The Walt Disney Company (DIS) Earnings Call Transcript & Summary

Bob Chapek, thanks for being here. It's great to have you. We appreciate it. A busy week, appreciate you taking time to come down to Laguna.

Thanks for having me. Beautiful setting.

Obviously, the first question, I think everybody wants to know, I think you've got the world premiere of Wakanda Forever tonight. So tell us the plot of the movie and everything that happens, please. I think that's what everybody wants.

Well, I think that would probably get me ex-communicated. But let's just say this, we're very proud of that film. And I think it's going to be a real crowd pleaser.

Do you enjoy those premieres? That's one of the fun perks of this job, I would think. And...

Well, I've been with Disney 30 years now. And I started off my first 19 years at the movie studio. And as such, I've been to quite a few premiere. There's a tendency as they kind of come one after another after another to think of, oh, gosh, it's another premiere. But each one is really sort of the gestation of a bunch of creative people's really hard work for about 5 years. And when you think of it in that context, it's like, wow, this is a really a special moment. And it's nice to see those things finally kind of come to life.

And of course, this one because of Chadwick Boseman, an unusually appointing a meaningful one.

Yes, I'm sure there will be a lot of emotion tonight.

Well, that sounds exciting. I know people are looking forward to that one. Obviously, I have a lot to ask about Disney, but I want to start really with kind of a satellite question, and then we'll get into some specifics. So as Jason mentioned, you've been in the job about 2.5 years. You came in really like a week or 2 before the pandemic hit. So quite a time to take over. You've been pretty willing from the start to aggressively rethink strategy, approach. I think you wanted to tackle some sacred cows. That's obviously also generated some headlines that we can talk about in different ways. But your -- you've had your contract extended for 3 years this year. And so I really want to ask in the broadest sense possible, you just mentioned you've been Disney a long time, what's your overall sense as you change Disney as it evolves -- whenever you hand the keys over, how is the world changing? What does Disney need to be? What are you evolving to meet in the world that you see?

Right, right, right. Well, our legacy is really important. We're a company that turns 100 years old next year. And there's very few companies like the 2 of ours that can say that they've been around for 100 years or more. In fact, the statistics that I understand is that less than 1/100 of a percent of companies can say they've been around 100 years or more. So that you're sort of in rarefied air to be one of those companies. But for us, there's a lot of things that will be the same. Storytelling, for example, the route and the heart of the Walt Disney Company is in storytelling. That will not change. But there are other things that we'll need to transform and we'll need to evolve. Another strength we have that won't change is our brands and franchises. Our brands and franchises really are the pillars that keep our company going. But technology is evolving and much like, at least from a strategy standpoint, Walt really set the world on fire with the multi-playing camera and a lot of technology to help to tell stories. We need to do that as well. And sometimes, that means that you've got to sort of be bold and use new technologies for storytelling and give your creative people another dimension to paint, if you will, and we want to go ahead and do that. But ultimately, really what we're after is to create those magical memories that last a lifetime.

Let's get into some of the specifics on that, then I think one of your biggest projects right now is beefing up the Disney+ app, making -- I've heard the term lifestyle brand app thrown around compared to just a streaming app. What does that mean? What do you want it to be?

Well, once upon a time, you talked about some of the transformation I've done since I've gotten the job. I think we had more or less 5 operating units in the company. And I distilled it down into 2: the physical world of our parks and our cruises and things like that, and then the digital or media world that we operate in. And that's a direct reflection of a couple of things. But maybe most fundamentally, it's a reflection that if you're a fan of Disney, you really don't care about our organizational structure and the less silos that we have -- less silos that we have, the less times that we have to worry about going across cross transom in order to make something happen. If you look at our company through the eyes, look at our brands, our franchises, our stories, through the eyes of a consumer, all they see is what I call capital D. They only see Disney, and we should facilitate that. So a lifestyle brand is if you look at what we're doing with Storyliving by Disney, our 55-plus communities, it's really about embracing that lifestyle, not relying on the consumer only to piece it together themselves but really creating that sort of that lifestyle brand that Disney is, we just don't facilitate it.

So I figure that you've got the parks and the cruises and the content, does it mean bringing commerce? We've talked a lot about commerce at this conference. Commerce into it in a way more than you've got or other kinds of features and things that you'd like over time to see that grow and expand into?

It's commerce, but I think the commerce is an outcome of the inputs and the inputs are really a holistic relationship with the company. So no matter what phase of life you're in, you're still building those magical memories either for your grandkids or for you or your friends and family. And so bringing together the physicality of Disney+, the media element of Disney into one element, I think, is really what -- it's our job.

So one of the things you talked about how the world has changed, even Walt Disney stays the same. When I hear that, I think, competitively, you're thinking about an Amazon or maybe about some Chinese apps. Is it something like Amazon Prime kind of product in a way as you think about it?

No, it's really -- not really. It's about customizing and personalizing our products and experiences to cater to what individuals want as opposed to sort of looking at them in mass and trying to program that way. And I think when we do that -- and we have a unique ability to do that, not only because we have the physical and the digital or -- and the media, but because people have such a deep founded relationship with Disney, I mean, they love this company. And they -- and frankly, they don't even look at it as a company. They look at it as a utility, they look at it as something that's part of their lives.

Yes, part of their identity, I believe...

Yes, part of their identity, and that's great. We need to embrace that, but it also puts extra pressure on us because they don't think of us as a company. And when we do things that normal companies might do, sometimes it creates a friction because all of a sudden, they're like, well, why are you doing that? But of course, we have shareholders that have different expectations. So one of the pleasures of my job is trying to balance all the different constituencies and especially with the brand like Disney.

Well -- and I want to come back to some of those points of friction. But it's an interesting thing that you're saying because as streaming services have taken off, and we've all got a lot of them, part of what you described, I think, it's fair to say, is a way to make sure Disney isn't affected by churn and streaming, but Disney+ is more than just streaming. But the landscape has changed very fast in the last couple of years. So how many streaming services between Netflix and Disney+ and HBO Max and Paramount, how many can the consumer ultimately want or pay for in your view as this industry develops?

Yes. I don't know that there's an easy answer to how many, but I'll say, first, I think we'll be one of them at the end of the day. And I think that not everybody who's out in the marketplace today will make it ultimately, unless there's some type of recombination of secondary players in the marketplace that combine to create something greater. This is a critical mass business. Streaming is a critical mass business. Scale is really, really important in order to be able to thrive. And so I think there'll be fewer than more but definitely we'll be there.

And I think you kind of said earlier, more than content streaming, other features, services, other things are really going to become necessary to make it in this world.

Absolutely. Part of the lifestyle brand is using Disney+, not as a movie server -- service, but using it as a platform for experiential Disney engagement. And so we have ambition to use Disney+ way beyond just a movie service.

You mentioned a minute ago, and I just want to take you back quickly to your restructuring of the company. I think it's fair to say Disney has been famous for a long time for having large, very powerful fiefdoms as a company. A mixed history in different ways with technology. Can you just talk a little bit more about how you're thinking about the change in the company and how it will continue to evolve and how much patience it's going to require to get it where you think it needs to be structurally? I mean, part of it is the digital is so demanding in the sort of centrality of many kinds of things in a way that wasn't always the case. So you've got a centrality issue, and you still want local work by artists. So how far do you have to go still in where you want the company to be?

Well, I think if we follow the consumer, we're going to be in pretty good shape. There are certain things that the consumer, our guests, our audience loves about Disney, and those things are mutable and will never change. Call it the magic, call it wonder, call it fantasy, call it optimism. Those things can never change. But I think the challenge with becoming a company that's going to turn to its next century is not being so beholden to legacy that you're afraid to evolve because we all know what happens when you're afraid to evolve. And so it's -- again, it's another balancing factor between being respectful of the legacy, understanding what got us here, but then knowing that the world is changing so fast now and that we've got to change with it. I always say I'd like to be on the front end of the wave, not on the back end of the wave and create those opportunities, create those transformative moments for the company and be bold and technology is certainly a way to do that. But I think what -- in the end of the day, if we follow the consumer, we're going to be great. And to go to your question about local markets versus obviously, Star Wars and Marvel and Pixar and Disney, those are big across the world. But in a lot of markets, that is not the predominance of media consumption. And so we've just built another thing that we did that was transformative, at least for the Walt Disney Company. We built centers of creative excellence around the globe so that if there's particular content that needs to be built in India that caters to the Indian audience, we've got that now. And...

How many people have you got around the globe in those centers roughly, do you know? That's a big deal.

We have roughly 200,000 cast members as we call them, around the globe. A good chunk of them catering to local market needs. So I like to use the term strategically consistent and tactically divergent because we need to be strategically consistent across the globe because we are Disney in our brands and our franchises or everything. But at the same time, one size does not fit all.

So for instance, in India, they're making Indian market content for Disney there, we might not see that here ever?

You would likely not see it here, although one of our goals is to have our content travel so that we can build something, say, in Latin America or Europe or in Asia and have it be something that is just pure grade content and can travel. But we realize the majority of it is probably going to stay within the market that it was created in.

So that sort of touches on a larger thing that I know has been an issue for you in the job. You've talked a lot about -- you were just talking about scale a few minutes ago. I think you'd like to talk about feeding the beast, the demanding content to keep a streaming service alive. It's widely thought, and I think you've spoken at different times that Disney could have a deeper content library over time, would like to have one. Your critics say, you're very dependent on the franchises and the extensions. How deep does your content pool need to get do you think from where it is now?

Well, when you have a streaming service that has the risk of churn, you need to constantly refresh your services with new content. So then it becomes a question of rate. What is the rate of replenishment that you need in order not to churn people out. And obviously, we had COVID like every other company had. And essentially, we stopped creating new things for way too long. Things were in development because it didn't take production, so you can do development from your homes. But then finally, the dam broke and now all that content is rushing out. And so it gives us the opportunity now to feed each of our distribution entities, whether it's theatrical, whether it's linear television and streaming, without having to do what we did in the very beginning, which was select and choose. So one piece of content is coming out because it was close to post-production when COVID hit, where is it going to go? Now we can actually very thoughtfully plan the amount of content we need to maximize each channel without being inefficient by overproducing. And so you can imagine, nothing, nothing, nothing, the dam breaks, everything comes and we're now just normalizing this. And I think we've said in the past, that the fourth quarter of this year is where we'll finally reach some level of normalization and going forward, do things on a very rational standpoint in terms of new content for each channel.

I know you're in a quiet period, so this is not meant to be a leading question, specifically ready to that. But as you deepen your pool, is it -- I mean, you have, as you just said, been creating a lot more and thinking about that. Will it be all self-generated? Might you be in the market possibly for content libraries if they become available one day or other ways of deepening the pool? How do you think about that in the space?

We have the best creative teams and the best brands and franchises in the world. And we're quite happy with our ability to have an output level with the kind of quality that we expect across all distribution channels in all our countries without having to be a buyer in the open marketplace. So our plan is to have all of our content creation self-contained.

Okay. Interesting. Now you have an interesting piece of it, which is the Hulu piece. And so Disney got some attention with something like Pam & Tommy last year on Hulu. How do you think, as you extend the content and the kinds of content that fit with the Disney brand or don't. How do you think about that line of appropriateness. I mean I kind of assume -- maybe I'm wrong, I kind of assume Dahmer wouldn't be on the Disney or Squid Games. But Pam & Tommy did raise a few eyebrows. So how do you think about what's the line for Disney in a changing world?

I'll withhold judgment on any one title. But what I will tell you is every day, even after 30 years, I am amazed at the elasticity of the Disney brand. I always say that, one, our fans and our audiences put their kids to bed at night after watching Pinocchio or Dumbo or Little Mermaid, they're probably not going to tune into another animated movie. They want something for them. And I -- again, I want to respect legacy. I want to respect what this brand is. But at the same time, I know that we may be even more precious about what's Disney than the consumer base is. And if it's -- if the consumer base has more elasticity than we've traditionally had in terms of defining what's Disney, then we probably ought to listen to our audience, which means we have more degrees of freedom than we probably thought.

Well, it's interesting you say it, it's interesting that you mentioned Pinocchio, though, because obviously, one of the things we see in our volatile in some ways, divided world is Disney often becomes a political football, partly because people feel so passionate about Disney. And this -- so I know you want to reflect changes, reach all families, all kinds of families, be contemporary, but you also get blowback. I mean, Lightyear was banned in the Middle East because of a same sex kiss. You mentioned Pinocchio, if -- I may be wrong, but I think the new Pinocchio, he doesn't change. In the end, he just accepts himself for who he is. So the ending has changed a little bit with sort of contemporary mores. And your people love to get out there and say Disney's too woke, Disney's become too politically correct. Are they right to make a point, what's your take on those criticisms and reaching that wide span of people?

I think the more complex something is, the more you have to really drill down into the basics. And we want our content to reflect the rich diverse world that we live in. And again, I guess that's another way of saying, catering to your audience. But the world is a rich, diverse place and we want our content to reflect that. And we're so blessed to have the greatest content creators and they see it similarly. But I think that's good from a commercial standpoint as well because then you appeal to the largest possible audience. And certainly, we live in a world now where everything seems to be polarized. But I think we want Disney to stand for bringing people together. I always say when someone walks down Main Street and you look at the castle, you're not thinking I'm on one side of the political spectrum or the other, you have a shared belief in all the wonderful aspects of what Disney is, and we want to use Disney to bring people together. I think we'll do that by diverse stories and diverse characters.

What do you think your role as CEO of this gigantic company is very specifically on that storytelling front though? I mean you -- again, I don't -- you've got -- and you read, oh, Lightyear is band in this region because of this kiss or something like that. I'm sure it comes to you after the product has been pretty far down the path. Do you have a role in some ways of shepherding and shaping? Do you have views about what you should be doing there? Do you think that you leave it to the creators? And do you get to express your opinions?

Yes, we talk about shaping our content a lot and some of the push-pull of all these different forces. But in the end, we have to follow our North Star, which again is storytelling and catering to the audiences that are -- that actually love Disney and all audiences that love Disney.

So to be clear, you don't think Disney is too woke?