迪士尼 (DIS) 2017 Q1 法說會逐字稿

Welcome to The Walt Disney Company Q1 FY17 earnings conference call.

My name is Victoria, and I will be your operator for today's call.

(Operator Instructions)

Please note that this conference is being recorded.

And I'll now turn the call over to your host, Lowell Singer, Senior Vice President of Investor Relations.

Lowell, you may begin.

Good afternoon, and welcome to The Walt Disney Company's first-quarter 2017 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 also being webcast, and we will post a transcript and a copy of the webcast to our website.

Joining me for today's call are Bob Iger, Disney's Chairman and Chief Executive Officer, and Christine McCarthy, Senior Executive Vice President and Chief Financial Officer.

Bob will lead off, followed by Christine, and then of course we will be happy to take your questions.

With that, let me turn the call over to Bob and we can get started.

Thanks Lowell, and good afternoon.

We're very happy with our results for the quarter, and we continue to be extremely confident in our ability to drive significant long-term growth.

Coming off an historic performance last year, including more than $7.5 billion in global box office, we are thrilled with the continued success of our studio in the first quarter.

All three films released by the studio in the quarter were global hits.

Marvel's Dr. Strange became the latest addition to Marvel Studio's winning streak, generating $670 million in global box office, and sending us into the new fiscal year with some great momentum.

We followed that success with Disney Animation's newest musical masterpiece, Moana, which has achieved total worldwide box office of $555 million, along with two Oscar nominations for outstanding animated feature and original song.

We're incredibly proud of this movie, as well as Zootopia, which topped $1 billion in box office, and also earned an Oscar nomination.

Rogue One, our first standalone Star Wars story, also connected with audiences in a big way.

It is our first $1 billion movie of the fiscal year, as well as our fourth $1 billion release in calendar 2016, further demonstrating the incredible strength of this franchise.

Star Wars: The Last Jedi, otherwise known as Episode VIII will open in December, and I just saw it last week, and it is a great next chapter in the iconic Skywalker family saga.

It will be followed by our Han Solo origin film, which is just going into production.

Our studio's next release is our live-action Beauty and the Beast, premiering in March.

The anticipation and excitement around this movie is astonishing.

The first trailer drew more than 127 million online views in the first 24 hours, breaking the record held by Star Wars: The Force Awakens.

And the trailer we released last week also generated more than 100 million views.

The first week of ticket presales has also been very strong, reminiscent of presales of some of our biggest Marvel movies.

After Beauty, we have Marvel's Guardians of the Galaxy: Volume 2, opening in May.

It's another great Marvel film with even more of the fantastic action and humor that made the original Guardians such a breakout hit.

We'll follow that was another grand adventure, Pirates of the Caribbean: Dead Men Tell No Tales, in a new story that captures everything audiences have always loved about this franchise.

Pixar's Cars 3 will give fans an original twist on the world of Cars this summer, with a brand-new story and some great new characters.

And in November, we will release Coco, another brand-new original story from Pixar, as well as Marvel's Thor: Ragnarok, the best Thor so far, with a major crossover appearance by one of Marvel's most popular characters, The Hulk.

One of our biggest success stories in 2016 came from parks and resorts, with the opening of Shanghai Disneyland.

The park recently proved to be enormously popular with guests celebrating the Chinese New Year, operating at maximum capacity for virtually the entire holiday period.

With the year's two peak seasons now behind us, we have welcomed more than 7 million guests to date.

We're thrilled with this performance, and could potentially exceed 10 million in total attendance by the resort's first anniversary.

The park's rapidly growing popularity, its extremely high levels of guest satisfaction, and the huge attendance during Chinese New Year add to our confidence in the resort's ability to reach breakeven in this fiscal year.

In our domestic parks, this year we will open a great addition to Disney's Animal Kingdom with a brand-new land called Pandora: The World of Avatar.

Our Imagineers have brought the breathtaking world of Pandora to life, through astonishing feats of artistic genius and groundbreaking engineering.

The result is an exquisite environment with phenomenal attractions, and today, I'm happy to announce this incredible new world will officially open on May 27.

Additionally, our progress continues on Star Wars Lands, at Disneyland Resort and Walt Disney World, both of which will open in calendar 2019.

Turning to media networks, we continue to address a dynamic evolving media environment.

We are certainly well aware of the attention paid to ESPN, and were pleased with our implementation of strategies aimed at further strengthening ESPN's position, and expanding its growth opportunities.

As outlined in our last call these include launching ESPN on all new multi-channel services, including Sling TV, PlayStation Vue, DirecTV now, and the soon to be launched Hulu.

We're also continuing to invest in ESPN's industry-leading programming, and we're improving and growing ESPN's presence on mobile devices, with new and compelling apps.

We're also investing in technology platforms, to enable direct to consumer products.

And to that end, I have spent time with the team at BAMTech recently, and I'm very impressed and excited about the various initiatives being implemented to grow that business, and to leverage its capabilities for our media businesses.

Great content will continue to drive opportunities and growth in this changing environment, and given our incredible portfolio of high quality, in-demand branded content, we're extremely well-positioned to strategically and successfully navigate the dynamic marketplace, and generate value for our consumers and our shareholders over the long term.

I'm going to let Christine take you through the details of the quarter, and then we will be happy to take your questions.

Christine?

Thanks Bob, and good afternoon, everyone.

Earnings per share for the first quarter of FY17 were $1.55, which when adjusted for items affecting comparability, represents a decline of only 5% compared to Q1 last year.

I will remind you, last year's first quarter was the best quarter in the Company's history.

The year-over-year decline in earnings per share reflects this difficult comparison, especially in our studio and consumer products businesses.

Due to the strength of Star Wars, and to a lesser extent, Frozen, during the first quarter last year.

Parks and resorts had another strong quarter, with 6% revenue growth, and operating income growth of 13%, driven by increases in our domestic and international businesses.

Results in the quarter include unfavorable impacts totaling about $70 million, due to Hurricane Matthew, which disrupted operations at Walt Disney World and resulted in the closure of our parks for about a day and a half, and the impact of one week of the winter holiday period falling in Q2 this year, whereas the entire holiday period fell in Q1 last year.

We estimate these two items had an adverse impact on the year-over-year growth in operating income of about 7 percentage points.

Growth at our domestic operations was driven primarily by higher guest spending across our businesses, partially offset by lower attendance.

Attendance at our domestic parks was down 5% in the quarter, reflecting a number of comparability factors: Last year's 60th anniversary celebration at Disneyland Resort, the impact of Hurricane Matthew, and the shift in timing of the winter holiday.

We estimate these factors had an adverse impact on the year-over-year change in attendance of about 4 percentage points.

We continued to see very healthy spending at our domestic parks.

Per capita spending was up 7% on higher admissions and food and beverage spending.

Per-room spending at our domestic hotels was up 3%, and occupancy was down modestly to 91%.

So far this quarter, domestic resort reservations are comparable to prior-year levels, while booked rates are up 2%.

Growth at our international parks was due to the opening of Shanghai Disney resort in Q3 of FY16, and improved results at Disneyland Paris and Hong Kong Disneyland.

Shanghai Disney Resort is off to a strong start.

We continued to make great progress, and as Bob discussed, we're very encouraged by what we're seeing there so far.

We feel great about the performance of our parks businesses during the first quarter.

Segment operating margin was 24.4%, up 150 basis points over last year, and represents the highest margin for the segment since we began consolidating our international parks in 2004.

And that is despite an estimated 100 basis point headwind, due to the impact of Hurricane Matthew, and the timing of the winter holiday.

At media networks, operating income was down 4% in the quarter, as growth in broadcasting was more than offset by a decline in cable.

Lower cable results were driven by a decline at ESPN, where higher affiliate revenue was more than offset by an increase in programming and production expenses, and a decrease in advertising revenue.

Growth in ESPN's programming costs was due to our new NBA agreement and contractual rate increases for NFL programming, partially offset by lower programming costs for college football, due to the timing of the college football playoffs relative to our fiscal calendar.

As you know, this year ESPN aired only three of the New Year's six bowl games during the first quarter, whereas it aired all six games during the first quarter last year.

ESPN's ad revenue was down 7% in the quarter.

The majority of the decline was due to the shift of the three bowl games out of Q1.

So far this quarter, ESPN's ad sales are pacing up, compared to last year.

At broadcasting, growth in operating income reflected higher affiliate revenue and lower programming costs at the ABC network.

First-quarter ad revenue across our broadcasting business was roughly comparable to last year, as higher ad revenue at our owned TV stations was offset by lower ad revenue at the ABC network, where higher pricing was more than offset by a decrease in impressions.

Quarter-to-date, prime time scatter pricing at the ABC network is running over 25% above upfront levels.

Total media network's affiliate revenue was up 4% in the quarter, due to growth at both cable and broadcasting, as growth in rates was partially offset by lower subscribers and foreign exchange.

At consumer products and interactive media, as anticipated, operating income was down meaningfully in the first quarter, given the record-breaking quarter the segment delivered last year.

The decline in operating income was driven by lower results at our merchandise licensing business, as sales of Rogue One, Finding Dory and Moana merchandise were more than offset by very strong sales of Star Wars and Frozen merchandise in Q1 last year.

The strength of Star Wars last year also created a tough comp in our games businesses during Q1, given the success of Star Wars: Battlefront last year, and no comparable title this year.

Our studio had another outstanding quarter, and continues to deliver on both financial and creative fronts.

While operating income was lower in the first quarter compared to last year, keep in mind, Q1 FY16 was the best quarter ever for the studio, and Q1 of FY17 was the second-best quarter ever, with $842 million in operating income.

The decline in operating income was due to lower results in our home entertainment and theatrical businesses.

Lower home entertainment results reflected strong catalog unit sales in Q1 last year particularly the classic Star Wars titles and Frozen, compared to Q1 of this year.

On the theatrical side, Q1 results benefited from the strong performance of Rogue One: A Star Wars Story, but that was more than offset by the exceptional performance of Star Wars: The Force Awakens, in the first quarter last year.

During the first quarter, we repurchased about 15 million shares for about $1.5 billion.

Fiscal year to date, we have repurchased 22.2 million shares for approximately $2.2 billion, and as we have mentioned previously, we intend to repurchase between $7 billion and $8 billion for the year.

As we look to the second quarter, there are a couple of comparability items I want to highlight.

At ESPN, the shift of the three college football playoff games into Q2 will drive an increase in ESPN's programming costs, compared to Q2 last year.

Additionally, ESPN's programming costs will continue to reflect the first year of its new NBA rights deal.

In total, we estimate cable programming and production costs will be up about 16% in the second quarter, and that is in line with our expectation for an 8% increase for the full year.

At parks and resorts, Q2 results will benefit from one week of the winter holiday shifting into the quarter; however, the timing of the Easter holiday will negatively impact Q2 results, as this holiday period will fall entirely in Q3 this year, whereas it fell in Q2 last year.

We estimate these two shifts will have a net adverse impact of about $50 million to operating income.

And, at the studio, while we are incredibly excited for the release of Beauty and the Beast, I want to remind everyone it will be our only release in the quarter, so studio results will once again face a tough comparison to a very strong second quarter last year, which benefited from the strength of Star Wars: The Force Awakens and the release of Zootopia.

Overall, we are pleased with our first-quarter results and with the start of the fiscal year.

And with that, I'll now turn the call over to Lowell for Q&A.

Okay Christine, thanks a lot.

Operator, we're ready for the first question.

(Operator Instructions)

Alexia Quadrani, JPMorgan.

How should we think about the outlook to the consumer products business this year, given what you know about the studio slate or what we know about the studio slate?

It looks very favorable from what we can see, with the princess character in Beauty and the Beast, and Cars and Spiderman.

Any other growth drivers such as higher royalty rates or additional international territories that you see as opportunities?

Any color on that would be great.

Alexia, this is Christine.

I think the best way to look at the consumer products is, we had given you the outlook that they were going to be down for this first fiscal quarter, and they in fact were, but we expected them to have growth for the year, but most of that would be back-end loaded, and that is the case.

So you should expect growth year over year for the second half, both third and fourth quarter.

The properties that really going to contribute to that are going to be Cars and Spiderman, and we expect that to be a strong back half of the year for consumer products.

Just a bigger picture question, I was going to ask on the studio side, you had such a stellar performance obviously, and so many home runs, particularly when some of your peers have had a bit of a slump.

I guess with the slate ahead, I don't want to jinx it, it looks equally impressive.

What gives us the confidence that this is more reflective of the assets you own and the franchises you have invested in versus a positive streak that you are going through?

I think, if you look at the record, Alexia, since we bought Pixar, which was a decade ago, we have made about 30 films under Pixar and Disney Animation, because John Lasseter and Ed Catmull took over that, and then Marvel and Star Wars are Lucasfilm.

Those films have averaged about $900 million in global box office, so we're not -- I'm sorry, about $800 million in global box office.

So we don't think that there is a coincidence to this.

And while obviously because we're dealing in a creative business, there is risk associated.

We think that we have done a really great job of derisking the business, and that is a combination of the franchises we have an obviously the stories that we are mining, but also the talent that we have at the Company or that we are attracting to the Company, to make those films.

And we have a lot of visibility into the early part of the next decade of the film slate, and we feel great about the projects that have been chosen and the progress that has been made on them.

Thank you very much.

Michael Nathanson, MoffettNathanson.

I have two.

First Bob and then Christine.

Bob I wonder if you can comment any story that was in the Journal yesterday that you may exceed your contract past 2018?

What's the second question?

Before you ask the second one, when I targeted 2018 as the year that I was going to leave the Company, that was a very personal decision.

But I think as you know, I've been with this company for 43 years have actually been CEO for almost a dozen years, and I'm going to do what is in the best interest at this Company, which is something the Board is clearly going to help determine.

While I am confident that my successor is going to be chosen on a timely basis, and chosen well, if it is in the best interest of the Company for me to extend my term, I am open to that.

But there's nothing specific to announce at this point.

We have a good strong succession process underway.

The Board is engaged in this, as I have said before, on a regular basis, and the absence of any announcements or specifics about it should in no way indicate otherwise.

Thanks, Bob.

Then, for Christine, in the press release, it said the parks and resort costs were flat in the quarter, and looks like there were some cost initiatives.

Can you tell us what you have done to control costs in the parks, and how sustainable is low single digit cost inflation this year?

The parks, as you saw the margins in my comments, 24.4% operating margin, that is not only for the domestic operations, but that is for the global segment.

They have done a really good job on many fronts, and very importantly, is their cost control.

That has been through ongoing cost initiatives throughout their businesses, and they have offset the normal increases that we would get through inflation and wage increases.

I think you can expect continued cost management in the parks, and continued strong margins.

Okay, thanks.

Jessica Reif Cohen, Bank of America Merrill Lynch.

Two questions.

One, the press release states that Hulu results were in line with a year ago.

Can you discuss the ramp into its launch, and overall expectations for this and other over the top services?

As part of that Bob, I remember you saying that you were bullish on ESPN's outlook for subs in the last call.

Is that because of new services, or more due to better penetration by distributors like Comcast X1?

First of all on Hulu, as you know, they have announced they are going to launch an over the top MVPD service.

They have not been specific about a date.

It's in private beta, and it will go into more broad beta relatively soon.

They have negotiated deals with a variety of different program or channel owners, and so far, in terms of what we have seen of the product, we're encouraged by it, in terms of its user interface and actually have a lot of faith in it from a technological perspective, as well.

To the second part of the question, my confidence in ESPN is due to a number of things, but clearly, the deals that we have done with new platform owners, mostly over the top, have already yielded some nice gains from those services in subs, but they are not right now being counted fully by Nielsen.

We have also done a deal with Hulu, and we have done a deal with another entity that has not been announced, and we are in discussions with others.

So it seems like we are on the cusp of some significant growth for new entrants in the multi-channel marketplace.

What we like about them is they are mobile friendly, or mobile first.

Their user interfaces tend to be very strong, and their pricing is priced substantially lower than the expanded basic bundle that most of the MVPDs are offering.

That obviously, we think, gives us a chance to both attract consumers that may not sign up for a multi-channel service, or hold consumers into multi-channel subscriptions.

And then lastly, what is really important is the deals that we have negotiated for distribution, particularly for ESPN, are to be in all subs or all households launched.

These are light packages that offer us 100% penetration from those packages.

We think that this wave that we are seeing is really a signal of what is to come, and what the future will be.

And the other thing I think it's really good about this is that, if we end up with a world where the $40 to $50 a month package becomes more and more popular, that means that some consumers may obviously take the savings that they may have from that, and spend it on other things, or save it.

It also could mean they spend it on other video services, and some of those services are services that we might offer.

We talk about going with our own direct to consumer product, it is possible that the first product that goes into the marketplace will be in effect add-on or adjunct product that consumers can buy on top of what is their normal multi-channel package.

So if the multi-channel package is less expensive, consumers you could argue, could have more spendable income, or more money to spend on other video services, whether it is Netflix, whether it's Hulu, or whether it is other Disney-owned products that we are selling direct to the consumer.

I also want to say one other thing, Jessica.

I mentioned it in my remarks but I was at BAMTech a couple of weeks ago, and the quality of that technology has just blown us away, and the potential that we believe that has for us is enormous.

We have, as you know, we have invested so that we own a third.

We have a path to control.

We're extremely excited about the prospects of what BAM is going to be doing near-term.

We will be launching a direct to consumer sports service sometime in probably calendar 2017, but we're also very excited about what the potential of this is long-term, both for the Company and for third parties who could use the product, because the technological side of it is so strong, in ways that are value-enhancing for them as well.

Can you just the advertising implications, because you have so much direct to consumer, and so much data on the users?

One of the things that impressed me a lot from the BAMTech meeting that I had is what the potential is for them to use data to increase or to generate great revenue from advertising.

Something that we don't have today, in part because a lot of our distribution comes through third parties, so we don't get access to that information.

Great, thank you.

Benjamin Swinburne, Morgan Stanley.

Bob, last quarter you talked about, both on the earnings call and I think at some conferences, digital distribution as a question mark, and something that the company was thinking about strategically.

You had DisneyLife in the market in a few regions, you made the BAMTech investment.

But how are you thinking about the distribution side of the business strategically?

Do you think there is acquisitions you need to make to get ESPN where it needs to be, or in ABC long term?

Do you find watching the market evolve, and make your move from there?

Any updated thoughts on how you're thinking about the M&A landscape and distribution assets?

And I'll sneak one in on the parks, for either you or Christine.

Any help in thinking about Avatar Land, and sizing the opportunity?

I'm trying to get a sense for how big of a needle mover that might be for the business, with when that opens in May?

I will take the second question first.

On Avatar Land, which as I said earlier, will open on May 27.

This is a very big land, with an extremely unique design and architecture, because it really does make you feel as though you are in Pandora, the great world that Jim Cameron created.

And an e-ticket attraction that we have ever built.

And it's sizable, the whole experience is sizable, and it is an add-on to Animal Kingdom, which has always been a good park, but has never been a full-day experience.

So we included, we added within the last year a nighttime safari experience, and some other entertainment.

And by adding this, we're going to be turning what is our fourth gate, the last one to be opened in Orlando, into a much fuller experience, and that gives it a lot of potential.

It is also the biggest new land that we have opened in Florida in a very long time, and I think that is good for the whole business down there.

To the extent that we can know this, we really believe that in the coming years, that the interest in Avatar is only going to grow as those movies enter the marketplace.

We can't quantify it, but we think this is big potential.

The first question, we don't really believe we need to make any acquisitions to accomplish what we need to do on the digital side.

In reality, we believe that the best approach to doing well in a world that is disruptive, in a world that has far more digital distribution, is to have great content, and tell great stories.

And that includes ESPN by the way.

So if anything, I think the most important thing for ESPN is to continue to support and nurture their program offerings.

Second to that, you have to be willing to either create or experience some disruption, as we migrate from what has been a more traditionally distributed world, to a more modern or more nontraditional distribution world.

Some of that we're going to end up doing to ourselves, meaning, we understand that there is disruption, but we believe we have two be a disruptor too, and the investment in Bam, which is significant, from a variety of different perspectives, is aimed at doing just that.

We have to be careful, because we have existing agreements and existing relationships, and a lot of value still being reaped from the traditional distribution relationships, but I can tell you that it is our full intent to go out there aggressively with digital offerings direct to the consumer, for ESPN and other Disney branded properties.

Helpful, thank you.

Anthony DiClemente, Nomura.

Just to keep the ball rolling on the BAMTech meeting, Bob, just curious what came out of that meeting in terms of specific sports content that would be included in it.

You previously mentioned you had a lot of digital rights already.

Do you still it is not necessary to go out and acquire incremental digital rights for it?

And then following on to Ben's question, once it launches do you think would make sense for you to go partner with a big Internet platform, in order to help distribute that product?

If I may, one for Christine please.

Christine, on the quarter, what was the underlying affiliate fee growth rate for the cable network segment?

And also, you mentioned the timing shifts of the college football games in the quarter for the cable net segment.

What was the underlying ad growth or decline, if you normalize out those timing shifts in the quarter?

Thank you.

Wow, okay.

Multi-pronged question.

BAMTech has already licensed a number of digital rights to sporting events, and we have licensed at ESPN a number of them.

We bring to the table a fair amount of rights that can be added to the rights that they have, and we are a minority shareholder right now, so I want to be careful, but our strong sense is as partners and as part owners, is that we're going to continue to go out on behalf of the entity, and license more content to that entity.

But they are going to start off with, I think a wide array of pretty attractive sports that come from both what they have licensed and what we have licensed.

When you see it all together, in some of the early, I will call it concepts, you realize that there is a lot there, and a lot more than anyone else has.

I actually, think there will be continued opportunities.

In terms of distribution, do they need to enter into an agreement with a third-party entrant?

I will leave that to BAM ultimately to address, maybe at a time when they are ready to launch the product.

I don't think it would be appropriate for me to speak on their behalf.

Anthony, on your drivers of the affiliate revenue in the quarter, as I said in my comments, the affiliate revenue growth was 4%.

That was, rates impacted it by 7%, subs were a 2 point drag, and FX was a 1 point drag.

That is for media networks overall.

These trends are consistent with the trends that we have had in recent quarters, so it is really no change.

On advertising, as it relates to ESPN, the ad revenue was down 7% in the quarter.

The biggest driver of that was the shift in the college football playoff games, 3Q into 2Q.

You also had some ratings decline in SportsCenter and that was in part due to fewer programming hours for SportsCenter.

Also, and we talked about this last conference call for earnings, was declines in Monday Night Football ratings.

But when you look at 2Q pacings, they are up, even when you adjust for the college football playoffs, which did have the most significant impact in 1Q.

Todd Juenger, Sanford Bernstein.

I'll try to keep it to one for Bob, and one Christine.

Bob, I'd love your current thoughts on the business of kids television.

I know there's lots of different ways to count audiences.

It looks to us like conventionally defined audiences on your linear kids networks are down pretty significantly over multiple years.

You are not alone in that, it seems to for most kids networks.

I just wonder as you process that, and especially thinking about direct to consumer offerings, what you take from that, in terms of thinking about that business, and how that looks in the future?

Christine, a quick one for you, caught our eye, believe it or not, it looked like there is maybe an extra $1 billion of cash contribution from the pension.

It caused me to think, it was probably worthwhile asking you, in a rising rate environment, a couple of things.

How that might affect the pension expense that rolls through the parks, and its impact on margins?

And how it might affect cash contributions?

And if there is anything else we need to think about that, after seeing that $1 billion number.

Thanks.

Todd, first question on kids programming, you are right.

We have seen a decline ratings-wise in kids viewing overall on linear channels.

I don't want to speak for the industry, but I will speak for Disney.

I think that is a result of a couple of things.

One, I will call it a bit of an off cycle in terms of programming, and two, proliferation kids programming in a variety of other places.

To the first part of the answer, we have just debuted a show called Mickey Mouse Roadster Racers, that has done extremely well.

We have a Tangled series that is hitting soon, and a product cycle over the next year to two years, that we felt great about.

We think that the ratings are likely to improve with the addition of some new shows that we think creatively are very strong.

In addition to that, I think we stand a chance of doing really well, no matter what the environment is from a disruption perspective, because of that name Disney, and what it means to the consumer, and I think that will result in a couple of things.

Greater demand to license our product, on other direct to consumer platforms, Hulu and Netflix examples of that, and also the possibility of us taking Disney-branded television programming direct to the consumer.

That is what we are doing in the UK with DisneyLife.

It is a combination of movies, television programming, and then other Disney properties like digital books and music, for instance.

We're still in what I will call an experimental stage, because we have been learning more and more about technology platform, churn rates, pricing, those sorts of things, but we do know that we have a brand and the product behind it to be able to take it direct to consumer.

I think as we look at the future of our kids programming, we look at it in all likelihood, as probably a blend of linear channels, some third-party licensing arrangements, and also direct to consumer properties.

And this is not just for the United States.

I had an interesting meeting with our country manager in India recently, where we owned a number of channels.

He was talking about the opportunities there from Netflix and Amazon, and discussing the possibility of licensing more to them.

The other thing, by the way, you have to think about, is some of that licensing does not have to be off network.

It can be original programming, as we have done with Netflix and Marvel.

The demand for Disney is huge from the consumer perspective, and from a distribution perspective.

And again we're seeing, I think, a world where disruption is definitely on the table and real, but it's not something that we feel is daunting in terms of the task ahead.

Todd, to answer your question on pension.

As you saw, the first page of our press release on the first table, we showed cash from operations, you saw it down pretty significantly from a year ago, but if you account for that, if you adjust for the $1.3 billion of pension contribution that we made in the quarter, it more than offsets that decline.

You mentioned rising rates, and rising rates will definitely benefit our pension going forward.

In our 10-Q, I believe the 10-Q had explicitly stated that for each 100 basis point increase in the discount rate, our pension liability would decreased by about $2.4 billion.

That being said, rising rates are certainly going to benefit us.

As it relates to pension expense for the year, we don't expect to change from what we had talked about in our last conference call, and after this $1.3 billion that we put in, in the first quarter, there shouldn't be any meaningful contributions for the balance of the year.

Thanks, fantastic.

John Janedis, Jefferies.

Another quick follow-up at the parks.

I think you have increased ticket prices in February the last couple of years.

You are going to lap the demand-based pricing model in a couple of weeks, and with Pandora opening, is there maybe a near-term opportunity to further increase single or multi-day ticket prices?

Yes.

Nothing to announce at this point, but we do take ticket pricing up on typically an annual basis, and we do so in a variety of different ways.

Sometimes it is redesign the packages.

Remember that in Florida, that most of our attendance is multi-day in nature, so the single day, including when take pricing increases is less important than when we take single-day pricing up in California.

We're not prepared to make any specific comments about what is in store in that regard.

Thanks, Bob.

Maybe separately, I thought it was interesting that units delivered were up at ESPN and down at ABC.

There's clearly been a lot of discussion around inventory across the industry.

So as you look at your strategy this year, is there a flex to add units to ESPN, if some of the programming or ratings are soft?

And is there a concerted effort to reduce units at ABC?

I think that on the ABC site, the reason there weren't as many units sold is that they were using units for audience deficiencies or make goods.

I think that in general, there is probably too much commercial interruption in television.

It is a subject that has been discussed both on the ESPN front and on the ABC front, and it is something we will continue to look at.

Particularly when you have got entrants in the marketplace that are offering programming that are not commercially interrupted.

Thanks, Bob.

Jason Bazinet, Citi.

I had one question for Mr. Iger.

As it relates to BAMTech, as a minority holder, you have got baseball that owns a stake, and also the hockey league NHL as a minority holder, as well.

Can you just spend a minute and talk about the strategic implication of having leagues having an equity stake in that entity with you?

I think it is obvious, in the sense that the equity position, particularly the one you cited, the hockey position, came with an agreement to license product to BAMTech.

While I don't necessarily believe that means that the future will result in more owners coming in, although again, I don't want to speak for BAM, that could potentially be on the table.

I do want to say though, that our agreement with BAM to take the stake that we took, does give us a path to control.

And where it is premature for us to discuss whether we will exercise that right or not.

But I should say that if we were to exercise that right, when we can, it is still quite possible that there will be minority shareholders, if that is in a way a quid pro quo to having access to their content.

Does that make sense?

It does.

Can I just ask a follow-up?

It seems like at some level, it fundamentally changes your relationship with the leagues, in that in the past you would buy sports rights and then resell them to the pay TV distributors, and now it seems like your equity incentive some more aligned in a way?

Is that fair?

I think there is a yes and a no to that.

I think it will be both.

We don't see ourselves getting out what I'll call the linear ESPN multi-channel service for a while.

We do see ourselves, as I mentioned, adding through BAMTech a direct to consumer proposition, that will in all likelihood include a lot of sports.

Sports from some entities that we license content from, for ESPN, baseball is actually one example of that.

I do not think it fundamentally changes the relationship.

I think, I guess it is, in a way, creates a different form of partnership, but I don't think that is necessarily a bad thing.

I think it is a good thing.

Thank you very much.

David Miller, Loop Capital Markets.

Bob, just another quick question on the ESPN direct to consumer offering, using the BAMTech technology.

I would assume that you will probably have this out by maybe July or August or so, so any kind of hint on timing would be great.

And then how do you see pricing this?

Do you see pricing it like CBS All Access, and doing what they have done, or do you see perhaps pricing it lower than that, and taking a Starbucks point of view of pricing it low, and then getting people hooked into it, and then raising the price later?

Any thought on pricing would be helpful.

Thanks so much.

First of all, I am hooked on Starbucks by the way, so maybe I guess I have fallen prey to that strategy.

I just can't comment about pricing.

It has been discussed with BAM, but I really can't comment about that, nor can I comment about the specifics of, in terms of the time of launch, except to say that the goal is to launch the platform sometime in 2017.

Okay, and then, Christine, if I could sneak one in, I apologize, my audio faded out.

Did you happen to say in your prepared remarks where ABC scatter stands at this time in terms of scatter spreads relative to up front?

Thanks a lot.

Quarter-to-date scatter pricing is over 25% above upfront.

Wonderful.

Thank you so much.

Operator, we have time for one more question.

Bryan Kraft, Deutsche Bank.

Had a question on the parks.

I think Christine, you said that attendance was down 1% excluding the one-timers and the timing factors.

I just want to ask, is this, would you say weaker demand, or is there something else at play here?

And as we think about the normal attendance levels going forward, should we think about those as being flattish, except for, of course, the timing of holiday periods?

I also wanted to ask about use of cash.

Under operating activities there was a large use of cash in accounts payables and other liabilities.

I just wanted to see if you could help us understand what was driving that?

I didn't know if that was partly the pension contribution.

Thank you.

On the parks, as you noted, we did have a lot of comparability factors, and once again, there is a lapping of Hurricane Matthew and also the impact of the shift in the holiday period.

We also, as was noted previously on the call, we did introduce seasonal pricing a year ago, and we are seeing some shift in some of our demand, to try to smooth attendance over those peak demand periods, so I don't think you should read too much into the attendance.

Over the same period that you are noting, we have also seen strong increases in per capita spending.

It was up 7% in the quarter which we gave you, and so that has more than offset the impact of the attendance decline.

We also have some new offerings, as Bob mentioned, Avatar, there's also Guardians of the Galaxy coming this summer at Disneyland Resort in Anaheim.

We think these new offerings are going to stimulate future demand, and I do not think you should read too much into this one quarter.

On the change in payables, that decline is related to the pension plan contribution of $1.3 billion.

Okay, great.

Thank you.

Thank you Bryan, and thanks again everyone for joining us today.

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Thank you, ladies and gentlemen.

This concludes this call.

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