have has to be more dynamic. Ours was elegant looking, but fairly static in nature. The more dynamic it is, the more people are drawn into it, the more people use it and the more people don’t basically close the app out and go elsewhere. That’s a big deal.

But a lot going on. We’re still building his team out. And I’d say that by the end of the year, there will be significant progress made, but we’ve already made some progress — we’ve made some progress already.

Hugh F. Johnston: Yes, Ben, and I’ll handle the Experiences question. Obviously, no change to the guide that we had previously provided. We had said Experiences would be up 6% to 8% on the year. The strong Q1 increases our level of confidence in the guide, for sure. It’s obviously quite early, but we certainly feel good about the fact that we were able to power through with stronger performance than our expectations were for Q1.

In terms of the balance of the year, recall the easier comps for the Experiences business occur in the back half of the year, particularly in Q4. In addition to that, we obviously have lots going on in terms of our ships coming — or our ship coming on as of this quarter, which will support the results from Q2 going forward.

And in addition to that, as we built our plans, we did anticipate some small impact. I think we have it effectively hedged in the guides that we’ve given to you. So overall, level of confidence in the Experiences guide is high.

Operator: Our next question today comes from Robert Fishman with MoffettNathanson.

Robert S. Fishman: Bob, now that DirecTV and Comcast have launched their skinnier bundles and Hulu + Live, Fubo planning their own, do you expect these skinnier bundles at current pricing to change the trajectory of cord-cutting? And if not, what else on the pricing or product side do you plan with Fubo that you couldn’t accomplish with just Hulu + Live?

And then if I could just take a step back, after the Fubo deal and shutting down Venu, can you discuss Disney’s overall sports or broader streaming strategy with the potential for consumer confusion from all the different options, including the upcoming ESPN Flagship launch?

Iger: The goal all along, Robert, as it relates to ESPN is to make ESPN as accessible as possible and in as many ways as possible to the consumer. Some will want to consume it just through an app, some will want to consume it as part of, I’ll call it, the more traditional expanded basic bundle. Some will migrate in the direction of skinnier bundles or sports bundles only.

I can’t predict whether the emergence of these skinnier bundles is going to have a material impact on cord-cutting or not except to say that we plan to take advantage of the emergence of these bundles because it is a great way to distribute ESPN.

And look, what essentially happened is after the decision was made and we started to implement the launch of Venu, the emergence of these skinnier bundles surfaced and Venu basically looked redundant to us. And so this was a great opportunity for us to make ESPN available to multiple skinny bundles and then to actually merge the Hulu + Live and the Fubo essentially channel business as one because, frankly, while we like being in that business, it wasn’t a core business to Hulu.

This gives us the ability to actually enhance the Hulu + Live experience because the combination — the combined entity when it’s approved will spend more time, put more resources into the user interface and essentially making the former Hulu + Live experience better for consumers.

In terms of our Sports strategy, I’ve touched on some of it and that is make ESPN available however the consumer wants it, wherever the consumer wants it. Some will want to consume it as part of a linear channel. But we’re obviously leaning into the development of what is now called Flagship, which is essentially ESPN with multiple, multiple elements to it or multiple essentially enhancements, and of course, the inclusion ultimately of some form of betting and fantasy and a high degree of customization and personalization and essentially a much bigger offering in terms of product programming than the linear channels currently offer.

The other thing I want to mention about ESPN because I know that others have gotten — other streamers are getting into the sports game, is we have the advantage of not only a menu of sports and sports programming that no one else has, but we’re on 365 days a year, 24 hours a day. So if you’re a sports fan, it’s not about 1 day of — 1 boxing event or 1 day of football, it’s about sports every single day of the year and every hour of the day. And that’s a pretty compelling consumer proposition.

Operator: And our next question today comes from John Hodulik with UBS.

John Christopher Hodulik: Great. And maybe some questions for Hugh. Hugh, can you update us on the cost-cutting initiatives and how far along you are?

And then lastly, I have to ask, you have guidance for high single-digit earnings growth for the year, started out with earnings growth of over 40% in the first quarter here. Can you just talk a little bit about cadence of earnings growth as we look out through the rest of the year?

Johnston: Sure. Happy to. That’s quite a few questions, but I’ll take a good whack at them. First, in terms of cost-cutting. As a company, we’re focused constantly on identifying opportunities that — where we’re spending money perhaps less efficiently and looking for opportunities to do it more efficiently. That’s not a once-a-year thing, that’s not a once-a-month thing, that’s something that we do every day of the year. It’s part of what a good management team does, and we do think we’re a good management team in that regard.

So we’re going to continue to identify opportunities to redeploy money in order to make the company both higher growth and ultimately more profitable.

Regarding your question on the guide overall, obviously, the results were certainly in excess of expectations in the first quarter. It certainly gives us confidence, an even higher level of confidence than we probably even had before as we get into the balance of the year. At the same time, given the rapidly evolving macro environment, we think it would be premature at this point to change the guidance.

That said, to the degree that the business momentum and the business performance justifies it, we’re certainly not a management team that’s afraid of over-delivering if, in fact, that is where the business takes us. So generally speaking, feel better about the balance of the year and when we started out the year feeling very, very positive way about it.

Operator: Our next question comes from Jessica Reif Ehrlich with Bank of America.

Jessica Jean Reif Ehrlich Cohen: I guess, two things. One, on the NBA, can you talk about how you view the path to profitability in the new contract given the weaker season to-date ratings and obviously the step-up next season?

Iger: In the NBA, we don’t talk about profitability for any one of our licensed sports packages. We obviously believe in the NBA long term. It’s a great sport. We think it’s a growth sport. We don’t really look at ratings year-to-year that carefully.

In terms of subscribers, we believe that in order for us to grow subscribers, it’s really a combination of things. We have to continue to make great product, films and television series. We clearly have demonstrated over the last couple of years the ability to do that. and we are confident that we will deliver on a consistent basis high-quality films and television over the long run.

The only way you succeed in global streaming, both from a subscription perspective and a profitability perspective, is with a great combination of high-quality product with volume and technology. And we feel if you look at all the competitors that are in that space, we’re very well positioned to both grow subs and grow profits over the long run and actually over the next few years where we’ve already demonstrated the ability to make this a much more economically attractive business. And with the technology that we’ve got in place, combined with the success of our content, we actually are bullish about our ability to grow subs, too.

Johnston: And Jessica, the only thing I would add to Bob’s comments are we gave you guidance in terms of ESPN for next year, we knew all of the aspects of the NBA contract when we made that deal and there is nothing that is changing in our mind in that regard.

Iger: And one last thing, you asked about news. We like the opportunity to make room for our news output, both the ABC News output and the output of our local stations as part of the app experience. With improved technology, we’re now offering live — or streams on the Disney+ Hulu app and news will — does occupy one of those streams and it will continue to be a feature of our overall Disney+ and Hulu offering, and it’s also something that differentiates us from some of the others in the space.

Michael Ng: I just wanted to follow up on your comments, Bob, about streaming and news. Could you talk a little bit about your decision to add the SportsCenter Daily Show to Disney+ instead of ESPN flagship? And with streams and SC+, the investments in live content, what have you found to be the benefit of live as it relates to gross adds and churn and streaming?

And could you expand a little bit about the competitive advantage that Disney has in producing and distributed live relative to some other streaming services?

Iger: Well, I think we’ve all seen the benefit of live. Just look at ESPN’s ratings as for instance or talk to anyone in the advertising business, Live is extremely attractive. And we have the benefit, as I said earlier, of having live programming every day of the week, every day of the year or every week of the year.

What we did with ESPN and the SportsCenter show that you mentioned is we put us in ESPN tile, as we call it, or presence on the home screen of Disney+ that was in part designed to increase engagement for Disney+ Hulu subscribers, gives them something to see on a daily basis. And obviously, as we’ve talked today, engage — growing engagement is critical, particularly to lowering churn.

So it’s there to improve, but to do 2 things: to benefit Disney+ Hulu and it’s also there to ultimately benefit ESPN Flagship.

David Karnovsky: With Experiences, wanted to see if you could provide any color on the Disney Treasure launch, how the early returns look relative to expectations and the read-throughs for the launches later this calendar year?

And then just sticking with Parks, maybe you could discuss the rollout of Lightning Lane Premier, which I think you recently expanded access for. What type of take rates are you observing on the product? And how is that impacting other spending buckets or the overall experience?

Johnston: Yes. Disney Treasure is off to a spectacular start. Certainly, in terms of selling out the rooms, we’ve done terrifically well. The feedback and guest experience, high percentage of people are rating it excellent, very much in line with the rest of our ships. And this is just sort of in the initial cruises.

Lighting Lane, we’re launching that product. But remember, it is a premium product, it is a product that we are learning how to use. So we are marketing it very gently initially. It’s very much in line with our expectations, but we are moving slowly with that product in order to make it a great experience both for the purchasers of Lightning Lane and for the rest of our guests in the park. So feel great about it. It’s going to build over time, but it’s certainly very much early days.

Operator: And our next question today comes from Michael Morris with Guggenheim.

Michael C. Morris: Two questions about your outlook. First, at Experiences, Hugh, on the fourth quarter call, you mentioned that bookings in the back half of the year were positive at that point in time. I’m wondering if you can give us an update there? Are they still positive? Do you have any more visibility? How has that trended?

Johnston: Yes, happy to cover both of those. Hitting on DTC first. As I mentioned, it’s obviously an evolving environment. Our expectations are for the business to do terrifically well. We made $300 million in the quarter. For the full year, our expectation is to be a little over $1 billion. So we obviously still have some work to do, but we’re out of the blocks very, very quickly.

And the second question was in terms of…

Johnston: The bookings, I’m sorry. I should have written that down. Basically, we are further into the curve, but the messaging is exactly the same as I gave you last quarter. Bookings are up in the summer right now.

So certainly feeling positive. And obviously, we have more of them in given that we’re 90 days later. So certainly, the outlook is good in that regard. But as always, we’re going to take a view at this point that it’s premature to be changing guide in that regard, but off to a great start in Experiences.

Operator: Our next question comes from Bryan Kraft with Deutsche Bank.

So I just wanted to ask if we should be thinking about some offset and other sports rights coming out of the business to offset the NBA increase or if the fiscal ’26 growth is more a function of the OI growth from Flagship or a big improvement in pay TV sub declines because of smaller priced — excuse me, lower-priced, small sports and news packages? So just trying to get underneath of the drivers of that strength.

And then secondly, just on Disney+, if you could talk about the outlook for Disney+ subscriber growth this year, I think you’re guiding to essentially flat subs through the end of 2Q. What are you expecting in the second half of the year directionally? And what are some of the key factors that are shaping the outlook for the rest of the year?

Johnston: Yes. So in terms of ESPN and the NBA, obviously, there are a lot of variables that go into ESPN’s P&L, including the advertising market for live sports, which is obviously very, very strong. It’s also in terms of aggregate cost management, not just rights costs for the entire business and Jimmy and the team do a phenomenal job managing their costs and that’s a tailwind.

So I’ll leave it at that. But as I said earlier in the call, we mentioned low single digits next year. We’re still very much committed to that based on the aggregate of all of those inputs.

Iger: And I’ll add to what Hugh said. We actually are very pleased with where we are sub-wise for Disney+ and Hulu. As you know, we took prices up significantly fairly recently and expected the churn would be significantly greater. And it turned out we delivered numbers that were better than we had expected.

So we’re bullish about our ability to turn streaming not just into the profitable business than it is today, but into a growth business for the company due to the combination of all these things and that includes the ability to successfully bundle both for the consumer and for our shareholder Disney+, Hulu and ultimately, ESPN.

Operator: And our final question today comes from Kannan Venkateshwar with Barclays.

Kannan Venkateshwar: Maybe on ESPN flagship, Bob. Just in terms of the vision that you have for the product and the objectives with that service, is this to basically further grow the Sports business relative to where it is today? Or is it more to preserve existing profitability and preserve the ecosystem as it is today? Would be great to get your thoughts on that.

Iger: Let me just make a quick comment about the linear networks. We actually are at a point where the linear networks in our company are not a burden at all. They’re actually an asset. We are programming them and we are funding them at levels that actually give us the ability to enhance our overall television business, that obviously includes and leans into streaming, which, let’s face it, is really the future of the television business.

So while I won’t rule out the possibility of some of the smaller networks in some form or another being configured differently in terms of how we bring them to market, maybe even ownership. But we’re not — right now, we actually feel good about the hand that we have and the manner in which we’re managing both the linear and the streaming businesses across the board at Disney.

Regarding Flagship, look, it’s pretty clear that young viewers, I guess you call them, or young consumers, are leaning more and more into streaming experiences, both fixed televisions on walls and mobile devices. And the more ESPN can be present for a new generation of consumers with a product that serves them really well, the better off ESPN’s business is.

Gomez: Thanks, Kannan, and thanks, everyone, for your questions this morning. We want to thank you for joining us and wish everyone a good rest of the day.