DIS 10-K diff: FY 2023-09-30 → FY 2025-09-27
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+82 paragraphs −74 paragraphs ~74 changed
FY 2023-09-30 (earlier)
ITEM 1A. Risk Factors
For an enterprise as large and complex as the Company, a wide range of factors could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in our filings with the SEC, the most significant factors affecting our business include the following:BUSINESS, ECONOMIC, MARKET and OPERATING CONDITION RISKS
Declines in U.S., global, and regional economic conditions generally adversely affect the profitability of our businesses.
Declines in economic conditions, such as recession, economic downturn, and/or inflationary conditions in the U.S. and other regions of the world in which we do business, or a failure of conditions to improve as anticipated typically adversely affect demand and/or expenses for one or more of our businesses, reducing our revenue and earnings. Past declines in economic conditions reduced guest spending at our parks and resorts, purchases of and prices for advertising on our broadcast and cable networks and owned stations, performance of our home entertainment releases, and purchases of Company-branded consumer products, and similar impacts can be expected as such conditions recur. Recent inflationary conditions increased certain of our costs. The current economic conditions could also have the effect of reducing attendance at our parks and resorts, prices that MVPDs pay for our cable programming, purchases of and prices for advertising on our DTC products or subscription levels for our cable programming or DTC products, while also continuing to increase the prices we pay for goods, services and labor. Unfavorable economic conditions also impair the ability of those with whom we do business to satisfy their obligations to us. In addition, an increase in price levels generally, or in price levels in a particular sector, could result in a shift in consumer demand away from the entertainment and experiences we offer, which could also adversely affect our revenues and, at the same time, increase our costs. A decline in economic conditions or a failure of conditions to improve as anticipated could impact17
TABLE OF CONTENTSimplementation or success of our business plans, such as our plans to increase investment in our Experiences segment, the realignment of our cost structure and plans for our DTC ad-supported services, enhancements, pricing structure and price increases. In addition, actions to reduce inflation, including raising interest rates, increase our cost of borrowing, which in turn make it more difficult to obtain financing for our operations or investments on favorable terms. Further, global economic conditions impact foreign currency exchange rates against the U.S. dollar. The current or continued strength in the value of the U.S. dollar has adversely impacted the U.S. dollar value of revenue we receive and expect to receive from other markets and may reduce international demand for our products and services. Although we hedge exposure to certain foreign currency fluctuations, any such hedging activity may not substantially offset the negative financial impact of exchange rate fluctuations and is not expected to offset all such negative financial impact, particularly in periods of sustained U.S. dollar strength relative to multiple foreign currencies. Further, economic or political conditions in countries outside the U.S. also have reduced, and could continue to reduce, our ability to hedge exposure to currency fluctuations in those countries or our ability to repatriate revenue from those countries. Broader or targeted supply chain delays, such as those that have impacted global distribution from time to time, may further exacerbate inflationary pressures and impact our ability to sell and deliver goods or otherwise disrupt our operations. The adverse impact on our businesses of declines in economic conditions or a failure of conditions to improve as anticipated will depend, in part, on the severity and duration of such economic conditions and our ability to mitigate the impacts of economic conditions on our businesses may be limited.
Changes in technology, in consumer consumption patterns and in how entertainment products are created affect demand for our entertainment products, the revenue we can generate from these products and the cost of producing or distributing these products.
The media entertainment and internet businesses in which we participate increasingly depend on our ability to successfully adapt to new technologies including shifting patterns of content consumption and how entertainment products are generated. New technologies affect the demand for our products, the manner in which our products are distributed to consumers, ways we charge for and receive revenue for our entertainment products and the stability of those revenue streams, the sources and nature of competing content offerings, the time and manner in which consumers acquire and view some of our entertainment products and the options available to advertisers for reaching their desired audiences. These developments have impacted the business model for certain traditional forms of distribution, as evidenced by the industry-wide decline in ratings for broadcast and cable television, the reduction in demand for home entertainment sales of theatrical content, the development of alternative distribution channels for broadcast and cable programming and declines in subscriber levels for traditional cable channels. These trends have decreased advertising and affiliate revenue at some of our linear networks. In addition, theater-going to watch movies currently is, and may continue to be, below pre-COVID-19 levels.
Rules governing new technological developments, such as developments in generative artificial intelligence (AI), remain unsettled, and these developments may affect aspects of our existing business model, including revenue streams for the use of our IP and how we create our entertainment products. In order to respond to the impact of new technologies on our businesses, we regularly consider, and from time to time implement changes to our business models, most recently by developing, investing in and acquiring DTC products, reorganizing our media and entertainment businesses to advance our DTC strategies, and developing new media offerings. There can be no assurance that our DTC offerings, new media offerings and other efforts will successfully respond to technological changes. In addition, declines in certain traditional forms of distribution may increase the cost of content allocable to our DTC offerings, negatively impacting the profitability of our DTC offerings. We expect to forgo revenue from traditional sources, particularly as we expand our DTC offerings. To date our DTC streaming services have experienced significant losses. There can be no assurance that the DTC model and other business models we may develop will ultimately be profitable or as profitable as our existing or historic business models.
We face risks relating to misalignment with public and consumer tastes and preferences for entertainment, travel and consumer products, which impact demand for our entertainment offerings and products and the profitability of any of our businesses.
Our businesses create entertainment, travel and consumer products whose success depends substantially on consumer tastes and preferences that change in often unpredictable ways. The success of our businesses depends on our ability to consistently create compelling content, which may be distributed, among other ways, through broadcast, cable, theaters, internet or mobile technology, and used in theme park attractions, hotels and other resort facilities and travel experiences and consumer products. Such distribution must meet the changing preferences of the broad consumer market and respond to competition from an expanding array of choices facilitated by technological developments in the delivery of content. The success of our theme parks, resorts, cruise ships and experiences, as well as our theatrical releases, depends on demand for public or out-of-home entertainment experiences. Demand for certain out-of-home entertainment experiences, such as theater-going to watch movies, has not returned to pre-pandemic levels. In addition, many of our businesses increasingly depend on acceptance of our offerings and products by consumers outside the U.S. The success of our businesses therefore depends on our ability to successfully predict and adapt to changing consumer tastes and preferences outside as well as inside the U.S. Moreover, we must often invest substantial amounts in content production and acquisition, acquisition of sports rights, launch of new sports-related studio programming, theme park attractions, cruise ships or hotels and other facilities or customer facing platforms before we18
TABLE OF CONTENTSknow the extent to which these products will earn consumer acceptance, and these products may be introduced into a significantly different market or economic or social climate from the one we anticipated at the time of the investment decisions. Generally, our revenues and profitability are adversely impacted when our entertainment offerings and products, as well as our methods to make our offerings and products available to consumers, do not achieve sufficient consumer acceptance. Further, consumers’ perceptions of our position on matters of public interest, including our efforts to achieve certain of our environmental and social goals, often differ widely and present risks to our reputation and brands. Consumer tastes and preferences impact, among other items, revenue from advertising sales (which are based in part on ratings for the programs in which advertisements air), affiliate fees, subscription fees, theatrical film receipts, the license of rights to other distributors, theme park admissions, hotel room charges and merchandise, food and beverage sales, sales of licensed consumer products or sales of our other consumer products and services.
The success of our businesses is highly dependent on the existence and maintenance of intellectual property rights in the entertainment products and services we create.
The value to us of our IP is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from our IP may decrease, or the cost of obtaining and maintaining rights may increase. The terms of some copyrights for IP related to some of our products and services have expired and other copyrights will expire in the future. For example, in the United States and countries that look to the United States copyright term when shorter than their own, the copyright term for early works such as the short film Steamboat Willie (1928), and the specific early versions of characters depicted in those works, expires at the end of the 95th calendar year after the date the copyright was originally secured in the United States. As copyrights expire, we expect that revenues generated from such IP will be negatively impacted to some extent.
The unauthorized use of our IP may increase the cost of protecting rights in our IP or reduce our revenues. The convergence of computing, communication and entertainment devices, increased broadband internet speed and penetration, increased availability and speed of mobile data transmission and increasingly sophisticated attempts to obtain unauthorized access to data systems have made the unauthorized digital copying and distribution of our films, television productions and other creative works easier and faster and protection and enforcement of IP rights more challenging. The unauthorized distribution and access to entertainment content generally continues to be a significant challenge for IP rights holders. Inadequate laws or weak enforcement mechanisms to protect entertainment industry IP in one country can adversely affect the results of the Company’s operations worldwide, despite the Company’s efforts to protect its IP rights. Distribution innovations, including in response to COVID-19, have increased opportunities to access content in unauthorized ways. Additionally, negative economic conditions coupled with a shift in government priorities could lead to less enforcement. These developments require us to devote substantial resources to protecting our IP against unlicensed use and present the risk of increased losses of revenue as a result of unlicensed distribution of our content and other commercial misuses of our IP. The legal landscape for some new technologies, including some generative AI, remains uncertain, and development of the law in this area could impact our ability to protect against infringing uses.
With respect to IP developed by the Company and rights acquired by the Company from others, the Company is subject to the risk of challenges to our copyright, trademark and patent rights by third parties. In addition, the availability of copyright protection and other legal protections for IP generated by certain new technologies, such as generative AI, is uncertain. Successful challenges to our rights in IP may result in increased costs for obtaining rights or the loss of the opportunity to earn revenue from or utilize the IP that is the subject of challenged rights. From time to time, the Company has been notified that it may be infringing certain IP rights of third parties. Technological changes in industries in which the Company operates and extensive patent coverage in those areas may increase the risk of such claims being brought and prevailing.
Protection of electronically stored data and other cybersecurity is costly, and if our data or systems are materially compromised in spite of this protection, we may incur additional costs, lost opportunities, damage to our reputation, disruption of service or theft of our assets.
We maintain information necessary to conduct our business, including confidential and proprietary information as well as personal information regarding our customers and employees, in digital form. We also use computer systems to deliver our products and services and operate our businesses. Data maintained in digital form is subject to the risk of unauthorized access, modification, exfiltration, destruction or denial of access and our computer systems are subject to cyberattacks that may result in disruptions in service. We use many third-party systems and software, which are also subject to supply chain and other cyberattacks. We develop and maintain an information security program to identify and mitigate cyber risks but the development and maintenance of this program is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Accordingly, despite our efforts, the risk of unauthorized access, modification, exfiltration, destruction or denial of access with respect to data or systems and other cybersecurity attacks cannot be eliminated entirely, and the risks associated with a potentially material incident remain. In19
TABLE OF CONTENTSaddition, we provide confidential, proprietary and personal information to third parties in certain cases, which information is also subject to risk of compromise.
If our information or cyber security systems or data are compromised in a material way, our ability to conduct our business may be impaired, we may lose profitable opportunities or the value of those opportunities may be diminished and, as described above, we may lose revenue as a result of unlicensed use of our intellectual property. If personal information of our customers or employees is misappropriated, our reputation with our customers and employees may be damaged resulting in loss of business or morale, and related remediation of harm to our customers and employees or damages arising from litigation and/or fines or other actions we take with respect to judicial or regulatory actions arising out of an incident create additional costs. Insurance we obtain does not cover all potential losses or damages associated with such attacks or events. Our systems and users and those of third parties with whom we engage are continually attacked, sometimes successfully, and there can be no assurance that future incidents will not have material adverse effects on our operations or financial results.
A variety of uncontrollable events may disrupt our businesses, reduce demand for or consumption of our products and services, impair our ability to provide our products and services or increase the cost or reduce the profitability of providing our products and services.
The operation and profitability of our businesses and demand for and consumption of our products and services, particularly our parks and experiences businesses, are highly dependent on the general environment for travel and tourism, including in the specific regions in which our parks and experiences businesses operate. In addition, we have extensive international operations, including our international theme parks and resorts, which are dependent on domestic and international regulations consistent with trade and investment in those regions. The operation of our businesses and the environment for travel and tourism, as well as demand for and consumption of our other entertainment products, can be significantly adversely affected in the U.S., globally or in specific regions as a result of a variety of factors beyond our control, including: health concerns (including as it has been by COVID-19 and could be by future health outbreaks and pandemics); adverse weather conditions arising from short-term weather patterns or long-term climate change, including longer and more regular excessive heat conditions, catastrophic events or natural disasters (such as excessive heat or rain, hurricanes, typhoons, floods, droughts, tsunamis and earthquakes); international, political or military developments, including trade and other international disputes and social unrest; macroeconomic conditions, including a decline in economic activity, inflation and foreign exchange rates; and terrorist attacks. These events and others, such as fluctuations in travel and energy costs and computer virus attacks, intrusions or other widespread computing or telecommunications failures, may also damage our ability to provide our products and services or to obtain insurance coverage with respect to some of these events. An incident that affected our property directly would have a direct impact on our ability to provide goods and services and could have an extended effect of discouraging consumers from attending our facilities. Moreover, the costs of protecting against such incidents reduces the profitability of our operations.
For example, COVID-19 and measures to prevent its spread impacted our businesses in a number of ways, most significantly at the Experiences segment where our theme parks and resorts were closed and cruise ship sailings and guided tours were suspended. In addition, we delayed, or in some cases, shortened or canceled theatrical releases and experienced disruptions in the production and availability of content. Collectively, our impacted businesses historically have been the source of the majority of our revenue. In addition, hurricanes have impacted the profitability of Walt Disney World Resort and may do so in the future. The Company has paused certain operations in certain regions, including in response to sanctions, trade restrictions and related developments and the profitability of certain operations has been impacted as a result of events in the corresponding regions.
In addition, we derive affiliate fees and royalties from the distribution of our programming, sales of our licensed goods and services by third parties, and the management of businesses operated under brands licensed from the Company, and we are therefore dependent on the successes of those third parties for that portion of our revenue. The profitability of one or more of our businesses could be adversely impacted by the significant contraction of distribution channels for our products and services, including through third-party licensees or sellers of our licensed goods and services. In addition, third-party suppliers provide products and services essential to the operation of a number of our businesses. A wide variety of factors could influence the success of those third parties and if negative factors significantly impacted a sufficient number of those third parties or materially impacted a supplier of a significant product or service, the profitability of one or more of our businesses could be adversely affected. In specific geographic markets, we have experienced delayed and/or partial payments from certain third parties due to liquidity issues.
We obtain insurance against the risk of losses relating to some of these events, generally including certain physical damage to our property and resulting business interruption, certain injuries occurring on our property and some liabilities for alleged breach of legal responsibilities. When insurance is obtained it is subject to deductibles, exclusions, terms, conditions and limits of liability. The types and levels of coverage we obtain vary from time to time depending on our view of the likelihood of specific types and levels of loss in relation to the cost of obtaining coverage for such types and levels of loss and we may experience material losses not covered by our insurance.20
TABLE OF CONTENTSWe face risks related to changes in our business strategy or restructuring of our businesses, which have affected and may continue to affect our cost structure, the profitability of our businesses or the value of our assets.
As changes in our business environment occur we have adjusted, continue to adjust and may further adjust our business strategies to meet these changes and we may otherwise decide to further restructure our operations or particular businesses or assets. For example, in fiscal 2023, we reorganized our media and entertainment operations, which had been previously reported in one segment, into two segments, Entertainment and Sports; in fiscal 2023 we announced that we would review content, primarily on our DTC services, for alignment with a strategic change in our approach to content curation, resulting in removal of certain content from our platforms and related impairment charges; in fiscal 2022, we announced plans to introduce an ad-supported Disney+ service, new pricing model and price increases and cost realignment; in fiscal 2021, we announced the closure of a substantial number of our Disney-branded retail stores; and we have announced exploration of a number of new types of businesses. Changes in strategy, such as was the case with the most recent reorganization of our media and entertainment operations, can lead to workforce disruptions. Our new organization and strategies are, among other things, subject to execution risk and may not produce the anticipated benefits, such as supporting our growth strategies and enhancing shareholder value. For example, notwithstanding our announced plans to rationalize costs, the costs of our DTC strategy, and associated losses, may continue to grow or be reduced more slowly than anticipated, which may impact our distribution strategy across businesses/distribution platforms, the types of content we distribute through various businesses/distribution platforms, and the timing and sequencing of content windows. Our new organization and strategies could be less successful than our previous organizational structure and strategies. In addition, external events including changing technology, changing consumer purchasing patterns, acceptance of content offerings and changes in macroeconomic conditions may impair the value of our assets. When these changes or events occur, we have incurred and may continue to incur costs to change our business strategy and have needed and may in the future need to write-down the value of assets. In addition to the content impairment noted above, among other assets, we have impaired goodwill and intangible assets at our linear networks and impaired the value of certain of our retail store assets. We may write down other assets as our strategy evolves to account for the current business environment.
We also make investments in existing or new businesses, including investments in international expansion of our business and in new business lines. For example, in fiscal 2023, we announced that we are developing plans to accelerate and expand investment in our Experiences segment. In addition, in recent years, other investments have included expansion and renovation of certain of our theme parks, expansion of our fleet of cruise ships, the acquisition of TFCF Corporation (TFCF) and investments related to DTC offerings. Some of these and future investments may ultimately result in returns that are negative or low, the ultimate business prospects of the businesses related to these investments are uncertain, and these investments may impact the resources available to, and the profitability of, our other businesses. In addition, our costs may increase, we may have significant charges associated with the write-down of assets, as occurred in connection with the closure of Star Wars: Galactic Starcruiser or returns on new investments may be negative or lower than prior to the change in strategy or restructuring. Even if our strategies are effective in the long term, our new offerings will generally not be profitable in the short term, growth of our new offerings is unlikely to be even quarter over quarter and we may not expand into new markets as or when anticipated. Our ability to forecast for new businesses may be impacted by our lack of experience operating in those new businesses, speed with which the competitive landscape changes, volatility beyond our control (such as the events beyond our control noted above) and our ability to obtain or develop the content and rights on which our projections are based. Accordingly, we may not achieve our forecasted outcomes.
Increased competitive pressures impact our revenues and increase our costs.
We face substantial competition in each of our businesses from alternative providers of the products and services we offer and from other forms of entertainment, lodging, tourism and recreational activities. This includes, among other types, competition for human resources, content and other resources we require in operating our business. For example:
• Our programming and production operations compete to obtain creative, performing, production and business talent, sports and other programming, story properties, advertiser support, production facilities and market share with traditional and new media platforms, including other studio operators, television networks, VOD providers and other sources of broadband delivered content.
• Our television networks and stations and DTC offerings compete for the sale of advertising time with traditional and new media platforms, including other television and VOD services, as well as with newspapers, magazines, billboards and radio stations, and various forms of internet and mobile delivered content, which offer advertising delivery technologies that are more targeted than can be achieved through traditional means.
• Our television networks compete for carriage of their programming with other programming providers.
• Our theme parks and resorts compete for guests with all other forms of entertainment, lodging, tourism and recreation activities and compete for creative, performing and business talent, including with other theme park and resort operators.
• Our content sales/licensing operations compete for customers with all other forms of entertainment.21
TABLE OF CONTENTS• Our consumer products business competes with other licensors and creators of IP.
• Our DTC streaming services compete for customers with an increasing number of competitors’ DTC offerings, all other forms of media and all other forms of entertainment, as well as for technology, creative, performing and business talent and for content.
Competition in each of these areas may further increase as a result of technological developments and changes in market structure, including consolidation of suppliers of resources and distribution channels. Increased competition has increased, and may continue to increase, the cost of programming, including sports and other products and diverts consumers from, or delays their consumption of, our creative or other products, or to other products or other forms of entertainment and experiences, which could reduce our revenue or increase our marketing costs.
Competition for the acquisition of resources can further increase the cost of producing our products and services; change the composition of our offerings, including sports; deprive us of talent needed for our entertainment and experiences businesses, including the talent necessary to produce high quality creative material; increase employee turnover and staffing instability; or increase the cost of compensation for our employees. Such competition may also reduce, or limit growth in, prices for our products and services, including advertising rates and subscription fees at our media networks and DTC offerings, parks and resorts admissions and room rates and prices for consumer products from which we derive license revenues.
Our results may be adversely affected if long-term programming or distribution contracts are not renewed on sufficiently favorable terms.
We enter into long-term contracts for both the acquisition and the distribution of media programming and products, including contracts for the acquisition of programming rights for sporting events and other programs, and contracts for the distribution of our programming to content distributors. As these contracts expire, we must renew or renegotiate the contracts, which from time to time has led to service blackouts when distribution contracts expired before renewal terms were agreed, and if we are unable to renew these contracts on acceptable terms, we may lose programming rights or distribution rights. As a result, our portfolio of programming rights we acquire and the distributors of our programming and the portfolio of programming rights our distributors acquire have changed and may continue to change over time. Even if these contracts are renewed, the cost of obtaining certain programming rights has increased and may continue to increase (or increase at faster rates than our historical experience) and programming distributors, facing pressures resulting from increased subscription fees and alternative distribution challenges, have demanded and may continue to demand terms (including with respect to the pricing for, and the nature and amount of, programming distributed) that reduce our revenue from distribution of programs (or increase revenue at slower rates than our historical experience). For example, a recent carriage agreement renewal includes fewer of our linear networks but provides for certain of our DTC streaming services to be made available to the distributor’s subscribers. Moreover, our ability to renew these contracts on favorable terms may be affected by a number of factors, such as consolidation in the market for program distribution and the entrance of new participants in the market for distribution of content on digital platforms. With respect to the acquisition of programming rights, particularly sports programming rights, the impact of these long-term contracts on our results over the term of the contracts depends on a number of factors, including the strength of advertising markets, subscription levels and programming rights costs increases, effectiveness of marketing efforts and the size of viewer audiences. There can be no assurance that revenues from programming based on these rights will exceed the cost of the rights plus the other costs of producing and distributing the programming.
Regulations applicable to our businesses may impair the profitability of our businesses.
Each of our businesses, including our broadcast networks and television stations, is subject to a variety of U.S. and international regulations, which impact the operations and profitability of our businesses. Some of these regulations include:
• U.S. FCC regulation of our television and radio networks, our national programming networks and our owned television stations. See Item 1 — Federal Regulation - Entertainment and Sports.
• Federal, state and foreign privacy and data protection laws and regulations.
• Regulation of the safety and supply chain of consumer products and theme park operations, including regulation regarding the sourcing, importation and the sale of goods.
• Environmental protection regulations.
• U.S. and international anti-corruption laws, sanction programs, trade restrictions and anti-money laundering laws.
• Restrictions on the manner in which content is currently licensed and distributed, ownership restrictions or film or television content requirements, investment obligations or quotas.
• Domestic and international labor laws, tax laws or currency controls.
New laws and regulations, as well as changes in any of these current laws and regulations or regulator activities in any of these areas, or others, may require us to spend additional amounts to comply with the regulations, or may restrict our ability to offer products and services in ways that are profitable, and create an increasingly unpredictable regulatory landscape. In addition, ongoing and future developments in international political, trade and security policy may lead to new regulations22
TABLE OF CONTENTSlimiting international trade and investment and disrupting our operations outside the U.S., including our international theme parks and resorts operations in France, mainland China and Hong Kong. For example, in 2022 the U.S. and other countries implemented a series of sanctions against Russia in response to events in Russia and Ukraine; U.S. agencies have enhanced trade restrictions, including new prohibitions on the importation of goods from certain regions and other jurisdictions are considering similar measures; U.S. state governments have become more active in passing legislation targeted at specific sectors and companies and applying existing laws in novel ways to new technologies, including streaming and online commerce; and in many countries/regions around the world (including but not limited to the EU) regulators are requiring us to broadcast on our linear (or display on our DTC streaming services) programming produced in specific countries as well as invest specified amounts of our revenues in local content productions. In Florida, steps directed at the Company (including the passage of legislation) have been taken and future actions have been threatened, which collectively could negatively impact (and may have already impacted) our ability to execute on our business strategy, our costs and the profitability of our operations in Florida.
Further, in response to the COVID-19 pandemic, public health and other regional, national, state and local regulations and policies impacted most of our businesses. Government requirements could be reinstated and new government requirements may be imposed to address COVID-19 or future health outbreaks or pandemics.
Our operations outside the U.S. may be adversely affected by the operation of laws in those jurisdictions.
Our operations in non-U.S. jurisdictions are in many cases subject to the laws of the jurisdictions in which they operate rather than, or in addition to, U.S. law. Laws in some jurisdictions differ in significant respects from those in the U.S. These differences can affect our ability to react to changes in our business, and our rights or ability to enforce rights may be different than would be expected under U.S. law. Moreover, enforcement of laws in some international jurisdictions can be inconsistent and unpredictable, which can affect both our ability to enforce our rights and to undertake activities that we believe are beneficial to our business. In addition, the business and political climate in some jurisdictions may encourage corruption, which could reduce our ability to compete successfully in those jurisdictions while remaining in compliance with local laws or U.S. anti-corruption laws applicable to our businesses. As a result, our ability to generate revenue and our expenses in non-U.S. jurisdictions may differ from what would be expected if U.S. law alone governed these operations.
Environmental, social and governance matters and any related reporting obligations may impact our businesses.
U.S. and international regulators, investors and other stakeholders are increasingly focused on environmental, social and governance matters. For example, new domestic and international laws and regulations relating to environmental, social and governance matters, including environmental sustainability and climate change, human capital management and cybersecurity, are under consideration or being adopted, which may include specific, target-driven disclosure requirements or obligations. Our response will require increased costs to comply, the implementation of new reporting processes, entailing additional compliance risk, a skilled workforce and other incremental investments.
In addition, we have undertaken or announced a number of related actions and goals, which will require changes to operations and ongoing investment. There is no assurance that our initiatives will achieve their intended outcomes or that we will achieve any of these goals. Consumer, government and other stakeholder perceptions of our efforts to achieve these objectives often differ widely and present risks to our reputation and brands. In addition, our ability to implement some initiatives or achieve some goals is dependent on external factors. For example, our ability to meet certain environmental sustainability goals or initiatives will depend in part on third-party collaboration, the availability of suppliers that can satisfy new requirements, mitigation innovations and/or the availability of economically feasible solutions at scale.
Damage to our reputation or brands may negatively impact our Company across businesses and regions.
Our reputation and globally recognizable brands are integral to the success of our businesses. Because our brands engage consumers across our businesses, damage to our reputation or brands in one business may have an impact on our other businesses. Because some of our brands are globally recognized, brand damage may not be locally contained. Maintenance of the reputation of our Company and brands depends on many factors including the quality of our offerings, maintenance of trust with our customers and our ability to successfully innovate. In addition, we may pursue brand or product integration combining previously separate brands or products targeting different audiences under one brand or pursue other business initiatives inconsistent with one or more of our brands, and there is no assurance that these initiatives will be accepted by our customers and not adversely impact one or more of our brands. Significant negative claims or publicity regarding the Company or its operations, products, management, employees, practices, business partners, business decisions, social responsibility and culture, which may be amplified by social media, adversely impact our brands or reputation, even if such claims are untrue. Damage to our reputation or brands could impact our sales, business opportunities, profitability, recruiting and valuation of our securities.
Various risks may impact the success of our DTC streaming services.
We may not successfully execute on our DTC strategy. The success of our DTC strategy and profitability of our DTC streaming services will be impacted by the success of the reorganization of our media and entertainment business and our ability to advance our DTC strategies, drive subscriber additions and retention based on the attractiveness of our content,23
TABLE OF CONTENTSmanage churn in reaction to price increases, achieve the desired financial impact of the Disney+ ad supported service, pricing model and price increases, our ability to execute on cost realignment and the effects of our determinations with regard to distribution for our creative content across windows. The initial costs of marketing campaigns are generally recognized in the business of initial exploitation, and amortization of capitalized production costs and licensed programming rights are generally allocated across businesses based on the estimated relative value of the distribution windows. Accordingly, our distribution determinations impact the costs of each business, including the applicable DTC service. There are a number of competing DTC businesses. Consumers may not be willing to pay for an expanding set of DTC streaming services at increasing prices, potentially exacerbated by an economic downturn. In addition, economic downturns negatively impact the purchase of and price for advertising on our DTC streaming services. We face competition for creative talent and sports and other programming rights and may not be successful in recruiting and retaining talent and obtaining desired programming rights or face increased costs to do so. Acquisition of new subscribers to our DTC streaming services is not linear, and we have experienced net losses of subscribers in some periods. Our content does not always successfully attract and retain subscribers in the quantities that we expect. Our content is subject to cost pressures and may cost more than we expect. We may not successfully manage our costs to meet our profitability goals. Government regulation, including revised foreign content and ownership regulations as well as government-imposed content restrictions, impacts the implementation of our DTC business plans. The highly competitive environment in which we operate puts pricing pressure on our DTC offerings and may require us to lower our prices or not take price increases to attract or retain customers or lead to higher churn rates. These and other risks may impact the profitability and success of our DTC streaming services.
Potential credit ratings actions, increases in interest rates, or volatility in the U.S. and global financial markets could impede access to, or increase the cost of, financing our operations and investments.
Our borrowing costs have been and can be affected by short- and long-term debt ratings assigned by independent ratings agencies that are based, in part, on the Company’s performance as measured by credit metrics such as leverage and interest coverage ratios. As a result of the financial impact of COVID-19 on our businesses, Standard and Poor’s downgraded our long-term debt ratings by two notches to BBB+ and downgraded our short-term debt ratings by one notch to A-2. Fitch downgraded our long- and short-term credit ratings by one notch to A- and F2, respectively. On June 5, 2023, Standard and Poor’s upgraded our long-term debt ratings by one notch to A-. As of September 30, 2023 Moody’s Investors Service’s long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, Standard and Poor’s long- and short-term debt ratings for the Company were A- and A-2 (Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively. Any future downgrades could increase our cost of borrowing and/or make it more difficult for us to obtain financing on acceptable terms.
In addition, increases in interest rates have increased our cost of borrowing and volatility in U.S. and global financial markets could impact our access to, or further increase the cost of, financing. Past disruptions in the U.S. and global credit and equity markets made it more difficult for many businesses to obtain financing on acceptable terms. These conditions tended to increase the cost of borrowing and if they recur, our cost of borrowing could increase and it may be more difficult to obtain financing for our operations or investments.
Elevated indebtedness or leverage ratios could adversely affect us, including by decreasing our business flexibility.
Elevated indebtedness could have the effect of, among other things, reducing our financial flexibility and our ability to respond to changing business and economic conditions and other uncontrollable events. Debt repayment obligations could also reduce funds available for investments, capital expenditures, share repurchases and dividends, and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels. Our leverage ratios increased as the result of COVID-19’s impact on financial performance, which caused certain of the credit ratings agencies to downgrade their assessment of our credit ratings. Downgrades to our debt rating may negatively impact our cost of borrowings and/or make it more difficult for us to obtain financing on acceptable terms.
Labor disputes disrupt our operations and may adversely affect the profitability of one or more of our businesses.
A significant number of employees in various parts of our businesses, including employees of our theme parks, and writers, directors, actors and production personnel for our productions are covered by collective bargaining agreements. In addition, some of our employees outside the U.S. are represented by works councils, trade unions or other employee associations. Further, the employees of licensees who manufacture and retailers who sell our licensed consumer products, and employees of providers of programming content (such as sports leagues) may be covered by labor agreements with their employers. From time to time, collective bargaining agreements and other labor agreements expire, requiring renegotiation of their terms. In general, labor disputes and work stoppages involving our employees; persons employed on our productions; athletes or others employed by, or otherwise connected with, sports leagues or organizers; or the employees of our licensees or retailers who sell our licensed consumer products or providers of programming content may disrupt our operations and reduce our revenues. For example, on May 2, 2023, members of the Writers Guild of America (WGA) commenced a work stoppage, which lasted for almost five months. On July 14, 2023, members of SAG-AFTRA, the union representing television and movie actors, also commenced a work stoppage, which lasted for almost four months. These work stoppages have impacted our24
TABLE OF CONTENTSproductions and the pipeline for programming and theatrical releases, which could result in reduced revenue and have an adverse effect on our profitability. The new collective bargaining agreements with the Directors Guild of America, WGA and SAG-AFTRA will lead to increased costs to create content, including as a result of increases in rates, residuals and benefits. Generally, resolution of disputes or negotiation of new agreements, including rate increases and other changes to employee benefits, has in the past increased our costs and may increase our costs in the future.
The seasonality of certain of our businesses and timing of certain of our product offerings could exacerbate negative impacts on our operations.
Each of our businesses is normally subject to seasonal variations and variations in connection with the timing of our product offerings, including as follows:
• Revenues at the Experiences segment fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and leisure activities and seasonal consumer purchasing behavior, which generally results in increased revenues during the Company’s first and fourth fiscal quarters. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early winter and spring holiday periods. Revenues at the Experiences segment also may fluctuate with changes in theme park attendance and resort occupancy resulting from special celebrations or events that may increase demand in the applicable periods and decrease demand in prior or later periods as guests time their vacations to occur during such special celebrations or events. In addition, licensing revenues fluctuate with the timing and performance of our theatrical releases and cable programming broadcasts.
• Revenues from television networks and stations are subject to seasonal advertising patterns and changes in viewership levels, including related to certain sporting events. In general, domestic general entertainment linear networks advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months, and sports advertising revenues are impacted by the timing of sports seasons and events, which varies throughout the year or may take place periodically.
• Revenues from content sales/licensing fluctuate due to the timing of content releases across various distribution markets. Release dates and methods are determined by a number of factors, including, among others, competition, and the timing of vacation and holiday periods.
• DTC revenues fluctuate based on: changes in the number of subscribers, mix of subscribers to different offerings and subscriber fees; viewership levels; and the demand for sports and film and television content. Each of these may depend on the availability of content, which varies from time to time throughout the year based on, among other things, sports seasons, content production schedules and sports league work stoppages.
Accordingly, negative impacts on our business occurring during a time of typical high seasonal demand such as our park closures due to COVID-19 restrictions or hurricane damage during the summer travel season or other high seasons, could have a disproportionate effect on the results of that business for the year.
Our operations are impacted by our ability to attract and retain employees and costs of employee wages and health, welfare and pension benefits, including postretirement medical benefits for some employees and retirees, may reduce our profitability.
With approximately 225,000 employees, the success of our businesses is substantially affected by our ability to attract and retain a workforce with the necessary skills for our varied businesses, including executing successfully on succession planning for the talent at all levels necessary to advance the Company’s key objectives and strategies. Further, our profitability is substantially affected by labor costs, including wages and our health, welfare and pension benefits, including the costs of medical benefits for current employees and the costs of postretirement medical benefits for some current employees and retirees. We may experience significant increases in these costs as a result of macroeconomic, regulatory, competitive and other factors. For example, labor costs in our parks and resorts have increased, and we expect will continue to increase, as a result of collective bargaining agreements and wage laws and regulations where we operate. Future health outbreaks and pandemics may lead to an increase in the cost of medical insurance and expenses. In addition, changes in investment returns and discount rates used to calculate pension and postretirement medical expense and related assets and liabilities can be volatile and may have an unfavorable impact on our costs in some years. These macroeconomic factors as well as a decline in the fair value of pension and postretirement medical plan assets may put upward pressure on the cost of providing pension and postretirement medical benefits and may increase future funding requirements. There can be no assurance that we will succeed in attracting and retaining the human resources necessary for the success of our businesses or in limiting cost increases from wages and other employee benefits, which could reduce the profitability of our businesses.
We face risks related to costs and expenses in connection with the acquisition of NBCU’s equity interest in Hulu and the TFCF acquisition.
On November 1, 2023, NBCU exercised its right to require the Company to purchase NBCU’s equity interest in Hulu under a put/call arrangement between the parties. The purchase price for NBCU’s equity interest in Hulu will be determined25
TABLE OF CONTENTSbased on NBCU’s equity ownership percentage of the greater of Hulu’s equity fair value as of September 30, 2023, and a guaranteed floor value. Further, the Company will share with NBCU 50% of the Company’s tax benefit from the purchase of NBCU’s interest in Hulu, which payments are expected to be made primarily over a 15-year period. In addition, we may incur significant costs and expenses in connection with the TFCF acquisition, including costs for which we have established reserves or which may lead to reserves in the future. The cost to purchase NBCU’s equity interest in Hulu and related obligations to NBCU and any such other costs could negatively impact the Company’s cash position and result in the Company incurring additional indebtedness.
GENERAL RISKSThe price of our common stock has been, and may continue to be, volatile.The price of our common stock has experienced substantial volatility and may continue to be volatile. Various factors have impacted, and may continue to impact, the price of our common stock, including, among others, changes in management; variations in our operating results; variations between our actual results and expectations of securities analysts; changes in our estimates, guidance or business plans; changes in financial estimates and recommendations by securities analysts; the activities, operating results or stock price of our competitors or other industry participants in the industries in which we operate; the announcement or completion of significant transactions by us or a competitor; events affecting the stock market generally; and the economic and political conditions in the U.S. and internationally, as well as other factors described in this Item 1A. Some of these factors may adversely impact the price of our common stock, regardless of our operating performance. Further, volatility in the price of our common stock may negatively impact one or more of our businesses, including by increasing cash compensation or stock awards for our employees who participate in our stock incentive programs or limiting our financing options for acquisitions and other business expansion.The Company’s amended and restated bylaws provide to the fullest extent permitted by law that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its stockholders, which could increase costs to bring a claim, discourage claims or limit the ability of the Company’s stockholders to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company’s directors, officers or other employees.The Company’s amended and restated bylaws provide to the fullest extent permitted by law that unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of the Company, (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action or proceeding asserting a claim arising pursuant to, or seeking to enforce any right, obligation or remedy under, any provision of the General Corporation Law of the State of Delaware (the “DGCL”), the Certificate of Incorporation or these Bylaws (as each may be amended from time to time), (iv) any action or proceeding as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware, (v) or any action or proceeding asserting a claim governed by the internal affairs doctrine. The choice of forum provision may increase costs to bring a claim, discourage claims or limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or the Company’s directors, officers or other employees, which may discourage such lawsuits against the Company or the Company’s directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in the Company’s amended and restated bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions. The exclusive forum provision in the Company’s amended and restated bylaws will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws including the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or the respective rules and regulations promulgated thereunder.
FY 2025-09-27 (later)
ITEM 1A. Risk Factors
For an enterprise as large and complex as the Company, a wide range of factors could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in our filings with the SEC, the most significant factors affecting our business include the following:RISKS RELATED TO OUR BUSINESSES AND INDUSTRY
Declines in U.S., global and regional economic conditions adversely affect our results of operations and financial condition.
Declines in U.S., global and regional economic conditions, such as recessions, other less severe slowdowns in economic activity and/or inflationary conditions typically adversely affect demand for our products and services and/or costs to operate our businesses, reducing our revenue and earnings. While a number of different factors affect the demand for our products and services, actual or perceived declines in economic conditions typically have impacts across our businesses, including, among others, lower attendance and spending at our parks and experiences businesses, fees received for our cable programming and DTC services, including as a result of declines in subscription levels, purchases of and prices for advertising on our DTC services and linear networks or licensing fees, while in the case of inflationary conditions, also increasing the prices we pay for goods, services and labor, as well as typically our borrowing costs due to elevated interest rates, making it more difficult to obtain financing for our operations and investments on favorable terms. Even when inflationary pressures moderate, we expect certain costs, such as for labor, to remain elevated. In addition, an increase in price levels generally, or in price levels in a particular sector, could result in a shift in consumer demand away from the entertainment and experiences we offer, which could also adversely affect our revenues, while at the same time, increase our costs. A decline in economic conditions or a failure of conditions to improve as anticipated could impact implementation or success of our business plans, such as our investment plans for our Experiences segment, plans for our DTC ad-supported services, enhancements, product offerings, pricing structure and price increases and plans for strategic investments. Unfavorable economic conditions also impair the ability of those with whom we do business to satisfy their obligations to us. The adverse impact on our businesses of actual or perceived declines in economic conditions or a failure of conditions to improve as anticipated depends, in part, on their severity and duration, and our ability to mitigate these impacts on our businesses is limited.
Fluctuations in foreign currency exchange rates impact our results of operations, including our revenues and costs.
Fluctuations in foreign currency exchange rates against the U.S. dollar impact our results of operations, including by impacting the cost in U.S. dollars of providing our goods and services, our revenues in U.S. dollars generated by our international businesses and the international demand for our domestic products and services. An increase or sustained strength in the value of the U.S. dollar adversely impacts the U.S. dollar value of revenue we receive and expect to receive from other markets and contributes to reduced international demand for our domestic products and services, including international travel to our domestic parks and resorts. A decrease or sustained weakness in the value of the U.S. dollar often increases the cost of labor, goods and services in, or originating from, as applicable, non-U.S. markets. Although we hedge exposure to fluctuations in certain foreign currencies, any such hedging activity may not substantially offset the negative financial impact of exchange rate fluctuations and is not expected to offset all such negative financial impact, particularly in periods of sustained U.S. dollar strength or weakness relative to multiple foreign currencies. Further, economic or political conditions in certain countries outside the U.S. also limit, our ability to hedge exposure to currency fluctuations in those countries or our ability to repatriate revenue from those countries.
Changes in technology, in consumer consumption patterns and in how entertainment products and services are created affect demand for, the revenue we can generate from and the cost of producing or distributing our entertainment offerings and our results of operations.
The media entertainment and technology businesses in which we participate increasingly depend on our ability to successfully adapt to new technologies, including shifting patterns of content consumption and how entertainment products and services are generated. New technologies affect the demand for our products and services, the manner in which our entertainment offerings are distributed to consumers, the ways we charge for and receive revenue for our entertainment products and services and the stability of those revenue streams, the sources and nature of competing entertainment offerings, the time and manner in which consumers acquire and view some of our entertainment offerings and the options available to17
TABLE OF CONTENTSadvertisers for reaching their desired audiences. These developments have impacted the business model for certain traditional forms of distribution, as evidenced by the industry-wide decline in ratings for broadcast and cable television, the reduction in demand for home entertainment sales of theatrical content, the development of alternative distribution channels for broadcast and cable programming and declines in subscriber levels for traditional cable channels. In addition, the implementation of our DTC strategy may further contribute to such declines. These developments have decreased advertising and affiliate revenue at some of our linear networks and have led, and may lead in the future, to the impairment of the value of certain of our assets. In addition, theater-going to watch movies has remained below levels that existed prior to the COVID-19 pandemic.
Regulations governing new technological developments, such as developments in artificial intelligence (AI), including generative AI and large language model tools, remain unsettled, and these developments may affect aspects of our existing business models, including revenue streams for the use of our IP, how we create our entertainment offerings and the competition we face. In order to respond to the impact of new technologies on our businesses, we regularly consider, and from time to time implement, new initiatives and changes to our business models, including by developing and investing in DTC streaming services and content offerings and new media offerings. There can be no assurance that our DTC offerings, new media offerings and other efforts will successfully respond to technological changes. In addition, declines in certain traditional forms of distribution impact the cost of content allocable to our DTC offerings. As part of our DTC strategy, we forgo revenue from certain traditional sources. Initially, our DTC streaming services experienced significant losses. There can be no assurance that the DTC model and other business models we may develop will each be or remain profitable or be as profitable over the long term as our historic business models.
We face risks relating to misalignment with public and consumer tastes and preferences for entertainment, travel and consumer products, which impacts demand for our entertainment offerings and products and services and our results of operations.
Our businesses create entertainment, travel and consumer products, the success of which depends substantially on consumer tastes and preferences that change in often unpredictable ways. The success of our businesses depends on our ability to consistently produce compelling creative content, which may be distributed, among other ways, through DTC services, linear networks and theaters and used in theme park attractions, hotels and other resort facilities and travel experiences and consumer products. Such distribution must meet the changing preferences of the broad consumer market and respond to competition from an expanding array of choices facilitated by technological developments in the delivery of content. The success of our theme parks, resorts, cruise ships and experiences, as well as our theatrical releases, depends on demand for out-of-home entertainment experiences. Demand for certain out-of-home entertainment experiences, such as theater-going to watch movies, has not returned to levels that existed prior to the COVID-19 pandemic. In addition, as a global entertainment company with a global consumer base, the success of our businesses depends on our ability to predict and adapt to constantly evolving and often divergent consumer tastes and preferences across various domestic and international markets. Evolving tourist preferences regarding travel to destinations in the U.S. and other geographical regions where our parks and experiences businesses operate sometimes affect travel to those businesses. Moreover, we must often make substantial investments in content production and acquisition, acquisition of sports and other programming rights, theme park attractions, cruise ships or hotels and other facilities or customer facing platforms before we know the extent to which these products will earn consumer acceptance, and the market, economic or social conditions are sometimes significantly different from the ones we anticipated at the time of the investment decisions. Further, preferences of some consumers are affected by their perceptions of our position on matters of public interest, including regarding environmental and social issues, and such perceptions sometimes lead to consumer boycotts. Generally, our results of operations and financial condition are adversely impacted when our entertainment offerings and products and services, as well as our methods to make our offerings and products and services available to consumers, do not align with constantly evolving and often conflicting consumer preferences and tastes or achieve sufficient consumer acceptance.
A variety of uncontrollable events disrupt our businesses, reduce demand for or consumption of our products and services, impair our ability to provide our products and services or increase the cost of providing our products and services, adversely impacting our results of operations and financial condition.
The operation of, and demand for and consumption of our products and services, particularly our parks and experiences businesses, are highly dependent on the general environment for travel and tourism, including in the specific regions in which our parks and experiences businesses operate. In addition, we have extensive international operations, including our international theme parks and resorts, which are dependent on domestic and international regulations consistent with trade and investment in those regions. The operation of our businesses, the environment for travel and tourism, the demand for and consumption of our other products and services and ultimately our results of operations and financial condition are subject to adverse impacts from a variety of factors beyond our control in the U.S., globally or in specific geographic regions around the world where we operate, including: health concerns; adverse weather conditions arising from short-term weather patterns or long-term climate change, including longer and more regular excessive heat conditions, catastrophic events or natural disasters (such as excessive heat or rain, hurricanes, wildfires, typhoons, floods, droughts, tsunamis and earthquakes); international, political or military developments, including tariffs and other trade and international disputes and social unrest; legal and18
TABLE OF CONTENTSregulatory developments; macroeconomic conditions, including a decline in economic activity, inflation and foreign exchange rates; and terrorist attacks. These events and others, such as fluctuations in travel and energy costs, supply chain disruptions and malware and other cyber-related attacks or intrusions or other widespread computing, telecommunications or payment processing failures, from time to time disrupt our ability to provide our products and services, raise the cost of providing our products and services and in certain instances affect our ability to obtain insurance coverage with respect to some of these events. An incident or other event that affected our property directly, including a security incident, earthquake or hurricane, would have a direct impact on our ability to provide products and services and could result in closure of impacted operations or have an extended effect of discouraging consumers from attending our facilities. Moreover, we incur costs to protect against such incidents.
For example, COVID-19 and measures to prevent its spread impacted our businesses in a number of ways, including the closure of our theme parks and resorts, suspension of cruise ship sailings and guided tours, delayed, or in some cases, shortened or canceled, theatrical releases and disruptions in the production and availability of content, significantly reducing revenues across all of our segments. Certain of our business operations have been temporarily disrupted by payment processing outages and widespread computing failures. Hurricanes have caused park closures and other impacts to the operations of Walt Disney World Resort, adversely affecting segment results, and may do so in the future. The Company has ceased certain operations in certain regions, including in response to sanctions, trade restrictions and related developments, resulting in impairment charges.
In addition, we derive affiliate fees and royalties from the distribution of our programming, sales of our licensed products and services by third parties, and the management of businesses operated under brands licensed from the Company and advertising revenues from the purchase of advertising on our various platforms, including DTC services and linear networks, and we are therefore dependent on the successes of those third parties for that portion of our revenue. Our results of operations could be adversely impacted by a significant contraction of distribution channels for our products and services, including through third-party licensees or sellers of our licensed goods and services, or a contraction in the number or kind of advertisers purchasing advertising on our platforms, including as a result of legal or regulatory developments. In addition, third-party suppliers provide products and services essential to the operation of a number of our businesses. A wide variety of factors could influence the success of those third parties and if negative factors significantly impacted a sufficient number of those third parties or materially impacted a supplier of a significant product or service, our results of operations could be adversely affected. In specific geographic markets, we have experienced delayed and/or partial payments from certain third parties due to liquidity issues.
We obtain insurance against the risk of losses relating to some of these events, generally including certain physical damage to our property and resulting business interruption, certain injuries occurring on our property and some liabilities for alleged breach of legal responsibilities. When insurance is obtained it is subject to deductibles, exclusions, terms, conditions and limits of liability. The types and levels of coverage we obtain vary from time to time depending on our view of the likelihood of specific types and levels of loss in relation to the cost of obtaining coverage for such types and levels of loss and we experience losses not covered by our insurance, which could be material.
We face risks related to changes in our business strategies and plans, which have affected and may continue to affect our cost structure, the value of our assets and/or our results of operations.
We adjust our business strategies and plans from time to time in connection with changes in senior management and in our efforts to respond to changes in technology, consumer purchasing and consumption patterns, acceptance of our entertainment offerings, the market for advertising, macroeconomic conditions and other changes in the business environment. For example, in October 2025, we completed a combination of certain Hulu Live TV assets with Fubo to acquire a 70% interest in Fubo; in fiscal 2025, we announced plans for ESPN to acquire the NFL Network and certain other media assets owned and controlled by the NFL in exchange for a 10% noncontrolling interest in ESPN; in fiscal 2024, we transferred Star India into a joint venture and recorded related impairment charges and announced an investment in a multi-year project with Epic Games; in fiscal 2023, we reorganized our media and entertainment operations, which had been previously reported in one segment, into two segments, Entertainment and Sports; in fiscal 2023 we announced that we would review content, primarily on our DTC services, for alignment with a strategic change in our approach to content curation, resulting in removal of certain content from our platforms and related impairment charges; and from time to time, we announce exploration of new types of businesses. Our new business strategies and plans are, among other things, subject to execution risk and may not produce the anticipated benefits, such as supporting our growth strategies and enhancing shareholder value, and over the long term could be less successful than our prior strategies and plans. For example, the cost of executing on our DTC strategy may continue to grow or be reduced more slowly than anticipated, which may impact our distribution strategy across businesses/distribution platforms, the types of content we distribute through various businesses/distribution platforms, the timing and sequencing of content windows and ultimately, the financial results of our DTC services and other businesses/distribution platforms.
In addition, changing technology, consumer purchasing patterns and acceptance of content offerings and macroeconomic conditions may impair the value of our assets. We incur costs in connection with changes to our business strategy and plans and have needed and may in the future need to write-down the value of our assets. Among other assets, in connection with changes19
TABLE OF CONTENTSin strategy, we have impaired the value of our content primarily at our DTC services and goodwill and intangible assets at our linear networks and impaired the value of certain of our retail store assets and certain hotel experiences assets. We may write down other assets as our strategy evolves to account for the business environment.
We also make investments in existing or new businesses, including investments in international expansion of our business and in new business lines. For example, in recent years, we have expanded our fleet of cruise ships, with announced plans for further fleet expansion, and increased investment in our parks and resorts; completed the acquisition of Hulu and of a 70% interest in Fubo; and made substantial investments related to DTC offerings. The ultimate success of these investments is uncertain, some of these and future investments may ultimately result in returns that are negative or lower than anticipated, and these investments may negatively impact the resources available to our other businesses and ultimately, our results of operations. In addition, our costs increase in connection with these investments, and we may have significant charges associated with the write-down of assets if the investments are not as successful as anticipated. Over the long term, our new strategies could be less successful than previous strategies. Even if our strategies are effective in the long term, our new offerings generally negatively impact results of operations in the short term, results of our new offerings are unlikely to be even quarter over quarter and we may not expand into new markets as or when anticipated. Our ability to forecast for new businesses is impacted by our lack of experience operating in those new businesses, speed with which the competitive landscape changes, volatility beyond our control (such as the events beyond our control noted above) and our ability to obtain or develop the content and rights on which our projections are based. Accordingly, we may not achieve our forecasted outcomes.
Increased competitive pressures impact our revenues, increase our costs and impact our results of operations.
We face substantial competition in each of our businesses from alternative providers of the products and services we offer and from other forms of entertainment, lodging, tourism and recreational activities. This includes, among other types, competition for personnel, content and other resources we require in operating our businesses. For example:
• Our programming and production operations compete to obtain creative, performing, production and business talent, sports and other programming, story properties, advertiser support, production facilities and market share with traditional and new media platforms, including other video-on-demand services and sources of broadband delivered content, studio operators and television networks.
• Our linear networks and DTC streaming services compete for viewers and subscribers with an increasing number of competitors, including other DTC and linear offerings, all other forms of media and all other forms of entertainment, as well as for technology, creative, performing and business talent and for content.
• Our linear networks, television stations and DTC services compete for the sale of advertising time with traditional and new media platforms, including other television and video-on-demand services and various forms of internet and mobile delivered platforms and content, which offer advertising delivery technologies that are more targeted than can be achieved through traditional means, as well as with other forms of advertising.
• Our linear networks compete for carriage of their programming with other programming providers.
• Our theme parks, resorts and experiences compete for guests with other theme parks and resorts, all other forms of entertainment, lodging, tourism and recreation activities and compete for technology, creative, performing and business talent, including with other theme park and resort operators.
• Our content sales/licensing operations, including theatrical releases, compete for customers with all other forms of entertainment.
• Our consumer products business competes with other licensors and creators of IP.
Competition for the acquisition of resources sometimes further increases the cost of producing our products and services; changes the composition of our offerings, including sports; deprives us of talent needed for our entertainment and experiences businesses, which talent is necessary to produce high quality creative material; increases employee turnover and staffing instability; and increases our labor costs. Competition also reduces, or limits growth in, prices for our products and services, including advertising rates and subscription fees at our linear networks and DTC offerings, parks and resorts admissions and room rates and prices for consumer products from which we derive licensing revenues. For example, our advertising revenue is negatively impacted by the increased supply of advertising tools and platforms on which to place advertising, including search, social media, online marketplaces and other ad-supported DTC services, which depresses advertising rates across our DTC streaming services and linear networks and creates demand uncertainty.
Technological developments, including developments in generative AI tools that can be used to create competing low-cost content and products, and changes in market structure, including consolidation of suppliers of resources and distribution channels, increase competition in these areas. Increased competition raises the cost of programming, including for sports and other products, and diverts consumers from our offerings to other products and services or other forms of entertainment and experiences. In addition, given the nature of travel planning, consumers sometimes delay travel to our theme parks and resorts in connection with planned major product launches of regional travel industry competitors. Each of these competitive pressures could reduce our revenue and increase our marketing and other costs.20
TABLE OF CONTENTSWe face risks related to the renewal of long-term programming or distribution contracts on sufficiently favorable terms.
We enter into long-term contracts for both the acquisition and the distribution of media programming and products, including contracts for the acquisition of programming rights for sporting events and other programs, and contracts for the distribution of our programming to content distributors. As these contracts expire, we renew or renegotiate the contracts, which from time to time has led to service blackouts when distribution contracts expired before renewal terms were agreed. We may lose programming rights or distribution rights if we are unable to renew these contracts on acceptable terms. Renewal negotiations with certain MVPDs for distribution contracts scheduled to expire in fiscal 2026 could lead to temporary or longer-term service blackouts, negatively impacting our results of operations. On October 30, 2025, the Company’s channels were removed from YouTube TV following the expiration of the parties’ distribution contract without agreement on renewal terms, and the Company cannot predict how long this service blackout will last or reasonably estimate the adverse impact on our results of operations. Further, as a result, our portfolio of acquired programming rights, such as sporting events, and the distributors of our programming and the portfolio of programming rights our distributors acquire have changed and will continue to change over time. Even if these contracts are renewed, the cost of obtaining certain programming rights has increased and may continue to increase (or increase at faster rates than our historical experience) and programming distributors demand terms (including with respect to the pricing for, and the nature and amount of, programming distributed) that reduce our revenue from distribution of programs or increase revenue at slower rates than our historical experience. For example, the terms of certain renewals of carriage agreements have included fewer of our linear networks or the opportunity to offer multiple genre-specific bundle options of fewer than all our linear networks while providing for certain of our DTC streaming services to be made available to the distributor’s subscribers. Moreover, our ability to renew these contracts on favorable terms is affected by a number of factors, such as consolidation in the market for program distribution and the entrance of new participants in the market for distribution of content on digital platforms. With respect to the acquisition of programming rights, particularly sports programming rights, the impact of these long-term contracts on our results over the term of the contracts depends on a number of factors, including the strength of advertising markets, subscription levels and programming rights costs increases, effectiveness of marketing efforts and the size of viewer audiences. There can be no assurance that revenues from programming based on these rights will exceed the cost of the rights plus the other costs of producing and distributing the programming.
We face risks related to environmental, social and governance matters and related reporting obligations.
Domestic and international laws and regulations relating to environmental, social and governance matters, including environmental sustainability, climate change, human rights and human capital management, have been adopted or are under consideration, some of which include specific, target-driven disclosure requirements or obligations. Responding to these laws and regulations has increased our compliance costs, including from increased investment in technology and appropriate expertise and has required the implementation of new reporting processes, entailing additional compliance risk.
In addition, we have undertaken or announced a number of related actions and goals, which will require changes to operations and ongoing investment. There is no assurance that our initiatives will achieve their intended outcomes or that we will achieve any of these goals. Consumer, government and other stakeholder perceptions of our initiatives often differ widely and present risks to our reputation and brands. In addition, our ability to implement some initiatives or achieve some goals is dependent on external factors. For example, our ability to meet certain environmental sustainability goals or initiatives will depend in part on third-party collaboration, the availability of suppliers that can satisfy new requirements, mitigation innovations and/or the availability of economically feasible solutions at scale.
We face risks related to damage to our reputation or brands.
Our reputation and globally recognizable brands are integral to the success of our businesses. Because our brands engage consumers across our businesses, some types of damage to our reputation or brands have an impact on all of our businesses. Because some of our brands are globally recognized, some types of brand damage are not locally contained. Maintenance of the reputation of our Company and brands depends on many factors, including the quality of our offerings, maintenance of trust with our customers and our ability to successfully innovate. In addition, we may pursue brand or product integration combining previously separate brands or products targeting different audiences under one brand or pursue other business initiatives inconsistent with one or more of our brands, and there is no assurance that these initiatives will be accepted by our customers and not adversely impact one or more of our brands. Significant negative claims or publicity regarding the Company or its operations, products, management, employees, practices, business partners, business decisions, social responsibility and culture, which may be amplified by social media, adversely impact our brands or reputation, even if such claims are untrue. From time to time, these negative claims and publicity have led, and may lead in the future, to calls for consumer or other action, including boycotts, litigation, investigations or regulatory actions. These negative perceptions and other damage to our reputation or brands could persist, negatively impacting our sales, business opportunities, results of operations, financial condition and price of our common stock.
Various risks may impact the success of our DTC streaming services.
The success of our DTC streaming services will be impacted by the success of our content curation and investment decisions and ability to offer compelling content and product features; our ability to grow subscription and advertising21
TABLE OF CONTENTSrevenues, including by increasing subscriber and viewership levels and managing churn; our pricing, bundling, product features and content distribution determinations, including across windows; and our ability to contain costs. The initial costs of marketing campaigns are generally recognized in the business of initial exploitation, and amortization of capitalized production costs and licensed programming rights are generally allocated across businesses based on the estimated relative value of the distribution windows. Accordingly, our distribution determinations impact the costs of each business, including the applicable DTC service. There are a number of competing DTC businesses. Consumers may not be willing to pay for an expanding set of DTC services at increasing prices, potentially exacerbated by challenging economic conditions, such as during periods of high inflation or declines in economic activity. In addition, such economic conditions negatively impact the purchase of and price for advertising on our DTC streaming services. We face competition for creative talent and sports and other programming rights and are sometimes not successful in recruiting and retaining talent and obtaining desired programming rights and face increased costs to do so. We have experienced flat subscriber growth or net losses of subscribers in periods. Our content does not always successfully attract and retain subscribers in the quantities that we expect. Our content is subject to cost pressures and may cost more than we expect. We may not successfully manage our costs to meet our goals. Government regulations, including revised foreign content and ownership regulations as well as government-imposed content restrictions, impact the implementation of our DTC business plans and increase our costs. The highly competitive environment in which we operate puts pricing pressure on our DTC offerings and may require us to lower our prices or not increase our prices to attract or retain customers or lead to higher churn rates. These and other risks may impact the success of our DTC streaming services and our results of operations.
Potential credit ratings actions, increases in interest rates, volatility in the U.S. and global financial markets or periods of elevated indebtedness could impede access to, or increase the cost of, financing our operations and investments and have the effect of decreasing of business flexibility.
Our borrowing costs have been and can be affected by short- and long-term debt ratings assigned by nationally recognized ratings agencies that are based, in part, on the Company’s performance as measured by credit metrics such as leverage and interest coverage ratios. For example, our elevated indebtedness and leverage ratios in response to the financial impact of COVID-19 on our businesses resulted in certain rating agencies downgrading our debt ratings. As of September 27, 2025, Moody’s Ratings’ long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively; and S&P Global Ratings’ long- and short-term debt ratings for the Company were A and A-1 (Stable), respectively. Any future downgrades could increase our cost of borrowing and/or make it more difficult for us to obtain financing on acceptable terms.
In addition, increases in interest rates have increased our cost of borrowing and volatility in U.S. and global financial markets could impact our access to, or further increase the cost of, financing. Past disruptions in the U.S. and global credit and equity markets made it more difficult for many businesses to obtain financing on acceptable terms. These conditions tended to increase the cost of borrowing and if they recur, our cost of borrowing could increase and it may be more difficult to obtain financing for our operations or investments.
Further, periods of elevated indebtedness could have the effect of, among other things, reducing our financial flexibility and our ability to respond to changing business and economic conditions and other uncontrollable events, including by reducing funds available for investments, capital expenditures, share repurchases and dividends and other activities, and putting us at a competitive disadvantage relative to companies with lower debt levels.
Labor disputes disrupt our operations and adversely affect the profitability of our businesses.
A significant number of employees in various parts of our businesses, including employees of our theme parks, and writers, directors, actors and production personnel for our productions are covered by collective bargaining agreements. In addition, some of our employees outside the U.S. are represented by works councils, trade unions or other employee associations. Further, some employees of licensees who manufacture and retailers who sell our licensed consumer products, and employees of providers of programming content (such as sports leagues) are covered by labor agreements with their employers. From time to time, collective bargaining agreements and other labor agreements expire, requiring renegotiation of their terms. In general, labor disputes and work stoppages involving our employees; persons employed on our productions; athletes or others employed by, or otherwise connected with, sports leagues or organizers; or the employees of our licensees or retailers who sell our licensed consumer products or providers of programming content may disrupt or lead to closure of certain operations and reduce our revenues and the profitability of our businesses. For example, in fiscal 2023, members of the Writers Guild of America (WGA) commenced a work stoppage, which lasted for almost five months, and members of SAG-AFTRA, the union representing television and movie actors, also commenced a work stoppage, which lasted for almost four months. These work stoppages affected our productions and the pipeline for programming and theatrical releases, which resulted in reduced revenue for the impacted businesses. The resulting collective bargaining agreements with these and other entertainment guilds, some of which are scheduled to expire in fiscal 2026, and with certain labor unions at our domestic parks and resorts will increase our costs to create our content and to operate our domestic parks and resorts, respectively. As a general matter, resolution of labor disputes and negotiation of new collective bargaining agreements, including as a result of rate increases and other changes to employee benefits, has in the past increased our costs and may increase our costs in the future.22
TABLE OF CONTENTSThe seasonality of certain of our businesses and timing of certain of our product offerings could exacerbate negative impacts on our operations.
Each of our businesses is normally subject to seasonal variations and variations in connection with the timing of our product offerings, including as follows:
• Revenues at the Experiences segment fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and leisure activities and seasonal consumer purchasing behavior, which generally results in increased revenues during the Company’s first and fourth fiscal quarters. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early winter and spring holiday periods. Revenues at the Experiences segment also sometimes fluctuate with changes in theme park attendance and resort occupancy resulting from special celebrations or events that increase demand in the applicable periods and decrease demand in prior or later periods as guests time their vacations to occur during such special celebrations or events. In addition, licensing revenues fluctuate with the timing and performance of our theatrical releases and cable programming broadcasts.
• Revenues from television networks and stations are subject to seasonal and other cyclical advertising patterns and changes in viewership levels, including related to certain sporting events. In general, domestic general entertainment linear networks advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months, domestic advertising revenues are typically higher during election cycles and sports advertising revenues are impacted by the timing of sports seasons and events, which varies throughout the year and/or take place periodically.
• Revenues from content sales/licensing fluctuate due to the timing of content releases across various distribution markets. Release dates and methods are determined by a number of factors, including, among others, competition, and the timing of vacation and holiday periods.
• DTC revenues fluctuate based on changes in the number of subscribers, mix of subscribers to different offerings and subscriber fees; viewership levels; and the demand for sports and film and television content. Each of these is sensitive to the availability of content, which varies from time to time throughout the year based on, among other things, sports seasons, content production schedules and sports league work stoppages.
Accordingly, negative impacts on our business occurring during a time of typical high seasonal demand such as our park closures due to hurricane damage during the summer travel season or other high seasons, could have a disproportionate effect on the results of that business for the year.
Our operations are impacted by our ability to attract and retain employees and costs of employee wages and health, welfare and retirement benefits, including postretirement medical benefits for some employees and retirees, may negatively impact our results of operations and financial condition.
With approximately 231,000 employees, the success of our businesses is substantially affected by our ability to attract and retain a workforce with the necessary skills for our varied businesses, including executing successfully on succession planning for the talent at all levels necessary to advance the Company’s key objectives and strategies. Further, our results of operations are substantially affected by labor costs, including wages and our health, welfare and retirement benefits, including the costs of medical benefits for current employees and the costs of postretirement medical benefits for some current employees and retirees. We may experience significant increases in these costs as a result of macroeconomic, regulatory, competitive and other factors. For example, labor costs in our parks and resorts have increased, and we expect will continue to increase, as a result of collective bargaining agreements and wage laws and regulations where we operate. Further, the cost of providing medical insurance and other medical benefits for our employees have increased, and we expect will continue to increase. In addition, for benefits provided to certain employees, changes in asset values, investment returns and discount rates used to calculate pension and postretirement medical expense and related assets and liabilities can be volatile and may have an unfavorable impact on our costs in some years. These factors may also increase future funding requirements for these benefit plans. There can be no assurance that we will succeed in attracting and retaining the human resources necessary for the success of our businesses or in limiting cost increases from wages and other employee benefits, negatively impacting our results of operations and financial condition.
RISKS RELATED TO INTELLECTUAL PROPERTY, LITIGATION, CYBERSECURITY AND REGULATORY REQUIREMENTS
The success of our businesses is highly dependent on the existence and maintenance of intellectual property rights in the entertainment products and services we create.
The value to us of our IP is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. Where those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from our IP may decrease, or the cost of obtaining and maintaining rights may increase. In the United States and countries that look to the United States23
TABLE OF CONTENTScopyright term when shorter than their own, the copyright term for early works and the specific early versions of characters depicted in those works expires at the end of the 95th calendar year after the date the copyright was originally secured in the United States. The terms of some copyrights for IP related to some of our products and services have expired, and other copyrights will expire in the future. For example, the copyright term for the short film Steamboat Willie (1928) and early versions of characters depicted in this film have expired. As copyrights expire, we expect that revenues generated from such IP will be negatively impacted to some extent.
The unauthorized use of our IP typically increases our costs, including in connection with our efforts to protect rights in our IP, and may reduce our revenues. The convergence of computing, communications and entertainment devices, increased broadband internet speed and penetration, increased availability and speed of mobile data transmission and increasingly sophisticated attempts to obtain unauthorized access to data systems have made the unauthorized digital copying and distribution of our films, television productions and other creative works easier and faster and protection and the enforcement of IP rights more challenging. The unauthorized distribution and access to entertainment content generally continues to be a significant challenge for IP rights holders. Further, the availability of certain AI tools has facilitated the creation of infringing works based on the unauthorized use of our IP. Inadequate laws or weak enforcement mechanisms to protect entertainment industry IP in one country can adversely affect the results of the Company’s operations worldwide, despite the Company’s efforts to protect its IP rights. Distribution innovations have increased opportunities to access content in unauthorized ways. Additionally, negative economic conditions or a shift in government priorities or policies could lead to less enforcement. These developments require us to devote substantial resources to protecting our IP against unlicensed use and present the risk of increased losses of revenue as a result of unlicensed distribution of our content and other commercial misuses of our IP. The legal landscape for some new technologies, including some AI tools, remains uncertain, and development of the law or other regulatory frameworks in this area could impact our ability to protect against unauthorized uses.
With respect to IP developed by the Company and rights acquired by the Company from others, the Company is subject to the risk of challenges to our copyright, trademark and patent rights by third parties. In addition, the availability of copyright protection and other legal protections for IP generated by certain new technologies, such as generative AI, is uncertain. Successful challenges to our rights in IP typically result in increased costs for obtaining rights or the loss of the opportunity to earn revenue from or utilize the IP that is the subject of challenged rights. Routinely, third parties allege that the Company is infringing certain third-party IP rights. Technological changes in industries in which the Company operates and extensive patent coverage in those areas increase the risk of such claims being brought and prevailing. For example, from time to time, the Company’s streaming services and technology are the subject of patent infringement litigation and other claims seeking damages and injunctive relief, and the resolution of these matters in aggregate may negatively impact our results of operations.
We face risks from claims, litigation, governmental investigations and other proceedings to our businesses, reputation, results of operation and financial condition.
We are subject to various actual and threatened claims, litigation, investigations and other proceedings, including private individual actions, class actions and actions and investigations by governmental and other regulatory authorities, relating to a range of issues, including securities; competition and antitrust; intellectual property, including patent and copyright; employment and labor; taxes; privacy and data protection; data security; personal injury and property damage; consumer protection; contractual and commercial disputes; the production, distribution and licensing of our content; and other matters. For example, a private securities class action lawsuit was filed in federal court against the Company and certain current and former senior management on behalf of certain purchasers of securities of the Company seeking unspecified damages, plus interest and costs and fees, and an adverse final judgment or the terms of a settlement of such matter could result in the payment of substantial monetary damages. See Note 14 to the Consolidated Financial Statements for more details regarding this lawsuit and above in these risk factors regarding patent infringement litigation and other claims. In addition, from time to time, we pursue litigation against third parties seeking to vindicate our rights.
Actual and threatened proceedings and investigations increase our costs, divert management resources and disrupt business operations and may negatively impact our reputation and brands. The outcomes of such matters are inherently unpredictable, and determining legal reserves or potential losses from such matters involves judgment. If the losses to resolve such matters exceed the amounts recorded in any given reporting period, our results of operations for that interim or annual reporting period could be materially adversely affected. Further, from time to time, adverse resolutions or settlements of such matters result in substantial monetary damages or substantial future payment obligations and injunctive relief or other orders or actions that limit or prevent our implementation of our business plans, including our ability to complete strategic transactions and offer certain products and services, impact the enforcement or validity of our property and other (including intellectual property) rights, franchises and licenses or cause us to alter our business practices, which individually or taken together, negatively impact our business prospects, our results of operations, our financial condition and price of our common stock. While we maintain insurance for certain types of claims, our insurance may not be adequate to cover all losses and does not cover all types of claims that may arise.24
TABLE OF CONTENTSCybersecurity and other data compromises and/or attempted compromises increase our costs, disrupt our services and business plans, lead to the disclosure of our confidential information, including unauthorized use of our intellectual property, and negatively impact our reputation.
We maintain information necessary to conduct our businesses, including confidential and proprietary information as well as personal information regarding our customers and employees, in digital form. We also use computer and cloud-based systems to deliver our products and services and operate our businesses. Such data and systems are subject to the risk of compromise and other cyberattacks, including unauthorized access, modification, exfiltration, destruction or denial of access, which also can result in disruptions in service. We also provide confidential, proprietary and personal information to third parties in certain cases and use many third-party systems and software, which are also subject to compromise and other cyberattacks.
We have developed and maintain an information security program to assess, identify and manage cyber risks and the continued development and maintenance of this program is costly and requires ongoing monitoring and updating as technologies change, including as a result of the proliferation of AI tools, and efforts to overcome security measures become more sophisticated. We face an increasingly challenging cybersecurity environment with expanding and evolving threats from a variety of potential bad actors. While we employ various tools in an effort to protect our data and systems, certain aspects of our defenses remain subject to human error. Remote work by our employees and contractors and those of the third parties with whom we engage create additional risks. Despite our efforts, the risk of a potentially material incident as a result of unauthorized access, modification, exfiltration, destruction or denial of access with respect to data or systems and other cybersecurity attacks cannot be eliminated, and from time to time our systems and third-party systems have been compromised in this manner, and are subject to the risk of future compromise.
If our information or cyber security systems or data are compromised in a material way, our ability to conduct our business may be impaired, we may lose profitable opportunities or the value of those opportunities may be diminished and, as described above, we may lose revenue as a result of unlicensed use of our intellectual property. We have experienced and may in the future experience cybersecurity attacks that result in the misappropriation of personal information of our customers and/or employees, which may result in reputational damage, loss of business and/or harm to employee morale. Related remediation of harm to our customers and employees or damages arising from litigation and/or fines or other actions we take with respect to judicial or regulatory actions arising out of an incident create additional costs and/or impacts to our businesses. Insurance does not cover all potential losses or damages associated with such attacks or events. Our systems and users and those of third parties with whom we engage are continually attacked, sometimes successfully, and there can be no assurance that future incidents will not have material adverse effects on our operations or financial results.
Regulations applicable to our businesses impact the profitability of our businesses.
Each of our businesses, including our broadcast networks and television stations, is subject to a variety of U.S. and international regulations, which impact the operations and profitability of our businesses. Some of these regulations include:
• U.S. Federal Communications Commission (FCC) regulation of our television and radio networks, our national programming networks and our owned television stations. See Item 1 — Federal Communications Commission Regulation.
• Federal, state and foreign privacy and data protection laws and regulations, including with respect to child safety. See Item 1 — Privacy and Data Protection Regulation.
• Regulation of the safety and supply chain of consumer products and theme park operations, including regulation regarding the sourcing, importation and the sale of goods.
• Land planning, use and development regulations applicable to our theme parks operations.
• Environmental protection and sustainability regulations.
• U.S. and international anti-corruption laws, sanction programs, trade restrictions, tariffs, anti-money laundering laws or currency controls.
• Restrictions on the manner in which content is currently licensed and distributed, ownership restrictions or film or television content requirements, investment obligations or quotas. See Item 1 — International Content Regulation.
• Domestic and international labor laws, tax laws and antitrust laws.
Laws and regulations in any of these and other areas and changes in judicial and agency interpretation or regulatory priorities, actions or initiatives (or, if applicable, private litigation to enforce such laws and regulations), as well as an increasingly unpredictable regulatory landscape, require us to incur additional costs and may limit our ability to implement our business strategies as planned or offer products and services in ways that are profitable, or at all. In addition, ongoing and future developments in international political, trade and security policy may lead to new regulations that increase the cost of providing our products and services, negatively impact demand for our products and services and limit international trade and investment,25
TABLE OF CONTENTSdisrupting our operations in and outside the U.S., including our international theme parks and resorts operations in France, mainland China and Hong Kong.
For example, in 2022 the U.S. and other countries implemented a series of sanctions against Russia in response to events in Russia and Ukraine; U.S. agencies have enhanced trade restrictions, including new prohibitions on the importation of goods from certain regions and other jurisdictions are considering similar measures; and U.S. state governments have become more active in passing legislation targeted at specific sectors and companies and applying existing laws in novel ways to new technologies, including streaming and online commerce. In 2025, tariffs were announced with respect to and by certain U.S. trading partners, which could, depending on how these or future tariffs or other regulations with respect to trade are implemented, have a significant impact on our results of operations, including by impacting the macroeconomic environment, increasing costs or adversely affecting demand for our products and services. Further, the legal and regulatory landscape for certain new technologies, such as AI, is uncertain and evolving and our compliance obligations could increase our costs or limit how we may use these technologies in one or more of our businesses.
Our operations outside the U.S. are affected by the operation of laws in those jurisdictions.
Our operations outside the U.S. are in many cases subject to the laws of the jurisdictions in which they operate rather than, or in addition to, U.S. law. Laws in some international jurisdictions differ in significant respects from those in the U.S. These differences can affect our ability to react to changes in our businesses, and our rights or ability to enforce rights are sometimes different than would be expected under U.S. law. Moreover, enforcement of laws in some international jurisdictions can be inconsistent and unpredictable, which can affect both our ability to enforce our rights and to undertake activities that we believe are beneficial to our businesses. In addition, the business and political climate in some jurisdictions may encourage corruption, which could reduce our ability to compete successfully in those jurisdictions while remaining in compliance with local laws or U.S. anti-corruption laws applicable to our businesses. As a result, our ability to generate revenue and our expenses in non-U.S. jurisdictions may differ from what would be expected if U.S. law alone governed these operations.
RISKS RELATED TO OWNERSHIP OF OUR STOCKThe price of our common stock has been, and may continue to be, volatile.The price of our common stock has experienced substantial volatility and may continue to be volatile. Various factors have impacted, and may continue to impact, the price of our common stock, including, among others, changes in management; variations in our operating results; variations between our actual results and expectations of securities analysts; changes in our estimates, guidance or business plans; changes in financial estimates and recommendations by securities analysts; the activities, operating results or stock price of our competitors or other industry participants in the industries in which we operate; the announcement or completion of significant transactions by us or a competitor; events affecting the stock market generally; and the economic, trade and political conditions in the U.S. and internationally, as well as other factors described in this Item 1A. Some of these factors may adversely impact the price of our common stock, regardless of our operating performance. Further, volatility in the price of our common stock may negatively impact one or more of our businesses, including by increasing stock awards for our employees who participate in our stock incentive programs or limiting our financing options for acquisitions and other business expansion.
GENERAL RISKSThe Company’s amended and restated bylaws provide to the fullest extent permitted by law that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its stockholders, which could increase costs to bring a claim, discourage claims or limit the ability of the Company’s stockholders to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company’s directors, officers or other employees.The Company’s amended and restated bylaws provide to the fullest extent permitted by law that unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of the Company, (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action or proceeding asserting a claim arising pursuant to, or seeking to enforce any right, obligation or remedy under, any provision of the General Corporation Law of the State of Delaware (the “DGCL”), the Certificate of Incorporation or these Bylaws (as each may be amended from time to time), (iv) any action or proceeding as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware, (v) or any action or proceeding asserting a claim governed by the internal affairs doctrine. The choice of forum provision may increase costs to bring a claim, discourage claims or limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or the Company’s directors, officers or other employees, which may discourage such lawsuits against the Company or the Company’s directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in the Company’s amended and restated bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in
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other jurisdictions. The exclusive forum provision in the Company’s amended and restated bylaws will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws including the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or the respective rules and regulations promulgated thereunder.
Item 7 · Management's Discussion & Analysis
+500 paragraphs −815 paragraphs ~500 changed
FY 2023-09-30 (earlier)
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CONSOLIDATED RESULTS
($ in millions, except per share data)% ChangeBetter (Worse)2023 2022 2021 2023 vs. 2022 2022 vs. 2021Revenues:Services $ 79,562 $ 74,200 $ 61,768 7 % 20 %
Products 9,336 8,522 5,650 10 % 51 %
Total revenues 88,898 82,722 67,418 7 % 23 %Costs and expenses:Cost of services (exclusive of depreciation and amortization) ( 53,139 ) ( 48,962 ) ( 41,129 ) (9) % (19) %
Cost of products (exclusive of depreciation and amortization) ( 6,062 ) ( 5,439 ) ( 4,002 ) (11) % (36) %
Selling, general, administrative and other ( 15,336 ) ( 16,388 ) ( 13,517 ) 6 % (21) %
Depreciation and amortization ( 5,369 ) ( 5,163 ) ( 5,111 ) (4) % (1) %
Total costs and expenses (79,906) (75,952) (63,759) (5) % (19) %
Restructuring and impairment charges ( 3,892 ) ( 237 ) ( 654 ) >(100) % 64 %
Other income (expense), net 96 ( 667 ) 201 nm nm
Interest expense, net ( 1,209 ) ( 1,397 ) ( 1,406 ) 13 % 1 %
Equity in the income of investees, net 782 816 761 (4) % 7 %
Income from continuing operations before income taxes 4,769 5,285 2,561 (10) % >100 %
Income taxes from continuing operations ( 1,379 ) ( 1,732 ) ( 25 ) 20 % >(100) %
Net income from continuing operations 3,390 3,553 2,536 (5) % 40 %
Loss from discontinued operations, net of income tax benefit of $0, $14 and $9, respectively
— ( 48 ) ( 29 ) 100 % (66) %
Net income 3,390 3,505 2,507 (3) % 40 %
Net income from continuing operations attributable to noncontrolling and redeemable noncontrolling interests ( 1,036 ) ( 360 ) ( 512 ) >(100) % 30 %
Net income attributable to Disney $ 2,354 $ 3,145 $ 1,995 (25) % 58 %Diluted earnings per share attributable to Disney$ 1.29 $ 1.75 $ 1.11 (26) % 58 %Organization of Information
Management’s Discussion and Analysis provides a narrative on the Company’s financial performance and condition that should be read in conjunction with the accompanying financial statements. It includes the following sections:
• Consolidated Results and Non-Segment Items
• Business Segment Results
• Corporate and Unallocated Shared Expenses• Restructuring Activities• Liquidity and Capital Resources• Critical Accounting Policies and Estimates• DTC Product Descriptions, Key Definitions and Supplemental Information• Supplemental Guarantor Financial Information30TABLE OF CONTENTS
CONSOLIDATED RESULTS AND NON-SEGMENT ITEMSIn fiscal 2023, the Company reorganized into three business segments: Entertainment, Sports and Experiences (renamed from Disney Parks, Experiences and Products). Fiscal 2022 and 2021 segment financial information has been recast for the following:
• The prior Disney Media and Entertainment Distribution segment has been reorganized into the Entertainment and Sports segments
• A portion of Consumer Products revenues is recognized at the Entertainment segment, which is meant to reflect royalties on merchandise licensing revenues generated on IP created by the Entertainment segment
2023 vs. 2022
Revenues for fiscal 2023 increased 7%, or $6.2 billion, to $88.9 billion; net income attributable to Disney decreased $0.8 billion to income of $2.4 billion compared to $3.1 billion in the prior year; and diluted earnings per share (EPS) from continuing operations attributable to Disney decreased to $1.29 compared to $1.75 in the prior year. In the prior year, the Company recorded a reduction in revenue of $1.0 billion for amounts to early terminate certain license agreements with a customer for film and television content, which was delivered in previous years, in order for the Company to use the content primarily at our Entertainment Direct-to-Consumer services (Content License Early Termination). The EPS decrease was due to higher restructuring and impairment charges and lower operating income at Entertainment. These decreases were partially offset by the comparison to the impact of the Content License Early Termination, higher operating income at Experiences in the current year compared to the prior year and investment gains in the current year compared to investment losses in the prior year.RevenuesService revenues for fiscal 2023 increased 7%, or $5.4 billion, to $79.6 billion, due to growth at our theme parks and resorts, higher subscription revenue, an increase in theatrical distribution revenue and the comparison to the revenue reduction for the Content License Early Termination in the prior year. These increases were partially offset by decreases in advertising revenue, TV/VOD distribution sales and affiliate revenue. Growth at theme parks and resorts was due to higher volumes and guest spending. The increase in subscription revenue was due to subscriber growth and higher rates. Service revenues reflected an approximate 1 percentage point decrease due to an unfavorable movement of the U.S. dollar against major currencies including the impact of our hedging program (Foreign Exchange Impact).
Product revenues for fiscal 2023 increased 10%, or $0.8 billion, to $9.3 billion, due to higher sales volumes of merchandise, food and beverage at our theme parks and resorts, partially offset by lower home entertainment volumes. Product revenues reflected an approximate 2 percent point decrease due to an unfavorable Foreign Exchange Impact.Costs and expensesCost of services for fiscal 2023 increased 9%, or $4.2 billion, to $53.1 billion, due to higher programming and production costs, inflation and increased volumes at our theme parks and resorts and, to a lesser extent, higher technology and distribution costs at Entertainment Direct-to-Consumer. The increase in programming and production costs was due to higher costs at Entertainment Direct-to-Consumer and increased production cost amortization resulting from higher theatrical revenue, partially offset by a decrease in production cost amortization due to lower TV/VOD distribution sales. Costs of services reflected an approximate 1 percentage point decrease due to a favorable Foreign Exchange Impact.
Cost of products for fiscal 2023 increased 11%, or $0.6 billion, to $6.1 billion, due to higher sales volumes of merchandise, food and beverage and cost inflation at our theme parks and resorts. Cost of products reflected an approximate 1 percent point decrease due to a favorable Foreign Exchange Impact.
Selling, general, administrative and other costs for fiscal 2023 decreased 6%, or $1.1 billion, to $15.3 billion, primarily due to lower marketing costs at Entertainment Direct-to-Consumer. These decreases were partially offset by higher theatrical marketing costs and an increase in marketing costs at theme parks and resorts. Selling, general, administrative and other costs reflected an approximate 1 percentage point decrease due to a favorable Foreign Exchange Impact.
Depreciation and amortization increased 4 %, or $0.2 billion, to $5.4 billion due to higher depreciation at our domestic parks and resorts including accelerated depreciation related to the closure of Star Wars: Galactic Starcruiser and depreciation for the Disney Wish , which launched in the fourth quarter of the prior year, partially offset by lower amortization of intangible assets from the acquisition of TFCF and Hulu.Restructuring and Impairment ChargesRestructuring and impairment charges in fiscal 2023 were $3,892 million comprising:
• $2,577 million for the Content Impairment charge (see Note 18 of the Consolidated Financial Statements)
• $721 million of goodwill impairments (see Note 18 of the Consolidated Financial Statements)
31TABLE OF CONTENTS• $357 million for severance
• $141 million for an impairment of an equity investment
• $96 million for exiting our businesses in Russia and other charges
Restructuring and impairment charges in fiscal 2022 were $237 million primarily due to the impairment of an intangible and other assets related to exiting our businesses in Russia.
Other Income (expense), net
($ in millions)
2023 2022 % Change Better (Worse)
DraftKings gain (loss)
$ 169 $ ( 663 ) nm
Other, net (73) (4) >(100) %
Other income (expense), net $ 96 $ (667) nm
In fiscal 2023, the Company recognized a gain of $ 169 million on its investment in DraftKings, Inc. (DraftKings), which was sold in the current fiscal year.
In fiscal 2022, the Company recognized a non-cash loss of $663 million from the adjustment of its investment in DraftKings to fair value.Interest Expense, net
($ in millions)2023 2022 % Change Better (Worse)
Interest expense $ ( 1,973 ) $ ( 1,549 ) (27) %
Interest income, investment income and other 764 152 >100 %
Interest expense, net $ (1,209) $ (1,397) 13 %
The increase in interest expense was due to higher average rates, partially offset by lower average debt balances and higher capitalized interest.
The increase in interest income, investment income and other resulted from higher interest income on cash balances, which reflected an increase in interest rates, and a larger benefit from pension and postretirement benefit costs, other than service cost.Equity in the Income of InvesteesEquity in the income of investees decreased $34 million to $ 782 million in the current year primarily due to lower income from A+E.Effective Income Tax Rate
($ in millions)2023 2022
Income from continuing operations before income taxes $ 4,769 $ 5,285
Income tax expense on continuing operations 1,379 1,732
Effective income tax rate - continuing operations 28.9% 32.8%
The decrease in the effective income tax rate was due to the following:
• A lower effective tax rate on foreign earnings in the current year compared to the prior year;
• A favorable comparison from adjustments related to previous year’s tax matters, which was a benefit in the current year and a detriment in the prior year; partially offset by
• New tax regulations issued in the prior year that limited our ability to use certain accumulated foreign tax credits;
• An unfavorable impact in the current year from goodwill impairments, which were not tax deductible; and
• An unfavorable impact in the current year compared to a favorable impact in the prior year for the tax effect of employee share-based awards.
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TABLE OF CONTENTSNoncontrolling Interests
($ in millions)2023 2022 % Change Better (Worse)
Net income from continuing operations attributable to noncontrolling interests
$ ( 1,036 ) $ ( 360 ) >(100) %
The increase in net income from continuing operations attributable to noncontrolling interests was due to improved results at our Asia Theme Parks and higher accretion of NBC Universal’s interest in Hulu.Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.
Certain Items Impacting Results in the YearResults for fiscal 2023 were impacted by the following:
• TFCF and Hulu acquisition amortization of $1,998 million
• Other income of $96 million due to the DraftKings gain of $169 million
• Restructuring and impairment charges of $3,892 million
Results for fiscal 2022 were impacted by the following:
• TFCF and Hulu acquisition amortization of $2,353 million
• A $1.0 billion reduction in revenue for the Content License Early Termination
• Other expense of $667 million due to the DraftKings loss of $663 million
• Restructuring and impairment charges of $237 million
A summary of the impact of these items on EPS is as follows:
($ in millions, except per share data)
Pre-Tax Income (Loss) Tax Benefit (Expense) (1)
After-Tax Income (Loss) EPS Favorable (Adverse) (2)
Year Ended September 30, 2023:
Restructuring and impairment charges (3)
$ (3,836) $ 717 $ (3,119) $ (1.69)
TFCF and Hulu acquisition amortization (4)
(1,998) 465 (1,533) (0.82)
Other income (expense), net 96 (13) 83 0.05
Total $ (5,738) $ 1,169 $ (4,569) $ (2.46)
Year Ended October 1, 2022:
TFCF and Hulu acquisition amortization (4)
$ (2,353) $ 549 $ (1,804) $ (0.97)
Contract License Early Termination (1,023) 238 (785) (0.43)
Other income (expense), net (667) 156 (511) (0.28)
Restructuring and impairment charges (237) 55 (182) (0.10)
Total $ (4,280) $ 998 $ (3,282) $ (1.78)
(1) Tax benefit (expense) is determined using the tax rate applicable to the individual item.
(2) EPS is net of noncontrolling interest, where applicable. Total may not equal the sum of the column due to rounding.
(3) Restructuring and impairment charges include the impact of a content license agreement termination with A+E, which generated a gain at A+E. The Company’s 50% interest in this gain was $56 million (A+E gain) and is included in Restructuring and impairment charges in this table.
(4) Includes amortization of intangibles related to TFCF equity investees.
2022 vs. 2021
Revenues for fiscal 2022 increased 23%, or $15.3 billion, to $82.7 billion; net income attributable to Disney increased $1.2 billion, to income of $3.1 billion compared to $2.0 billion in fiscal 2021; and EPS from continuing operations attributable to Disney increased to $1.75 compared to $1.11 in fiscal 2021. The EPS increase was due to growth at Experiences, partially offset by lower operating results at Entertainment, higher income tax expense and the Content License Early Termination.
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Revenues
Service revenues for fiscal 2022 increased 20%, or $12.4 billion, to $74.2 billion, due to increased revenues at our theme parks and resorts, subscription revenue growth and, to a lesser extent, higher theatrical distribution and advertising revenue. These increases were partially offset by the Content License Early Termination. The increase at theme parks and resorts was due to higher volumes, which generally reflected the impact of operating with capacity restrictions in fiscal 2021 as a result of COVID-19, and higher average per capita ticket revenue. The increase in subscription revenue was due to subscriber growth and higher average rates. Service revenues reflected an approximate 1 percent point decrease due to an unfavorable Foreign Exchange Impact.
Product revenues for fiscal 2022 increased 51%, or $2.9 billion, to $8.5 billion, due to higher sales volumes of merchandise, food and beverage at our theme parks and resorts.
Costs and expenses
Cost of services for fiscal 2022 increased 19%, or $7.8 billion, to $49.0 billion, due to higher programming and production costs, increased volumes at our theme parks and resorts and higher technology and distribution costs at Entertainment Direct-to-Consumer. The increase in programming and production costs was due to higher costs at Entertainment Direct-to-Consumer, an increase in sports right costs and higher production cost amortization due to theatrical revenue growth. These increases were partially offset by lower programming and production costs as a result of international channel closures.
Cost of products for fiscal 2022 increased 36%, or $1.4 billion, to $5.4 billion, due to higher merchandise, food and beverage sales at our theme parks and resorts.
Selling, general, administrative and other costs for fiscal 2022 increased 21%, or $2.9 billion, to $16.4 billion, primarily due to higher marketing costs at Entertainment Direct-to-Consumer and, to a lesser extent, our theatrical distribution and parks and experiences businesses.
Restructuring and Impairment Charges
Restructuring and impairment charges in fiscal 2022 were $0.2 billion primarily due to the impairment of an intangible and other assets related to exiting our businesses in Russia.
Restructuring and impairment charges in fiscal 2021 were $0.7 billion comprising:
• $0.4 billion of asset impairments and severance costs related to the shut-down of an animation studio and the closure of a substantial number of Disney-branded retail stores in North America and Europe
• $0.3 billion of severance and other costs in connection with the integration of TFCF and workforce reductions at Experiences
Other Income (expense), net
($ in millions)
2022 2021 % Change Better (Worse)
fuboTV gain $ — $ 186 (100) %
German FTA gain — 126 (100) %
DraftKings loss ( 663 ) ( 111 ) >(100) %
Other, net (4) — nm
Other income (expense), net $ (667) $ 201 nm
In fiscal 2022, the Company recognized a non-cash loss of $ 663 million from the adjustment of our investment in DraftKings to fair value.
In fiscal 2021, the Company recognized a $186 million gain from the sale of our investment in fuboTV Inc. (fuboTV gain), a $126 million gain on the sale of our 50% interest in a German free-to-air (FTA) television network (German FTA gain) and a non-cash loss of $111 million from the adjustment of our investment in DraftKings to fair value.34
TABLE OF CONTENTSInterest Expense, net
($ in millions)
2022 2021 % Change Better (Worse)
Interest expense $ ( 1,549 ) $ ( 1,546 ) — %
Interest income, investment income and other 152 140 9 %
Interest expense, net $ (1,397) $ (1,406) 1 %
Interest expense in fiscal 2022 was comparable to fiscal 2021 as the impact of higher average interest rates was offset by the impact of lower average debt balances.
The increase in interest income, investment income and other was due to a favorable comparison of pension and postretirement benefit costs, other than service cost, which was a net benefit in fiscal 2022 and an expense in fiscal 2021. This increase was partially offset by investment losses in fiscal 2022 compared to investment gains in fiscal 2021.
Equity in the Income of Investees
Equity in the income of investees increased $55 million to $816 million in fiscal 2022 due to higher income from A+E and the comparison to investment impairments in fiscal 2021.
Effective Income Tax Rate
($ in millions)
2022 2021
Income from continuing operations before income taxes $ 5,285 $ 2,561
Income tax expense on continuing operations 1,732 25
Effective income tax rate - continuing operations 32.8% 1.0%
The effective income tax rate in fiscal 2022 was higher than the U.S. statutory rate primarily due to higher effective tax rates on foreign earnings. The effective income tax rate in fiscal 2021 was lower than the U.S. statutory rate due to favorable adjustments related to prior years and excess tax benefits on employee share-based awards, partially offset by higher effective tax rates on foreign earnings. Higher effective tax rates on foreign earnings in both fiscal 2022 and 2021 reflected the impact of foreign losses and, to a lesser extent, foreign tax credits for which we are unable to recognize a tax benefit.
Noncontrolling Interests
($ in millions)
2022 2021 % Change Better (Worse)
Net income from continuing operations attributable to noncontrolling interests
$ ( 360 ) $ ( 512 ) 30 %
The decrease in net income from continuing operations attributable to noncontrolling interests was primarily due to higher losses at Shanghai Disney Resort and at our DTC sports business, partially offset by higher results for ESPN.
Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.
Certain Items Impacting Results in the Year
Results for fiscal 2022 were impacted by the following:
• TFCF and Hulu acquisition amortization of $2,353 million
• A $1.0 billion reduction in revenue for the Content License Early Termination
• Other expense of $667 million due to the DraftKings loss of $663 million
• Restructuring and impairment charges of $237 million
Results for fiscal 2021 were impacted by the following:
• TFCF and Hulu acquisition amortization of $2,418 million
• Restructuring and impairment charges of $654 million
• Other income of $201 million due to the fuboTV gain of $186 million and the German FTA gain of $126 million, partially offset by the DraftKings loss of $111 million
35
TABLE OF CONTENTSA summary of the impact of these items on EPS is as follows:
($ in millions, except per share data)
Pre-Tax Income (Loss) Tax Benefit (Expense) (1)
After-Tax Income (Loss) EPS Favorable (Adverse) (2)Year Ended October 1, 2022:TFCF and Hulu acquisition amortization (3)$ (2,353) $ 549 $ (1,804) $ (0.97)
Contract License Early Termination (1,023) 238 (785) (0.43)
Other income (expense), net (667) 156 (511) (0.28)
Restructuring and impairment charges (237) 55 (182) (0.10)
Total $ (4,280) $ 998 $ (3,282) $ (1.78)
Year Ended October 2, 2021:TFCF and Hulu acquisition amortization (3)$ (2,418) $ 562 $ (1,856) $ (1.00)
Restructuring and impairment charges (654) 152 (502) (0.27)
Other income (expense), net 201 (46) 155 0.08
Total $ (2,871) $ 668 $ (2,203) $ (1.18)(1) Tax benefit (expense) is determined using the tax rate applicable to the individual item.
(2) EPS is net of noncontrolling interest, where applicable. Total may not equal the sum of the column due to rounding.
(3) Includes amortization of intangibles related to TFCF equity investees.
BUSINESS SEGMENT RESULTS
The Company evaluates the performance of its operating segments based on segment revenue and segment operating income.
Below is a discussion of the major revenue and expense categories for our business segments. Costs and expenses for each segment consist of operating expenses, selling, general, administrative and other costs, and depreciation and amortization. Selling, general, administrative and other costs include third-party and internal marketing expenses.The Entertainment segment comprises three significant lines of business:
• Linear Networks, which primarily generates revenue from affiliate fees and advertising. In recent years, revenues from affiliate fees have declined due to fewer subscribers to MVPD services that carry our linear networks. We anticipate this trend to continue, although the extent and duration is uncertain. In addition, these revenues will be impacted and may be further impacted in the future from the lapse of carriage agreements to certain networks.• Direct-to-Consumer, which primarily generates revenue from subscription fees and advertising• Content Sales/Licensing, which primarily generates revenue from the sale of film and episodic content in the TV/VOD and home entertainment markets, distribution of films in the theatrical market, licensing of our music rights, sales of tickets to stage play performances and licensing of our IP for use in stage plays. Revenues also include an intersegment allocation of revenues from the Experiences segment, which is meant to reflect royalties on consumer products merchandise licensing revenues generated on IP created by the Entertainment segment.
Operating expenses at the Entertainment segment primarily consist of programming and production costs, technology support costs, operating labor, distribution costs and cost of sales. Programming and production costs include the following:
• Amortization of capitalized production costs and licensed programming rights
• Subscriber-based fees for programming the Hulu Live service, including fees paid by Hulu to the Sports segment and other Entertainment segment businesses for the right to air their linear networks on Hulu Live• Production costs related to live programming (primarily news)• Amortization of participations and residual obligations
• Fees paid to the Sports segment to program ESPN on ABC and certain sports content on Star+
Amortization of capitalized production costs and licensed programming rights is generally allocated across Entertainment’s businesses based on the estimated relative value of the distribution windows. The initial costs of marketing campaigns are generally recognized in the business of initial exploitation.
The Sports segment primarily generates revenue from affiliate fees, advertising, subscription fees, pay-per-view fees and sub-licensing of sports rights. Linear sports channels are experiencing declines in subscribers that are directionally consistent with those at the linear networks in the Entertainment segment. Operating expenses consist primarily of programming and
36TABLE OF CONTENTSproduction costs, technology support costs, operating labor and distribution costs. Programming and production costs include amortization of licensed sports rights and production costs related to live sports and other programming.
The Experiences segment primarily generates revenue from the sale of admissions to theme parks, the sale of food, beverage and merchandise at our theme parks and resorts, charges for room nights at hotels, sales of cruise vacations, sales and rentals of vacation club properties, royalties from licensing our IP for use on consumer goods and the sale of branded merchandise. Revenues are also generated from sponsorships and co-branding opportunities, real estate rent and sales, and royalties from Tokyo Disney Resort. Significant expenses include operating labor, costs of goods sold, infrastructure costs, depreciation and other operating expenses. Infrastructure costs include technology support costs, repairs and maintenance, utilities and fuel, property taxes, retail occupancy costs, insurance and transportation. Other operating expenses include costs for such items as supplies, commissions and entertainment offerings.The following transactions are recognized in segment revenues and eliminated in total Company revenue:• Fees paid by Hulu to the Sports segment and other Entertainment segment businesses for the right to air their linear networks on Hulu Live
• Fees paid by the Entertainment segment to the Sports segment to program ESPN on ABC and certain sports content on Star+
BUSINESS SEGMENT RESULTS - 2023 vs. 2022
The following table presents revenues from our operating segments and other components of revenues:($ in millions)2023 2022 % Change Better (Worse)Entertainment$ 40,635 $ 39,569 3 %Sports17,111 17,270 (1) %Experiences32,549 28,085 16 %Eliminations(1,397) (1,179) (18) %
Content License Early Termination — ( 1,023 ) 100 %Revenues$ 88,898 $ 82,722 7 %
The following table presents income from our operating segments and other components of income from continuing operations before income taxes:($ in millions)2023 2022 % Change Better (Worse)Entertainment operating income$ 1,444 $ 2,126 (32) %Sports operating income2,465 2,710 (9) %Experiences operating income8,954 7,285 23 %
Content License Early Termination — ( 1,023 ) 100 %
Corporate and unallocated shared expenses ( 1,147 ) ( 1,159 ) 1 %
Restructuring and impairment charges (1)
( 3,836 ) ( 237 ) >(100) %
Other income (expense), net 96 ( 667 ) nmInterest expense, net( 1,209 ) ( 1,397 ) 13 %
TFCF and Hulu acquisition amortization ( 1,998 ) ( 2,353 ) 15 %
Income from continuing operations before income taxes $ 4,769 $ 5,285 (10) %
(1) Includes the A+E gain.
37
TABLE OF CONTENTSEntertainmentRevenue and operating results for Entertainment are as follows:($ in millions)2023 2022 % Change Better (Worse)Revenues:
Linear Networks$ 11,701 $ 12,828 (9) %
Direct-to-Consumer 19,886 17,975 11 %
Content Sales/Licensing and Other 9,048 8,766 3 %
$ 40,635 $ 39,569 3 %
Segment operating income (loss):Linear Networks$ 4,119 $ 5,198 (21) %
Direct-to-Consumer (2,496) (3,424) 27 %
Content Sales/Licensing and Other (179) 352 nm
$ 1,444 $ 2,126 (32) %Linear Networks
Operating results for Linear Networks are as follows:
($ in millions)2023 2022 % Change Better (Worse)RevenuesAffiliate fees $ 7,369 $ 7,739 (5) %
Advertising 4,159 4,877 (15) %
Other 173 212 (18) %
Total revenues 11,701 12,828 (9) %
Operating expenses (5,577) (5,777) 3 %
Selling, general, administrative and other (2,641) (2,571) (3) %
Depreciation and amortization (54) (65) 17 %
Equity in the income of investees 690 783 (12) %
Operating Income $ 4,119 $ 5,198 (21) %
Revenues
Affiliate fees are as follows:($ in millions)2023 2022 % Change Better (Worse)Domestic$ 6,136 $ 6,257 (2) %International1,233 1,482 (17) %
$ 7,369 $ 7,739 (5) %
The decrease in domestic affiliate fees reflected a decrease of 5% from fewer subscribers, partially offset by an increase of 4% from higher contractual rates.
Lower international affiliate fees were attributable to decreases of 8% from fewer subscribers driven by channel closures, 4% from lower contractual rates and 4% from an unfavorable Foreign Exchange Impact.
Advertising revenue is as follows:($ in millions)2023 2022 % Change Better (Worse)Domestic$ 3,178 $ 3,716 (14) %International981 1,161 (16) %
$ 4,159 $ 4,877 (15) %
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The decrease in domestic advertising revenue was due to decreases of 12% from fewer impressions and 2% from lower rates. The decrease in impressions was due to lower average viewership.
Lower international advertising revenue was due to decreases of 9% from an unfavorable Foreign Exchange Impact, 6% from fewer impressions and 1% from a decrease in rates. Lower impressions reflected a decrease in average viewership, which included the impact of channel closures.
Other revenue decreased $39 million, to $173 million from $212 million, driven by an unfavorable Foreign Exchange Impact.
Costs and Expenses
Operating expenses are as follows:($ in millions)2023 2022 % Change Better (Worse)Programming and production costsDomestic $ (3,858) $ (3,894) 1 %
International (712) (796) 11 %Total programming and production costs(4,570) (4,690) 3 %
Other operating expenses (1,007) (1,087) 7 %
$ (5,577) $ (5,777) 3 %
The decrease in domestic programming and production costs was due to a lower average cost mix of programming, partially offset by an increase in programming fees for ESPN on ABC and higher program write-offs.
International programming and production costs decreased primarily due to a favorable Foreign Exchange Impact and the impact of channel closures.
The decrease in other operating expenses was due to the realignment of certain costs primarily to selling, general and administrative costs, lower technology and distribution costs and a favorable Foreign Exchange Impact.
Selling, general administrative and other costs increased $70 million, to $2,641 million from $2,571 million. The increase includes the realignment of certain costs previously primarily reported in other operating expenses and higher labor-related costs, partially offset by lower marketing costs.Equity in the Income of InvesteesIncome from equity investees decreased $93 million, to $690 million from $783 million, due to lower income from A+E attributable to decreases in advertising and affiliate revenue, partially offset by higher program sales income.Operating Income from Linear NetworksOperating income decreased 21%, to $4,119 million from $5,198 million due to lower results both domestically and internationally.The following table provides supplemental revenue and operating income detail for Linear Networks:
($ in millions)2023 2022 % Change Better (Worse)Supplemental revenue detail
Domestic$ 9,406 $ 10,073 (7) %International2,295 2,755 (17) %
$ 11,701 $ 12,828 (9) %Supplemental operating income detail
Domestic$ 2,735 $ 3,358 (19) %International694 1,057 (34) %
Equity in the income of investees 690 783 (12) %
$ 4,119 $ 5,198 (21) %
39
TABLE OF CONTENTSDirect-to-Consumer
Operating results for Direct-to-Consumer are as follows:
($ in millions)2023 2022 % Change Better (Worse)RevenuesSubscription fees $ 16,420 $ 14,178 16 %
Advertising 3,260 3,614 (10) %Other206 183 13 %
Total revenues 19,886 17,975 11 %
Operating expenses (17,859) (15,641) (14) %
Selling, general, administrative and other (4,168) (5,395) 23 %
Depreciation and amortization (355) (363) 2 %
Operating Loss $ (2,496) $ (3,424) 27 %
Revenues
The increase in subscription fees reflected increases of 11% from more subscribers, due to growth at Disney+ Core and, to a lesser extent, Hulu, and 7% from higher average rates due to increases in retail pricing, partially offset by a decrease of 2% from an unfavorable Foreign Exchange Impact.
Lower advertising revenue reflected a decrease of 9% from fewer impressions due to declines at Hulu and, to a lesser extent, at Disney+, partially offset by growth of 2% from higher rates at Hulu. The decrease in impressions at Disney+ was due to the comparison to Indian Premier League (IPL) cricket programming on Disney+ Hotstar in the prior year, as we did not renew the digital rights beginning with the 2023 season. The decrease was partially offset by the U.S. launch of ad-supported Disney+ in the first quarter of the current fiscal year.
The following table presents additional information about Disney+ and Hulu (1) .
Paid subscribers (1) as of:
(in millions) September 30, 2023 October 1, 2022 % Change Better (Worse)Disney+Domestic (U.S. and Canada) 46.5 46.4 — %
International (excluding Disney+ Hotstar) (1)
66.1 56.5 17 %
Disney+ Core (2)
112.6 102.9 9 %
Disney+ Hotstar 37.6 61.3 (39) %HuluSVOD Only 43.9 42.8 3 %
Live TV + SVOD 4.6 4.4 5 %
Total Hulu (2)
48.5 47.2 3 %
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Average Monthly Revenue Per Paid Subscriber (1) for the fiscal year ended:
2023 2022 % Change Better (Worse)Disney+Domestic (U.S. and Canada) $ 6.97 $ 6.34 10 %
International (excluding Disney+ Hotstar) (1)
5.93 6.10 (3) %
Disney+ Core 6.39 6.22 3 %
Disney+ Hotstar 0.66 0.88 (25) %HuluSVOD Only 12.17 12.72 (4) %
Live TV + SVOD 90.52 87.62 3 %
(1) S ee discussion on page 66 —DTC Product Descriptions, Key Definitions and Supplemental Information
(2) Total may not equal the sum of the column due to rounding.
Domestic Disney+ average monthly revenue per paid subscriber increased from $6.34 to $6.97 due to an increase in average retail pricing and higher advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.
International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber decreased from $6.10 to $5.93 due to a higher mix of subscribers from lower-priced markets and an unfavorable Foreign Exchange Impact, partially offset by an increase in average retail pricing, a lower mix of wholesale subscribers and an increase in wholesale pricing.
Disney+ Hotstar average monthly revenue per paid subscriber decreased from $0.88 to $0.66 due to lower advertising revenue, partially offset by a lower mix of wholesale subscribers.
Hulu SVOD Only average monthly revenue per paid subscriber decreased from $12.72 to $12.17 due to lower advertising revenue, a higher mix of subscribers to multi-product offerings and lower per-subscriber premium and feature add-on revenue, partially offset by an increase in average retail pricing.
Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $87.62 to $90.52 due to an increase in average retail pricing, partially offset by lower advertising revenue, a higher mix of subscribers to multi-product offerings and lower per-subscriber premium and feature add-on revenue.
Costs and Expenses
Operating expenses are as follows:($ in millions)2023 2022 % Change Better (Worse)Programming and production costsDisney+ $ (5,674) $ (4,466) (27) %
Hulu (8,265) (7,564) (9) %
Other (20) (25) 20 %
Total programming and production costs (13,959) (12,055) (16) %
Other operating expense (3,900) (3,586) (9) %
$ (17,859) $ (15,641) (14) %
The increase in programming and production costs at Disney+ was attributable to more content provided on the service and higher costs per hour of non-sports content available on the service, partially offset by a decrease in sports programming costs reflecting the comparison to IPL cricket programming in the prior year.
The increase in programming and production costs at Hulu was due to higher subscriber-based fees for programming the Live TV service and higher costs per hour of content available on the service. Higher subscriber-based fees for programming the Live TV service resulted from rate increases and an increase in the number of subscribers.
Other operating expenses increased primarily due to higher technology and distribution costs at Disney+.
Selling, general, administrative and other costs decreased $1,227 million, to $4,168 million from $5,395 million, primarily attributable to lower marketing costs at Disney+ and, to a lesser extent, Hulu.
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Operating Loss from Direct-to-Consumer
Operating loss from Direct-to-Consumer decreased $928 million, to $2,496 million from $3,424 million due to a lower loss at Disney+ and, to a lesser extent, higher operating income at Hulu.Content Sales/Licensing and Other
Operating results for Content Sales/Licensing and Other are as follows:
($ in millions)2023 2022 % Change Better (Worse)RevenuesTV/VOD distribution
$ 2,618 $ 3,520 (26) %
Theatrical distribution 3,174 1,875 69 %
Home entertainment distribution
931 1,083 (14) %
Other 2,325 2,288 2 %
Total revenues 9,048 8,766 3 %
Operating expenses (6,280) (5,508) (14) %
Selling, general, administrative and other (2,595) (2,610) 1 %
Depreciation and amortization (347) (296) (17) %
Equity in the income (loss) of investees
(5) — nm
Operating Income (Loss) $ (179) $ 352 nm
Revenues
The decrease in TV/VOD distribution revenue was due to lower sales volumes of both episodic and film content, in part driven by the impact of the shift from licensing our content to third parties to distributing it on our Entertainment Direct-to-Consumer streaming services.
The increase in theatrical distribution revenue was due to the performance of Avatar: The Way of Water in the current year. The current year also included the Marvel titles: Black Panther: Wakanda Forever; Guardians of the Galaxy Vol. 3; and Ant-Man and the Wasp: Quantumania , the Disney live action title: The Little Mermaid, the Lucasfilm title: Indiana Jones and the Dial of Destiny and two animation titles . The prior year included the Marvel titles: Doctor Strange in the Multiverse of Madness; Thor: Love and Thunder; Eternals; and the co-produced title Spider-Man: No Way Home , along with two animation titles.
The decrease in home entertainment distribution revenue was due to lower sales volumes.
The increase in other revenue was due to higher revenue from stage plays, resulting from improved performance, partially offset by an unfavorable Foreign Exchange Impact.
Operating expenses are as follows:
($ in millions)
2023 2022 % Change Better (Worse)
Programming and production costs $ (5,383) $ (4,688) (15) %
Distribution costs and cost of goods sold (897) (820) (9) %
$ (6,280) $ (5,508) (14) %
The increase in programming and production costs was due to higher production cost amortization attributable to the increase in theatrical revenue, partially offset by a decrease as a result of lower TV/VOD distribution revenues.
Higher distribution costs and cost of goods sold were due to the realignment of certain costs previously reported in general and administrative costs and increased theatrical distribution costs.
Selling, general, administrative and other costs decreased $15 million, to $2,595 million from $2,610 million, due to the realignment of certain costs to distribution costs and cost of goods sold, a favorable Foreign Exchange Impact and lower home entertainment overhead and marketing costs, largely offset by higher theatrical marketing costs.
Depreciation and amortization increased $51 million, to $347 million from $296 million, primarily due to increased investment in technology assets.
42TABLE OF CONTENTSOperating Income (Loss) from Content Sales/Licensing and Other
Operating results from Content Sales/Licensing and Other decreased $531 million, to a loss of $179 million from income of $352 million, primarily due to lower TV/VOD distribution results.Items Excluded from Segment Operating Income Related to Entertainment
The following table presents supplemental information for items related to Entertainment that are excluded from segment operating income:
($ in millions)2023 2022 % Change Better (Worse)
Restructuring and impairment charges (1)
$ (3,431) $ (228) >(100) %
TFCF and Hulu acquisition amortization (2)
(1,602) (1,946) 18 %
Content License Early Termination — (1,023) 100 %
Gain on sale of a business
28 — nm
(1) Fiscal 2023 includes $2,521 million for the Content Impairment Charge (net of the A+E gain), $425 million for a goodwill impairment, $248 million of severance, a $141 million impairment of an equity investment and $96 million primarily related to exiting our businesses in Russia. Fiscal 2022 includes impairments of assets related to exiting our businesses in Russia.
(2) In fiscal 2023, amortization of step-up on film and television costs was $439 million and amortization of intangible assets was $1,151 million. In fiscal 2022, amortization of step-up on film and television costs was $ 634 million and amortization of intangible assets was $1,300 million.SportsOperating results for Sports are as follows:($ in millions)2023 2022 % Change Better (Worse)RevenuesAffiliate fees $ 10,590 $ 10,796 (2) %
Advertising 3,920 4,370 (10) %
Subscription fees 1,517 1,113 36 %Other1,084 991 9 %
Total revenues 17,111 17,270 (1) %
Operating expenses (13,314) (13,084) (2) %
Selling, general, administrative and other (1,314) (1,441) 9 %
Depreciation and amortization (73) (90) 19 %
Equity in the income of investees 55 55 — %
Operating Income $ 2,465 $ 2,710 (9) %
Revenues
Affiliate fees are as follows:($ in millions)2023 2022 % Change Better (Worse)ESPNDomestic $ 9,267 $ 9,437 (2) %
International 1,051 1,084 (3) %
10,318 10,521 (2) %
Star (India)
272 275 (1) %
$ 10,590 $ 10,796 (2) %
The decrease in domestic ESPN affiliate fees was due to decreases of 7% from fewer subscribers and 1% from the temporary suspension of carriage with an affiliate, partially offset by an increase of 5% from higher contractual rates.43
TABLE OF CONTENTSLower international ESPN affiliate fees were attributable to decreases of 14% from an unfavorable Foreign Exchange Impact and 3% from fewer subscribers, partially offset by an increase of 14% from higher contractual rates.
Advertising revenue is as follows:($ in millions)2023 2022 % Change Better (Worse)
ESPN
Domestic $ 3,413 $ 3,424 — %
International 189 173 9 %
3,602 3,597 — %
Star (India)
318 773 (59) %
$ 3,920 $ 4,370 (10) %
Domestic ESPN advertising revenue was comparable to the prior year reflecting a modest decrease in rates, largely offset by a slight increase in impressions.
The increase in international ESPN advertising revenue was due to an increase of 16% from higher impressions, partially offset by a decrease of 6% from an unfavorable Foreign Exchange Impact. The increase in impressions was attributable to higher average viewership.
Lower Star advertising revenue was due to decreases of 38% from fewer impressions, 14% from lower rates and 7% from an unfavorable Foreign Exchange Impact. Fewer impressions reflected a decrease in average units delivered and, to a lesser extent, fewer IPL matches aired in the current year compared to the prior year as matches from the 2021 season shifted into fiscal 2022 due to COVID-19.
Growth in subscription fees reflected increases of 19% from higher rates and 18% from more subscribers.
The increase in other revenue was primarily due to higher fees received for programming ESPN on ABC.
The following table presents additional information about ESPN+:
September 30, 2023 October 1, 2022 % Change Better (Worse)
Paid subscribers at fiscal year end (in millions)
26.0 24.3 7 %
Average Monthly Revenue per Paid Subscriber for the fiscal year
$ 5.49 $ 4.80 14 %
ESPN+ average monthly revenue per paid subscriber increased from $4.80 to $5.49 due to an increase in retail pricing, partially offset by a higher mix of subscribers to multi-product offerings.
Costs and Expenses
Operating expenses are as follows:
($ in millions)
2023 2022 % Change Better (Worse)Programming and production costs
ESPNDomestic $ (10,221) $ (10,003) (2) %
International (1,127) (998) (13) %
(11,348) (11,001) (3) %
Star (India) (1,025) (1,284) 20 %
(12,373) (12,285) (1) %
Other operating expenses (941) (799) (18) %
$ (13,314) $ (13,084) (2) %
The increase in domestic ESPN programming and production costs was due to contractual rate increases for NBA and College Football Playoffs (CFP) programming, new motor sports programming and higher costs for NFL and Ultimate Fighting Championship (UFC) programming. These increases were partially offset by lower costs for college football programming (excluding CFP) due to the non-renewal of certain contracts. NFL programming costs increased as a result of airing one additional regular season game on our linear networks in the current year compared to the prior year, partially offset by lower44
TABLE OF CONTENTScosts per game. The increase in UFC programming costs was due to airing two more events in the current year compared to the prior year and higher contractual rates.
Higher international ESPN programming and production costs were driven by the impact of inflation on soccer rights costs and production costs, partially offset by a favorable Foreign Exchange Impact.
The decrease in Star programming and production costs was due to lower costs for cricket programming and a favorable Foreign Exchange Impact. The decrease in cricket programming costs was attributable to fewer IPL matches in the current year compared to prior year and lower average costs per match for IPL and International Cricket Council (ICC) T20 World Cup matches.
Other operating expenses increased $142 million, to $941 million from $799 million, driven by higher technology and distribution costs and the realignment of certain costs previously reported in selling, general and administrative costs.
Selling, general, administrative and other costs decreased $127 million, to $1,314 million from $1,441 million, due to lower marketing spend and a realignment of certain costs to other operating expenses.
Operating Income
Operating income decreased 9%, to $2,465 million from $2,710 million due to decreases at Star and international ESPN, partially offset by an increase at domestic ESPN.
The following table provides supplemental revenue and operating income detail for Sports:($ in millions)2023 2022 % Change Better (Worse)Supplemental revenue detail
ESPNDomestic $ 14,945 $ 14,636 2 %
International 1,437 1,434 — %
16,382 16,070 2 %
Star (India)
729 1,200 (39) %
$ 17,111 $ 17,270 (1) %Supplemental operating income (loss) detail
ESPNDomestic $ 2,881 $ 2,814 2 %
International (39) 78 nm
2,842 2,892 (2) %
Star (India)
(432) (237) (82) %
Equity in the income of investees 55 55 — %
$ 2,465 $ 2,710 (9) %Items Excluded from Segment Operating Income Related to Sports
The following table presents supplemental information for items related to Sports that are excluded from segment operating income:
($ in millions)2023 2022 % Change Better (Worse)TFCF acquisition amortization (1)$ (388) $ (399) 3 %
Restructuring and impairment charges (2)
(346) (1) >(100) %(1) Represents amortization of intangible assets.(2) Fiscal 2023 includes $296 million for a goodwill impairment and $50 million for severance.
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TABLE OF CONTENTSExperiencesOperating results for Experiences are as follows:($ in millions)2023 2022 % Change Better (Worse)RevenuesTheme park admissions $ 10,423 $ 8,602 21 %
Resorts and vacations 7,949 6,410 24 %
Parks & Experiences merchandise, food and beverage 7,712 6,579 17 %
Merchandise licensing and retail 4,358 4,609 (5) %
Parks licensing and other 2,107 1,885 12 %
Total revenues 32,549 28,085 16 %
Operating expenses (17,129) (14,936) (15) %
Selling, general, administrative and other (3,675) (3,403) (8) %
Depreciation and amortization (2,789) (2,451) (14) %
Equity in the loss of investees (2) (10) 80 %
Operating Income $ 8,954 $ 7,285 23 %
Revenues
The increase in theme park admissions revenue was due to increases of 12% from attendance growth and 10% from higher average per capita ticket revenue.
Growth in resorts and vacations revenue was due to increases of 14% from additional passenger cruise days, 4% from higher occupied hotel room nights and 3% growth from guided tours.
Parks & Experiences merchandise, food and beverage revenue growth was attributable to increases of 12% from higher volumes and 3% from higher average guest spending.
Lower merchandise licensing and retail revenue was due to decreases of 2% from licensing, 2% from retail and 1% from an unfavorable Foreign Exchange Impact. The decrease in licensing revenue was due to lower sales of merchandise based on Star Wars, Frozen, Toy Story and Mickey and Friends, partially offset by higher minimum guarantee shortfall recognition. Lower retail revenue was primarily due to a decrease in online sales.
The increase in parks licensing and other revenue was attributable to an increase in royalties from Tokyo Disney Resort and higher co-branding and sponsorship revenues, partially offset by lower real estate sales.In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our theme parks and resorts, and we believe these metrics are useful to investors in analyzing the business :
Domestic International (1)Total
2023 2022 2023 2022 2023 2022Parks
Increase (decrease)
Attendance (2)6 % >100 % 55 % 54 % 17 % 87 %Per Capita Guest Spending (3)3 % 13 % 21 % 24 % 2 % 18 %Hotels
Occupancy (4)85 % 82 % 74 % 56 % 83 % 76 %Available Room Nights (in thousands) (5)10,096 10,073 3,178 3,179 13,274 13,252Change in Per Room Guest Spending (6)— % 19 % 14 % (7) % 1 % 15 %(1) Per capita guest spending growth rate and per room guest spending growth rate exclude the impact of changes in foreign currency exchange rates.(2) Attendance is used to analyze volume trends at our theme parks and is based on the number of unique daily entries, i.e. a person visiting multiple theme parks in a single day is counted only once. Our attendance count includes
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complimentary entries but excludes entries by children under the age of three.(3) Per capita guest spending is used to analyze guest spending trends and is defined as total revenue from ticket sales and sales of food, beverage and merchandise in our theme parks, divided by total theme park attendance.
(4) Occupancy is used to analyze the usage of available capacity at hotels and is defined as the number of room nights occupied by guests as a percentage of available hotel room nights.
(5) Available hotel room nights are defined as the total number of room nights that are available at our hotels and at DVC properties located at our theme parks and resorts that are not utilized by DVC members. Available hotel room nights include rooms temporarily taken out of service.(6) Per room guest spending is used to analyze guest spending at our hotels and is defined as total revenue from room rentals and sales of food, beverage and merchandise at our hotels, divided by total occupied hotel room nights. In the current year, the Company revised its method of allocating revenue on the sales of Disneyland Paris vacation packages between hotel room revenue and admissions revenue. The new method resulted in a decrease in the percentage of revenue allocated to hotel rooms. If we had applied the new method in the prior year, the impact would have been a decrease of approximatel y $50 million i n the prior year.
Costs and Expenses
Operating expenses are as follows:($ in millions)2023 2022 % Change Better (Worse)
Operating labor $ (7,550) $ (6,577) (15) %
Infrastructure costs (3,127) (2,766) (13) %
Cost of goods sold and distribution costs (3,357) (2,938) (14) %
Other operating expenses (3,095) (2,655) (17) %
$ (17,129) $ (14,936) (15) %
The increase in operating labor was due to inflation, higher volumes and increased costs for new guest offerings. Higher cost of goods sold and distribution costs were due to increased volumes, while the increase in infrastructure costs was due to higher operations support costs, increased costs for new guest offerings and higher technology spending. Other operating expenses increased due to higher volumes and inflation.
Selling, general, administrative and other costs increased $272 million from $3,403 million to $3,675 million, driven by higher ma rketing spend and a loss on the disposal of our ownership interest in Villages Nature.
Depreciation and amortization increased $338 million from $2,451 million to $2,789 million, due to accelerated depreciation related to the closure of Star Wars: Galactic Starcruiser and depreciation for the Disney Wish , which launched in the fourth quarter of the prior year.
Segment Operating Income
Segment operating income increased $1,669 million, to $8,954 million due to growth at our international and domestic parks and experiences, partially offset by a decrease at our consumer products business.The following table presents supplemental revenue and operating income detail for the Experiences segment:
($ in millions)2023 2022 % Change Better (Worse)Supplemental revenue detail
Parks & ExperiencesDomestic $ 22,677 $ 20,131 13 %
International 5,475 3,297 66 %Consumer Products4,397 4,657 (6) %
$ 32,549 $ 28,085 16 %
Supplemental operating income (loss) detail
Parks & Experiences
Domestic $ 5,876 $ 5,332 10 %
International 1,104 (237) nm
Consumer Products
1,974 2,190 (10) %
$ 8,954 $ 7,285 23 %
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Items Excluded from Segment Operating Income Related to Experiences
The following table presents supplemental information for items related to Experiences that are excluded from segment operating income:
($ in millions)
2023 2022 % Change Better (Worse)
Charge related to a legal ruling
$ (101) $ — nm
Restructuring and impairment charges (1)
(25) — nm
TFCF acquisition amortization
(8) (8) — %
(1) Charges for the current year were due to severance.
BUSINESS SEGMENT RESULTS - 2022 vs. 2021
The following table presents revenues from our operating segments and other components of revenues:
($ in millions)
2022 2021 % Change Better (Worse)
Entertainment
$ 39,569 $ 36,489 8 %
Sports
17,270 15,960 8 %
Experiences
28,085 15,961 76 %
Eliminations
(1,179) (992) (19) %
Content License Early Termination ( 1,023 ) — nm
Revenues
$ 82,722 $ 67,418 23 %
The following table presents income (loss) from our operating segments and other components of income from continuing operations before income taxes:
($ in millions)
2022 2021 % Change Better (Worse)
Entertainment operating income
$ 2,126 $ 5,196 (59) %
Sports operating income
2,710 2,690 1 %
Experiences operating income (loss)
7,285 (120) nm
Content License Early Termination ( 1,023 ) — nm
Corporate and unallocated shared expenses ( 1,159 ) ( 928 ) (25) %
Restructuring and impairment charges ( 237 ) ( 654 ) 64 %
Other income (expense), net ( 667 ) 201 nm
Interest expense, net ( 1,397 ) ( 1,406 ) 1 %
TFCF and Hulu acquisition amortization ( 2,353 ) ( 2,418 ) 3 %
Income from continuing operations before income taxes $ 5,285 $ 2,561 >100 %
Entertainment
Revenue and operating results for Entertainment are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Revenues:
Linear Networks
$ 12,828 $ 13,516 (5) %
Direct-to-Consumer 17,975 15,036 20 %
Content Sales/Licensing and Other 8,766 7,937 10 %
$ 39,569 $ 36,489 8 %
Operating income (loss):
Linear Networks
$ 5,198 $ 5,271 (1) %
Direct-to-Consumer (3,424) (1,252) >(100) %
Content Sales/Licensing and Other 352 1,177 (70) %
$ 2,126 $ 5,196 (59) %
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Linear Networks
Operating results for Linear Networks are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Revenues
Affiliate fees $ 7,739 $ 8,043 (4) %
Advertising 4,877 5,215 (6) %
Other 212 258 (18) %
Total revenues 12,828 13,516 (5) %
Operating expenses (5,777) (6,250) 8 %
Selling, general, administrative and other (2,571) (2,647) 3 %
Depreciation and amortization (65) (78) 17 %
Equity in the income of investees 783 730 7 %
Operating Income $ 5,198 $ 5,271 (1) %
Revenues
Affiliate fees are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Domestic
$ 6,257 $ 6,045 4 %
International
1,482 1,998 (26) %
$ 7,739 $ 8,043 (4) %
Growth in domestic affiliate fees was due to an increase of 7% from higher contractual rates, partially offset by a decrease of 3% from fewer subscribers.
The decline in international affiliate fees was due to decreases of 17% from fewer subscribers driven by channel closures, 5% from an unfavorable Foreign Exchange Impact and 2% from lower contractual rates.
Advertising revenue is as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Domestic
$ 3,716 $ 4,021 (8) %
International
1,161 1,194 (3) %
$ 4,877 $ 5,215 (6) %
The decline in domestic advertising revenue was due to a decrease of 14% from fewer impressions, reflecting lower average viewership, partially offset by an increase of 7% from higher rates.
Lower international advertising revenue reflected decreases of 8% from an unfavorable Foreign Exchange Impact and 6% from fewer impressions driven by channel closures, partially offset by an increase of 12% from higher rates.
Costs and Expenses
Operating expenses are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Programming and production costs
Domestic
$ (3,894) $ (3,940) 1 %
International (796) (1,165) 32 %
(4,690) (5,105) 8 %
Other operating expenses (1,087) (1,145) 5 %
$ (5,777) $ (6,250) 8 %
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The decrease in domestic programming and production costs was due to a lower cost mix of programming at FX Channels, partially offset by an increase in programming and production costs at the ABC Network. The increase at the ABC Network was due to higher costs for non-primetime news programming and an increase in programming fees for ESPN on ABC, partially offset by a lower cost mix of primetime programming.
Lower international programming and production costs were due to the impact of channel closures and, to a lesser extent, a favorable Foreign Exchange Impact.
Selling, general administrative and other costs decreased $76 million, to $2,571 million from $2,647 million, due to lower marketing costs.
Equity in the Income of Investees
Income from equity investees increased $53 million, to $783 million from $730 million, due to higher income from A+E and the comparison to impairments in fiscal 2021. The increase at A+E resulted from lower programming costs, partially offset by decreases in affiliate and advertising revenue and higher marketing costs.
Operating Income from Linear Networks
Operating income decreased 1%, to $5,198 million from $5,271 million due to lower domestic results, partially offset by higher income from our equity investees and an increase in international results.
The following table provides supplemental revenue and operating income detail for Linear Networks:
($ in millions)
2022 2021 % Change Better (Worse)
Supplemental revenue detail
Domestic
$ 10,073 $ 10,223 (1) %
International
2,755 3,293 (16) %
$ 12,828 $ 13,516 (5) %Supplemental operating income detailDomestic $ 3,358 $ 3,537 (5) %
International
1,057 1,004 5 %
Equity in the income of investees 783 730 7 %
$ 5,198 $ 5,271 (1) %
Direct-to-Consumer
Operating results for Direct-to-Consumer are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Revenues
Subscription fees $ 14,178 $ 11,295 26 %
Advertising 3,614 3,284 10 %
Other
183 457 (60) %
Total revenues 17,975 15,036 20 %
Operating expenses (15,641) (11,906) (31) %
Selling, general, administrative and other (5,395) (4,067) (33) %
Depreciation and amortization (363) (315) (15) %
Operating Loss $ (3,424) $ (1,252) >(100) %
Revenues
Higher subscription fees reflected increases of 18% from subscriber growth and 9% from higher average rates due to increases in retail pricing, partially offset by a decrease of 2% from an unfavorable Foreign Exchange Impact.
Advertising revenue growth reflected increases of 7% from higher rates due to increases at Hulu, and to a lesser extent, at Disney+, and 3% from higher impressions primarily attributable to Disney+ Hotstar. The increase in impressions at Disney+ Hotstar was primarily due to airing the ICC T20 World Cup and Asia Cricket Council (ACC) Asia Cup in fiscal 2022, neither of which were aired in fiscal 2021. The ICC T20 World Cup generally occurs every two years and was not held in fiscal 2021 due to COVID-19. The ACC Asia Cup was rescheduled from fiscal 2020 to fiscal 2022 as a result of COVID-19.
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The decrease in other revenue was due to Disney+ Premier Access revenue in fiscal 2021 compared to none in fiscal 2022, partially offset by a favorable Foreign Exchange Impact. Disney+ Premier Access titles in fiscal 2021 included Black Widow , Raya and the Last Dragon, Jungle Cruise and Cruella .
The following table presents additional information about our Disney+ and Hulu product offerings.
Paid subscribers as of:
(in millions) October 1, 2022 October 2, 2021 % Change Better (Worse)
Disney+
Domestic (U.S. and Canada) 46.4 38.8 20 %
International (excluding Disney+ Hotstar)
56.5 36.0 57 %
Disney+ Core (1)
102.9 74.8 38 %
Disney+ Hotstar 61.3 43.3 42 %
Hulu
SVOD Only 42.8 39.7 8 %
Live TV + SVOD 4.4 4.0 10 %
Total Hulu (1)
47.2 43.7 8 %
Average Monthly Revenue Per Paid Subscriber for the fiscal year ended:
2022 2021 % Change Better (Worse)
Disney+
Domestic (U.S. and Canada) $ 6.34 $ 6.33 — %
International (excluding Disney+ Hotstar)
6.10 5.31 15 %
Disney+ Core 6.22 5.87 6 %
Disney+ Hotstar 0.88 0.68 29 %
Hulu
SVOD Only 12.72 12.86 (1) %
Live TV + SVOD 87.62 81.35 8 %
(1) Total may not equal the sum of the column due to rounding
Domestic Disney+ average monthly revenue per paid subscriber was comparable to fiscal 2021, as an increase in retail pricing and a lower mix of wholesale subscribers was essentially offset by a higher mix of subscribers to multi-product offerings.
International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.31 to $6.10 due to an increase in average retail pricing, partially offset by an unfavorable Foreign Exchange Impact.
Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.68 to $0.88 driven by higher advertising revenue and increases in retail pricing, partially offset by a higher mix of wholesale subscribers.
Hulu SVOD Only average monthly revenue per paid subscriber decreased from $12.86 to $12.72 driven by lower per-subscriber advertising revenue, a higher mix of subscribers to multi-product offerings and, to a lesser extent, to promotional offerings, partially offset by an increase in average retail pricing.
Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $81.35 to $87.62 driven by an increase in average retail pricing and higher advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.
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Costs and Expenses
Operating expenses are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Programming and production costs
Disney+ $ (4,466) $ (2,536) (76) %
Hulu (7,564) (6,680) (13) %
Other (25) (31) 19 %
Total programming and production costs (12,055) (9,247) (30) %
Other operating expense (3,586) (2,659) (35) %
$ (15,641) $ (11,906) (31) %
The increase in programming and production costs at Disney+ was attributable to more content provided on the service and, to a lesser extent, higher average cost programming, which reflected an increased mix of original content.
The increase in programming and production costs at Hulu was due to more content provided on the service and higher subscriber-based fees for programming the Live TV service, which reflected rate increases and an increase in the number of subscribers.
Other operating expenses increased due to higher technology and distribution costs at Disney+ reflecting growth in existing markets and, to a lesser extent, expansion to new markets.
Selling, general, administrative and other costs increased $1,328 million, to $5,395 million from $4,067 million, attributable to higher marketing costs.
Depreciation and amortization increased $48 million, to $363 million from $315 million, primarily due to increased investment in technology assets at Disney+.
Operating Loss from Direct-to-Consumer
Operating loss from Direct-to-Consumer increased $2,172 million, to $3,424 million from $1,252 million due to a higher loss at Disney+ and, to a lesser extent, lower operating income at Hulu.
Content Sales/Licensing and Other
Operating results for Content Sales/Licensing and Other are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Revenues
TV/VOD distribution
$ 3,520 $ 3,925 (10) %
Theatrical distribution 1,875 920 >100 %
Home entertainment distribution
1,083 1,297 (16) %
Other 2,288 1,795 27 %
Total revenues 8,766 7,937 10 %
Operating expenses (5,508) (4,536) (21) %
Selling, general, administrative and other (2,610) (1,944) (34) %
Depreciation and amortization (296) (294) (1) %
Equity in the income of investees — 14 (100) %
Operating Income
$ 352 $ 1,177 (70) %
Revenues
The decrease in TV/VOD distribution revenue reflected lower sales volumes, which included the impact of the shift from licensing our content to third parties to distributing it on our Entertainment Direct-to-Consumer streaming services.
The increase in theatrical distribution revenue was due to more titles released in fiscal 2022 compared to fiscal 2021 and revenue in fiscal 2022 from the co-production of Marvel’s Spider-Man: No Way Home . Although COVID-19 continued to impact our theatrical distribution business in certain markets in fiscal 2022, the impact in fiscal 2021 was more significant. Titles released in fiscal 2022 included Doctor Strange in The Multiverse of Madness , Thor: Love and Thunder , Eternals ,
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Encanto and Lightyear. Titles released in fiscal 2021 included Shang-Chi and the Legend of the Ten Rings , Black Widow and Free Guy .
The decrease in home entertainment distribution revenue was attributable to lower unit sales despite the benefit of more new release titles in fiscal 2022. Net effective pricing was comparable to fiscal 2021 as lower unit pricing was offset by a higher mix of new release titles, which have a higher sales price than catalog titles.
The increase in other revenue was due to more stage play performances in fiscal 2022 as productions were generally shut down in fiscal 2021 due to COVID-19.
Costs and Expenses
Operating expenses are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Programming and production costs $ (4,688) $ (3,770) (24) %
Distribution costs and cost of goods sold (820) (766) (7) %
$ (5,508) $ (4,536) (21) %
The increase in programming and production costs was due to higher production cost amortization driven by more theatrical releases, the increased number of stage play performances in fiscal 2022 and higher film cost impairments.
The increase in distribution costs and cost of goods sold was primarily due to increased theatrical distribution costs.
Selling, general, administrative and other costs increased $666 million, to $2,610 million from $1,944 million, due to higher theatrical marketing costs as more titles were released in fiscal 2022 compared to fiscal 2021.
Operating Income from Content Sales/Licensing and Other
Operating income from Content Sales/Licensing and Other decreased 70% to $352 million from $1,177 million, due to lower TV/VOD and home entertainment distribution results, higher film cost impairments and lower theatrical distribution results, partially offset by higher stage play results.
Items Excluded from Segment Operating Income Related to Entertainment
The following table presents supplemental information for items related to Entertainment that are excluded from segment operating income:
($ in millions)
2022 2021 % Change Better (Worse)
TFCF and Hulu acquisition amortization (1)
$ (1,946) $ (2,006) 3 %
Content License Early Termination (1,023) — nm
Restructuring and impairment charges (2)
(228) (300) 24 %
German FTA gain — 126 (100) %
(1) In fiscal 2022, amortization of step-up on film and episodic costs was $634 million and amortization of intangible assets was $1,300 million. In fiscal 2021, amortization of step-up on film and episodic costs was $646 million and amortization of intangible assets was $1,345 million.
(2) Fiscal 2022 includes impairments of assets related to exiting our businesses in Russia. Fiscal 2021 includes impairments and severance costs related to the closure of an animation studio and severance costs and contract termination charges in connection with the integration of TFCF.
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Sports
Operating results for Sports are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Revenues
Affiliate fees $ 10,796 $ 10,609 2 %
Advertising 4,370 3,720 17 %
Subscription fees 1,113 725 54 %
Other
991 906 9 %
Total revenues 17,270 15,960 8 %
Operating expenses (13,084) (11,986) (9) %
Selling, general, administrative and other (1,441) (1,231) (17) %
Depreciation and amortization (90) (104) 13 %
Equity in the income of investees 55 51 8 %
Operating Income $ 2,710 $ 2,690 1 %
Revenues
Affiliate fees are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
ESPN
Domestic $ 9,437 $ 9,199 3 %
International 1,084 1,114 (3) %
10,521 10,313 2 %
Star (India)
275 296 (7) %
$ 10,796 $ 10,609 2 %
The increase in domestic ESPN af filiate fees was primarily due to an increase of 5% from higher contractual rates, partially offset by a decrease of 4% from fewer subscribers.
The decrease in international ESPN af filiate fees was attributable to decreases of 8% from fewer subscribers driven by channel closures, and 7% from an unfavorable Foreign Exchange Impact, partially offset by an increase of 11% from higher contractual rates.
The decrease in Star affiliate fees was due to decreases of 5% from an unfavorable Foreign Exchange Impact and 1% from fewer subscribers.
Advertising revenue is as follows:
($ in millions)
2022 2021 % Change Better (Worse)
ESPN
Domestic $ 3,424 $ 2,981 15 %
International 173 150 15 %
3,597 3,131 15 %
Star (India)
773 589 31 %
$ 4,370 $ 3,720 17 %
The increase in domestic ESPN advertising revenue was due to increases of 11% from higher impressions and 5% from higher rates. The increase in impressions reflected higher average vi ewership and, to a lesser extent, an increase in units delivered.
Higher international ESPN advertising revenue was primarily due to increases of 11% from higher average viewership and 7% from higher rates, partially offset by a decrease of 6% from an unfavorable Foreign Exchange Impact.
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Growth in Star advertising revenue was due to an increase of 37% from higher average viewership, partially offset by decreases of 3% from an unfavorable Foreign Exchange Impact and 3% from lower rates. The increase in average viewership reflected the airing of more cricket matches in fiscal 2022. Fiscal 2022 included the ICC T20 World Cup, more Board of Control for Cricket in India (BCCI) matches and the ACC Asia Cup, partially offset by fewer IPL matches compared to fiscal 2021. The ICC T20 World Cup and the ACC Asia Cup were not held in fiscal 2021. The increase in BCCI matches in fiscal 2022 was driven by COVID-19-related cancellations in fiscal 2021.
The increase in subscription fees was due to ESPN+ subscriber growth.
The increase in other revenue was due to higher sub-licensing fees and higher fees received for programming ESPN on ABC, partially offset by lower UFC pay-per-view fees due to lower average buys per event. The increase in sub-licensing fees was due to fees from ICC T20 World Cup matches in fiscal 2022 and higher fees from BCCI cricket matches.
The following table presents additional information about ESPN+.
(in millions) October 1, 2022 October 2, 2021 % Change Better (Worse)
Paid subscribers at fiscal year end (in millions)
24.3 17.1 42 %
Average Monthly Revenue per Paid Subscriber for the fiscal year
$ 4.80 $ 4.57 5 %
ESPN+ average monthly revenue per paid subscriber increased from $4.57 to $4.80 primarily due to an increase in retail pricing, a lower mix of annual subscribers and higher advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.
Costs and Expenses
Operating expenses are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Programming and production costs
ESPN
Domestic $ (10,003) $ (9,370) (7) %
International (998) (1,094) 9 %
(11,001) (10,464) (5) %
Star (India)
(1,284) (766) (68) %
(12,285) (11,230) (9) %
Other operating expenses (799) (756) (6) %
$ (13,084) $ (11,986) (9) %
The increase in domestic ESPN programming and production costs was due to new NHL programming, higher rights costs for NFL and CFP and an increase in production costs reflecting the return of ESPN-hosted events, which were canceled in fiscal 2021 due to COVID-19, and more ESPN films in fiscal 2022. These increases were partially offset by lower rights costs for MLB and NBA programming. Higher NFL programming costs were due to airing four additional regular season games in fiscal 2022 compared to fiscal 2021 and contractual rate increases. The increase in CFP rights costs was due to higher contractual rates. Lower MLB programming costs were due to airing 29 games of the 2022 regular season under our new contract and one 2021 season playoff game in fiscal 2022 compared to 92 games of the 2021 regular season in fiscal 2021. The decrease in NBA programming costs was due to the comparison to airing four games of the 2020 NBA Finals in the first quarter of fiscal 2021 due to COVID-19, partially offset by contractual rate increases. Fiscal 2021 also included the 2021 NBA Finals and fiscal 2022 included the 2022 NBA finals.
The decrease in international programming and production costs was due to channel closures in fiscal 2021, the impact of shifting exclusive soccer matches from Sports to Star+ in fiscal 2022 and a favorable Foreign Exchange Impact, partially offset by higher production costs.
The increase in Star programming and production costs was due to more cricket matches in fiscal 2022 and higher average costs per match for BCCI and IPL cricket matches.
Selling, general, administrative and other costs increased $210 million, to $1,441 million from $1,231 million, driven by higher marketing costs.
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Operating Income
Operating income increased 1%, to $2,710 million from $2,690 million due to an increase at ESPN, partially offset by a decrease at Star.
The following table provides supplemental revenue and operating income (loss) detail for Sports:
($ in millions)
2022 2021 % Change Better (Worse)
Supplemental revenue detail
ESPN
Domestic
$ 14,636 $ 13,623 7 %
International
1,434 1,390 3 %
16,070 15,013 7 %
Star (India)
1,200 947 27 %
$ 17,270 $ 15,960 8 %
Supplemental operating income (loss) detail
ESPN
Domestic
$ 2,814 $ 2,610 8 %
International
78 (14) nm
2,892 2,596 11 %
Star (India)
(237) 43 nm
Equity in the income of investees 55 51 8 %
$ 2,710 $ 2,690 1 %
Items Excluded from Segment Operating Income Related to Sports
The following table presents supplemental information for items related to Sports that are excluded from segment operating income:
(in millions) 2022 2021 % Change Better (Worse)
TFCF acquisition amortization (1)
$ (399) $ (404) 1 %
Restructuring and impairment charges
(1) (15) 93 %
(1) Represents amortization of intangible assets.
Experiences
Operating results for Experiences are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Revenues
Theme park admissions $ 8,602 $ 3,848 >100 %
Resorts and vacations 6,410 2,701 >100 %
Parks & Experiences merchandise, food and beverage 6,579 3,299 99 %
Merchandise licensing and retail 4,609 4,650 (1) %
Parks licensing and other 1,885 1,463 29 %
Total revenues 28,085 15,961 76 %
Operating expenses (14,936) (10,799) (38) %
Selling, general, administrative and other (3,403) (2,886) (18) %
Depreciation and amortization (2,451) (2,377) (3) %
Equity in the loss of investees (10) (19) 47 %
Operating Income (loss)
$ 7,285 $ (120) nm
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COVID-19
Revenues at Experiences benefited from fewer closures and operating capacity restrictions in fiscal 2022 compared to fiscal 2021 as a result of COVID-19. The following table summarizes the approximate number of weeks of operations in fiscal 2022 and fiscal 2021:
Weeks of Operation
2022 2021
Walt Disney World Resort 52 52
Disneyland Resort 52 22
Disneyland Paris 52 19
Hong Kong Disneyland Resort 37 40
Shanghai Disney Resort 37 52
Revenues
The increase in theme park admissions revenue was due to attendance growth and higher average per capita ticket revenue. Higher attendance reflected increases at Disneyland Resort, Walt Disney World Resort and, to a lesser extent, Disneyland Paris, partially offset by a decrease at Shanghai Disney Resort. Growth in average per capita ticket revenue was due to the introduction of Genie+ and Lightning Lane at our domestic parks in the first quarter of fiscal 2022 and higher average ticket prices at Walt Disney World Resort and Disneyland Paris, partially offset by lower average ticket prices at Disneyland Resort and Shanghai Disney Resort.
Growth in resorts and vacations revenue was primarily due to increases of 51% from higher occupied hotel room nights, 32% from an increase in passenger cruise days and 17% from higher average daily hotel room rates.
Parks & Experiences merchandise, food and beverage revenue growth was due to increases of 82% from higher volumes and 9% from higher average guest spending.
Merchandise licensing and retail revenue was comparable to the prior year, as a decrease of 8% from retail was offset by an increase of 8% from licensing. The decrease in retail revenues was due to the closure of a substantial number of Disney-branded retail stores in North America and Europe in the second half of fiscal 2021. The revenue growth at licensing was primarily due to higher sales of merchandise based on Mickey and Friends, Star Wars, Encanto , Spider-Man and Disney Princesses, partially offset by a decrease in revenues from merchandise based on Frozen.
The increase in parks licensing and other revenue was primarily due to higher sponsorship revenues and an increase in royalties from Tokyo Disney Resort.
In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our theme parks and resorts, and we believe these metrics are useful to investors in analyzing the business:
Domestic International (1)
Total
2022 2021 2022 2021 2022 2021
Parks
Increase (decrease)
Attendance
>100 % (17) % 54 % (4) % 87 % (14) %
Per Capita Guest Spending
13 % 17 % 24 % (3) % 18 % 11 %
Hotels
Occupancy
82 % 42 % 56 % 21 % 76 % 37 %
Available Room Nights (in thousands)
10,073 10,451 3,179 3,179 13,252 13,630
Change in Per Room Guest Spending (1)
19 % 1 % (7) % 22 % 15 % 4 %
(1) In fiscal 2023, the Company revised its method of allocating revenue on the sales of Disneyland Paris vacation packages between hotel room revenue and admissions revenue. The new method resulted in a decrease in the percentage of revenue allocated to hotel rooms. If we had applied the new method in fiscal 2022, the impact would have been a decrease of approximately $50 million. There is no impact to fiscal 2021 due to this change.
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Costs and Expenses
Operating expenses are as follows:
($ in millions)
2022 2021 % Change Better (Worse)
Operating labor $ (6,577) $ (4,711) (40) %
Infrastructure costs (2,766) (2,308) (20) %
Cost of goods sold and distribution costs (2,938) (2,086) (41) %
Other operating expenses (2,655) (1,694) (57) %
$ (14,936) $ (10,799) (38) %
The increases in operating labor, cost of goods sold and distribution costs and other operating expenses were due to higher volumes, while the increase in infrastructure costs was due to higher volumes and increased technology spending.
Selling, general, administrative and other costs increased $517 million from $2,886 million to $3,403 million due to higher marketing spend and inflation.
Depreciation and amortization increased $74 million from $2,377 million to $2,451 million, primarily due to new attractions at our domestic parks and resorts.
Segment Operating Income (loss)
Segment operating results increased $7,405 million, to income of $7,285 million from a loss of $120 million due to growth at our domestic parks and experiences and, to a lesser extent, at our international parks and experiences and consumer products business.
The following table presents supplemental revenue and operating income (loss) detail for the Experiences segment:
($ in millions)
2022 2021 % Change Better (Worse)
Supplemental revenue detailParks & ExperiencesDomestic $ 20,131 $ 9,353 >100 %
International 3,297 1,859 77 %Consumer Products4,657 4,749 (2) %
$ 28,085 $ 15,961 76 %
Supplemental operating income (loss) detail
Parks & Experiences
Domestic $ 5,332 $ (1,139) nm
International (237) (1,074) 78 %
Consumer Products
2,190 2,093 5 %
$ 7,285 $ (120) nmItems Excluded from Segment Operating Income Related to Experiences
The following table presents supplemental information for items related to Experiences that are excluded from segment operating income:
($ in millions)2022 2021 % Change Better (Worse)
Restructuring and impairment charges (1)
$ — $ (327) 100 %TFCF acquisition amortization(8) (8) — %
(1) Fiscal 2021 included asset impairments and severance costs related to the closure of a substantial number of our Disney-branded retail stores in North America and Europe and severance costs related to other workforce reductions.
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CORPORATE AND UNALLOCATED SHARED EXPENSES
Corporate and unallocated shared expenses are as follows:% Change Better (Worse)($ in millions)2023 2022 2021 2023 vs. 2022 2022 vs. 2021
Corporate and unallocated shared expenses $ (1,147) $ (1,159) $ (928) 1 % (25) %
From fiscal 2022 to fiscal 2023, the decrease in corporate and unallocated shared expenses was driven by lower compensation and human resource-related costs, partially offset by increases in rent expense and technology costs. From fiscal 2021 to fiscal 2022, the increase in corporate and unallocated shared expenses was driven by higher compensation and human resource-related costs.
RESTRUCTURING ACTIVITIES
See Note 18 to the Consolidated Financial Statements for information regarding the Company’s restructuring activities.LIQUIDITY AND CAPITAL RESOURCES
The change in cash, cash equivalents and restricted cash is as follows:
($ in millions)2023 2022 2021
Cash provided by operations - continuing operations $ 9,866 $ 6,002 $ 5,566
Cash used in investing activities - continuing operations ( 4,641 ) ( 5,008 ) ( 3,171 )
Cash used in financing activities - continuing operations ( 2,724 ) ( 4,729 ) ( 4,385 )
Cash (used in) provided by discontinued operations — (4) 9Impact of exchange rates on cash, cash equivalents and restricted cash73 ( 603 ) 30
Change in cash, cash equivalents and restricted cash $ 2,574 $ (4,342) $ (1,951)Operating ActivitiesCash provided by operating activities of $9.9 billion for fiscal 2023 increased 64% or $3.9 billion compared to $6.0 billion in fiscal 2022 due to lower spending on film and episodic content at Entertainment and higher operating cash flow at Experiences, partially offset by higher spending on sports content. The decrease in spending on film and episodic content at Entertainment included the impact of the WGA and SAG-AFTRA work stoppages. The increase in operating cash flow at Experiences was due to higher operating cash receipts driven by higher revenue, partially offset by an increase in operating cash disbursements due to higher operating expenses. The decrease in operating cash flow at Sports was due to the timing of payments for sports content.
Cash provided by operating activities of $6.0 billion for fiscal 2022 increased 8% or $436 million compared to $5.6 billion in fiscal 2021 due to higher operating cash flow at Experiences and, to a lesser extent, lower income tax payments and pension contributions, partially offset by lower operating cash flow at Entertainment and, to a lesser extent, a partial payment for the Content License Early Termination. The increase in operating cash flow at Experiences was due to higher operating cash receipts driven by higher revenue, partially offset by an increase in operating cash disbursements due to higher operating expenses. The decrease in operating cash flow at Entertainment was due to higher operating cash disbursements and higher spending on film and episodic content, partially offset by higher operating cash receipts. Higher operating cash disbursements were driven by increased operating expenses while higher operating cash receipts were due to revenue growth.
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($ in millions)2023 2022 2021Entertainment$ 669 $ 560 $ 513Sports73 90 100ExperiencesDomestic 2,011 1,680 1,551
International 669 662 718Total Experiences2,680 2,342 2,269
Corporate 204 191 186
Total depreciation expense $ 3,626 $ 3,183 $ 3,068Amortization of intangible assets is as follows:
($ in millions)2023 2022 2021Entertainment$ 87 $ 164 $ 174
Sports
— — 4Experiences109 109 108
TFCF and Hulu 1,547 1,707 1,757
Total amortization of intangible assets $ 1,743 $ 1,980 $ 2,043Produced and licensed content costsThe Entertainment and Sports segments incur costs to produce and license film, episodic, sports and other content. Production costs include spend on content internally produced at our studios such as live-action and animated films, episodic series, specials, shorts and theatrical stage plays. Production costs also include original content commissioned from third-party studios. Programming costs include content rights licensed from third parties for use on the Company’s sports and general entertainment networks and DTC streaming services. Programming assets are generally recorded when the programming becomes available to us with a corresponding increase in programming liabilities.
The Company’s production and programming activity for fiscal 2023, 2022 and 2021 are as follows:($ in millions)2023 2022 2021Beginning balances:Production and programming assets $ 37,667 $ 31,732 $ 27,193
Programming liabilities (3,940) (4,113) (4,099)
33,727 27,619 23,094Spending:Licensed programming and rights 14,851 13,316 12,412
Produced content 12,323 16,611 12,848
27,174 29,927 25,260Amortization:Licensed programming and rights (13,405) (13,432) (12,784)
Produced content (11,861) (10,224) (8,175)
(25,266) (23,656) (20,959)
Change in production and programming costs 1,908 6,271 4,301
Content Impairment
(2,266) — —
Other non-cash activity (568) (163) 224Ending balances:Production and programming assets 36,593 37,667 31,732
Programming liabilities (3,792) (3,940) (4,113)
$ 32,801 $ 33,727 $ 27,619
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The Company currently expects its fiscal 2024 spend on produced and licensed content to be approximately $25 billion, with sports rights expected to account for over 40% of spend. See Note 14 to the Consolidated Financial Statements for information regarding the Company’s contractual commitments to acquire sports and broadcast programming.Commitments and guarantees
The Company has various commitments and guarantees, such as long-term leases, purchase commitments and other executory contracts, that are disclosed in the footnotes to the financial statements. See Notes 14 and 15 to the Consolidated Financial Statements for further information regarding these commitments.
Legal and Tax Matters
As disclosed in Notes 9 and 14 to the Consolidated Financial Statements, the Company has exposure for certain tax and legal matters.Investing ActivitiesContinuing operations
Investing activities consist principally of investments in parks, resorts and other property and acquisition and divestiture activity. The Company’s investments in parks, resorts and other property for fiscal 2023, 2022 and 2021 are as follows:($ in millions)2023 2022 2021Entertainment$ 1,032 $ 802 $ 838Sports15 8 24ExperiencesDomestic 2,203 2,680 1,597
International 822 767 675Total Experiences3,025 3,447 2,272
Corporate 897 686 444
$ 4,969 $ 4,943 $ 3,578
Capital expenditures at Entertainment primarily reflect investments in technology and in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities. The increase in fiscal 2023 compared to fiscal 2022 was driven by higher technology spending to support our streaming services.
Capital expenditures at Experiences are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and systems infrastructure. The decrease in capital expenditures in fiscal 2023 compared to fiscal 2022 was due to lower spending on cruise ship fleet expansion. The increase in capital expenditures in fiscal 2022 compared to fiscal 2021 was due to cruise ship fleet expansion.
Capital expenditures at Corporate primarily reflect investments in facilities, information technology infrastructure and equipment. The increases in fiscal 2023 compared to fiscal 2022 and in fiscal 2022 compared to fiscal 2021 were both due to higher spending on facilities.
The Company currently expects its fiscal 2024 capital expenditures to total approximately $6 billion compared to fiscal 2023 capital expenditures of $5 billion. The increase in capital expenditures is primarily due to higher spending at Experiences, in part due to continued investment in our Disney Cruise Line business.Financing ActivitiesFinancing activities for fiscal 2023, 2022 and 2021 are as follows:($ in millions)2023 2022 2021Change in borrowings$ (1,783) $ (4,017) $ (3,699)
Activities related to noncontrolling and redeemable noncontrolling interests
(707) (507) (874)
Cash used in other financing activities, net (1)
(234) (205) 188
Cash used in financing activities - continuing operations
$ (2,724) $ (4,729) $ (4,385)
(1) Primarily consists of equity award activity.
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Borrowings activities and otherDuring the year ended September 30, 2023, the Company’s borrowing activity was as follows:($ in millions)October 1, 2022 Borrowings Payments Other Activity September 30, 2023Commercial paper with original maturities less than three months (1)$ 50 $ 238 $ — $ 1 $ 289Commercial paper with original maturities greater than three months1,612 3,603 ( 4,032 ) 4 1,187U.S. dollar denominated notes (2)45,091 — (1,450) (137) 43,504Asia Theme Parks borrowings (3)1,425 83 (225) 25 1,308Foreign currency denominated debt and other (4)191 — — (48) 143
$ 48,369 $ 3,924 $ (5,707) $ (155) $ 46,431(1) Borrowings and reductions of borrowings are reported net.
(2) The other activity is primarily due to the amortization of purchase accounting adjustments and debt issuance fees.
(3) See Note 6 to the Consolidated Financial Statements for information regarding commitments to fund the Asia Theme Parks.(4) The other activity is due to market value adjustments for debt with qualifying hedges.
See Note 8 to the Consolidated Financial Statements for information regarding the Company’s bank facilities and debt maturities. The Company may use operating cash flows, commercial paper borrowings up to the amount of its unused $12.25 billion bank facilities and incremental term debt issuances to retire or refinance other borrowings before or as they come due.
In November 2023, NBCU exercised its put right to require the Company to purchase NBCU’s interest in Hulu for the greater of approximately $9 billion or NBCU’s share of fair value (see Note 2 of the Consolidated Financial Statements for additional information).
The Company did not declare or pay a dividend or repurchase any of its shares in fiscal 2023, 2022 and 2021.
The Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its control. We believe that the Company’s financial condition is strong and that its cash balances, other liquid assets, operating cash flows, access to debt and equity capital markets and borrowing capacity under current bank facilities, taken together, provide adequate resources to fund ongoing operating requirements, contractual obligations, upcoming debt maturities as well as future capital expenditures related to the expansion of existing businesses and development of new projects. In addition, the Company could undertake other measures to ensure sufficient liquidity, such as continuing to not declare dividends; raising financing; reducing capital spending; reducing film and episodic content investments; or implementing furloughs or reductions in force.
The Company’s borrowing costs can also be impacted by short- and long-term debt ratings assigned by nationally recognized rating agencies, which are based, in significant part, on the Company’s performance as measured by certain credit metrics such as leverage and interest coverage ratios. As of September 30, 2023, Moody’s Investors Service’s long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, Standard and Poor’s long- and short-term debt ratings for the Company were A- and A-2 (Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively. The Company’s bank facilities contain only one financial covenant, relating to interest coverage of three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs. On September 30, 2023, the Company met this covenant by a significant margin. The Company’s bank facilities also specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default.CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We believe that the application of the following accounting policies, which are important to our financial position and results of operations, require significant judgments and estimates on the part of management. For a summary of our significant accounting policies, including the accounting policies discussed below, see Note 2 to the Consolidated Financial Statements.
Produced and Acquired/Licensed Content Costs
We amortize and test for impairment capitalized film and television production costs based on whether the content is predominantly monetized individually or as a group. See Note 2 to the Consolidated Financial Statements for further discussion.
Production costs that are classified as individual are amortized based upon the ratio of the current period’s revenues to the estimated remaining total revenues (Ultimate Revenues).62
TABLE OF CONTENTSWith respect to produced films intended for theatrical release, the most sensitive factor affecting our estimate of Ultimate Revenues is theatrical performance. Revenues derived from other markets subsequent to the theatrical release are generally highly correlated with theatrical performance. Theatrical performance varies primarily based upon the public interest and demand for a particular film, the popularity of competing films at the time of release and the level of marketing effort. Upon a film’s release and determination of the theatrical performance, the Company’s estimates of revenues from succeeding windows and markets, which may include imputed license fees for content that is used on our DTC streaming services, are revised based on historical relationships and an analysis of current market trends.
With respect to capitalized television production costs that are classified as individual, the most sensitive factor affecting estimates of Ultimate Revenues is program ratings of the content on our licensees’ platforms. Program ratings, which are an indication of market acceptance, directly affect the program’s ability to generate advertising and subscriber revenues and are correlated with the license fees we can charge for the content in subsequent windows and for subsequent seasons.
Ultimate Revenues are reassessed each reporting period and the impact of any changes on amortization of production cost is accounted for as if the change occurred at the beginning of the current fiscal year. If our estimate of Ultimate Revenues decreases, amortization of costs may be accelerated or result in an impairment. Conversely, if our estimate of Ultimate Revenues increases, cost amortization may be slowed.
Production costs classified as individual are tested for impairment at the individual title level by comparing that title’s unamortized costs to the present value of discounted cash flows directly attributable to the title. To the extent the title’s unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess.
Produced content costs that are part of a group and acquired/licensed content costs are amortized based on projected usage, typically resulting in an accelerated or straight-line amortization pattern. The determination of projected usage requires judgment and is reviewed on a regular basis for changes. Adjustments to projected usage are applied prospectively in the period of the change. Historical viewing patterns are the most significant input into determining the projected usage, and significant judgment is required in using historical viewing patterns to derive projected usage. If projected usage changes we may need to accelerate or slow the recognition of amortization expense.Cost of content that is predominantly monetized as a group is tested for impairment by comparing the present value of the discounted cash flows of the group to the aggregate unamortized costs of the group. The group is established by identifying the lowest level for which cash flows are independent of the cash flows of other produced and licensed content. If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group. If there are no plans to continue to use an individual film or television program that is part of a group, the unamortized cost of the individual title is written down to its estimated fair value. Licensed content is included as part of the group within which it is monetized for purposes of impairment testing.
The amortization of multi-year sports rights is based on projections of revenues for each season relative to projections of total revenues over the contract period (estimated relative value). Projected revenues include advertising revenue and an allocation of affiliate revenue. If the annual contractual payments related to each season approximate each season’s estimated relative value, we expense the related contractual payments during the applicable season. If estimated relative values by year were to change significantly, amortization of our sports rights costs may be accelerated or slowed.Revenue Recognition
The Company has revenue recognition policies for its various operating segments that are appropriate to the circumstances of each business. Refer to Note 2 to the Consolidated Financial Statements for our revenue recognition policies.
Pension and Postretirement Medical Plan Actuarial Assumptions
The Company’s pension and postretirement medical benefit obligations and related costs are calculated using a number of actuarial assumptions. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and/or liability measurement, which we evaluate annually. Other assumptions include the healthcare cost trend rate and employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increase.The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date. A lower discount rate increases the present value of benefit obligations and increases pension and postretirement medical expense. The guideline for setting this rate is a high-quality long-term corporate bond rate. We increased our discount rate to 5.94 % at the end of fiscal 2023 from 5.44 % at the end of fiscal 2022 to reflect market interest rate conditions at our fiscal 2023 year-end measurement date. The Company’s discount rate was determined by considering yield curves constructed of a large population of high-quality corporate bonds and reflects the matching of the plans’ liability cash flows to the yield curves. A one percentage point decrease in the assumed discount rate would increase total benefit expense for fiscal 2024 by approximately $200 million and would increase the projected benefit obligation at September 30, 2023 by approximately $2.0 billion. A one
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percentage point increase in the assumed discount rate would decrease total benefit expense and the projected benefit obligation by approximately $ 45 million and $1.8 billion, respectively.
To determine the expected long-term rate of return on the plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. Our expected return on plan assets is 7.00 %. A lower expected rate of return on plan assets will increase pension and postretirement medical expense. A one percentage point change in the long-term asset return assumption would impact fiscal 2024 annual expense by approximately $ 170 million.Goodwill, Other Intangible Assets, Long-Lived Assets and Investments
The Company is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and if current events or circumstances require, on an interim basis. The Company performs its annual test of goodwill and indefinite-lived intangible assets for impairment in its fiscal fourth quarter.
Goodwill is allocated to various reporting units, which are an operating segment or one level below the operating segment. To test goodwill for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of a reporting unit exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows of the reporting unit.The quantitative assessment compares the fair value of each goodwill reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the amount of goodwill allocated to the reporting unit.
In fiscal 2023, the Company bypassed the qualitative test and performed a quantitative assessment of goodwill for impairment, under both the previous segment reporting structure and the new segment reporting structure. There were no goodwill impairments under the previous reporting structure. The change in reporting structure requires judgment to identify new reporting units, allocate goodwill to these reporting units (based on relative fair values) and assign other recorded assets and liabilities to these reporting units.
To determine the fair value of our reporting units, we generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate. The discounted cash flow analyses are sensitive to our estimated projected future cash flows as well as the discount rates used to calculate their present value. Our future cash flows are based on internal forecasts for each reporting unit, which consider projected inflation and other economic indicators, as well as industry growth projections. Discount rates for each reporting unit are determined based on the inherent risks of each reporting unit’s underlying operations. We believe our estimates are consistent with how a marketplace participant would value our reporting units.
Since our prior annual impairment assessment performed in the fourth quarter of fiscal 2022, the fair values of our media and entertainment businesses have generally declined as a result of higher discount rates and lower projections for certain revenue streams.
Based on our projections, the carrying amounts of our entertainment and international sports linear networks reporting units exceeded their fair values and we recorded non-cash goodwill impairment charges of approximately $0.7 billion. The entertainment linear networks reporting unit goodwill after impairment is approximately $8 billion and the international sports linear networks reporting unit goodwill is fully impaired.
In addition, the fair value of our entertainment DTC services reporting unit exceeded its carrying amount by less than 10%. Goodwill of the entertainment DTC services reporting unit is approximately $45 billion.
Significant judgments and assumptions in the discounted cash flow model relate to future revenues and certain operating expenses, terminal growth rates and discount rates. Changes to these significant assumptions, market trends, or macroeconomic events could produce test results in the future that differ, and we could be required to record additional impairment charges.
For our entertainment linear networks reporting unit, a 25 basis point increase in the discount rate or a 1% reduction in projected cash flows used to determine fair value would result in an incremental impairment charge of approximately $0.3 billion.
For our entertainment DTC services reporting unit, a 25 basis point increase in the discount rate used to determine fair value would result in an impairment of $0.5 billion, and a 1% reduction in projected cash flows would result in a decrease in the excess fair value over carrying amount by approximately $0.9 billion.
To test other indefinite-lived intangible assets for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of each of its indefinite-lived intangible assets exceeds its fair
64TABLE OF CONTENTSvalue. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows.
The quantitative assessment compares the fair value of an indefinite-lived intangible asset to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess. Fair values of indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate.
The Company tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to hold the asset for sale. The impairment test for assets held for use requires a comparison of the estimated undiscounted future cash flows expected to be generated over the useful life of the significant assets of an asset group to the carrying amount of the asset group. An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the asset group and the carrying amount of the asset group. For assets held for sale, to the extent the carrying amount is greater than the asset’s fair value less costs to sell, an impairment loss is recognized for the difference. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, estimates of future cash flows and the discount rate used to determine fair values.The Company has investments in equity securities. For equity securities that do not have a readily determinable fair value, we consider forecasted financial performance of the investee companies, as well as volatility inherent in the external markets for these investments. If these forecasts are not met, impairment charges may be recorded.The Company tested its indefinite-lived intangible assets, long-lived assets and investments for impairment and recorded non-cash impairment charges of $2.3 billion, $ 0.2 billion and $ 0.3 billion in fiscal 2023, 2022 and 2021, respectively. The fiscal 2023 charges primarily related to content impairments resulting from a strategic change in our approach to content curation. See Note 18 to the Consolidated Financial Statements for additional information. The fiscal 2022 charges primarily related to exiting our businesses in Russia. The fiscal 2021 charges primarily related to the closure of an animation studio and a substantial number of our Disney-branded retail stores in North America and Europe.Allowance for Credit LossesWe evaluate our allowance for credit losses and estimate collectability of accounts receivable based on historical bad debt experience, our assessment of the financial condition of individual companies with which we do business, current market conditions, and reasonable and supportable forecasts of future economic conditions. In times of economic turmoil, including COVID-19, our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods. If our estimate of uncollectible accounts is too low, costs and expenses may increase in future periods, and if it is too high, costs and expenses may decrease in future periods. See Note 2 to the Consolidated Financial Statements for additional discussion.Contingencies and LitigationWe are currently involved in certain legal proceedings and, as required, have accrued estimates of the probable and estimable losses for the resolution of these proceedings. These estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and have been developed in consultation with outside counsel as appropriate. From time to time, we are also involved in other contingent matters for which we accrue estimates for a probable and estimable loss. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to legal proceedings or our assumptions regarding other contingent matters. See Note 14 to the Consolidated Financial Statements for more detailed information on litigation exposure.
Income Tax
As a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. From time to time, these audits result in proposed assessments. Our determinations regarding the recognition of income tax benefits are made in consultation with outside tax and legal counsel, where appropriate, and are based upon the technical merits of our tax positions in consideration of applicable tax statutes and related interpretations and precedents and upon the expected outcome of proceedings (or negotiations) with taxing and legal authorities. The tax benefits ultimately realized by the Company may differ from those recognized in our future financial statements based on a number of factors, including the Company’s decision to
65TABLE OF CONTENTSsettle rather than litigate a matter, relevant legal precedent related to similar matters and the Company’s success in supporting its filing positions with taxing authorities. See Note 9 to the Consolidated Financial Statements for additional discussion.New Accounting Pronouncements
See Note 19 to the Consolidated Financial Statements for information regarding new accounting pronouncements.DTC PRODUCT DESCRIPTIONS, KEY DEFINITIONS AND SUPPLEMENTAL INFORMATION
Product Offerings
In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or together as part of various multi-product offerings. Hulu Live TV + SVOD includes Disney+ and ESPN+. Disney+ is available in more than 150 countries and territories outside the U.S. and Canada. In India and certain other Southeast Asian countries, the service is branded Disney+ Hotstar. In certain Latin American countries, we offer Disney+ as well as Star+, a general entertainment SVOD service, which is available on a standalone basis or together with Disney+ (Combo+). Depending on the market, our services can be purchased on our websites or through third-party platforms/apps or are available via wholesale arrangements.
Paid Subscribers
Paid subscribers reflect subscribers for which we recognized subscription revenue. Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method. Subscribers to multi-product offerings in the U.S. are counted as a paid subscriber for each service included in the multi-product offering and subscribers to Hulu Live TV + SVOD are counted as one paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and ESPN+ services. In Latin America, if a subscriber has either the standalone Disney+ or Star+ service or subscribes to Combo+, the subscriber is counted as one Disney+ paid subscriber. Subscribers include those who receive a service through wholesale arrangements including those for which the service is distributed to each subscriber of an existing content distribution tier. When we aggregate the total number of paid subscribers across our DTC streaming services, we refer to them as paid subscriptions.
International Disney+ (excluding Disney+ Hotstar)
International Disney+ (excluding Disney+ Hotstar) includes the Disney+ service outside the U.S. and Canada and the Star+ service in Latin America.
Average Monthly Revenue Per Paid Subscriber
Hulu and ESPN+ average monthly revenue per paid subscriber is calculated based on the average of the monthly average paid subscribers for each month in the period. The monthly average paid subscribers is calculated as the sum of the beginning of the month and end of the month paid subscriber count, divided by two. Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period. Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses) and premium and feature add-on revenue but excludes Premier Access and Pay-Per-View revenue. The average revenue per paid subscriber is net of discounts on offerings that carry more than one service. Revenue is allocated to each service based on the relative retail or wholesale price of each service on a standalone basis. Hulu Live TV + SVOD revenue is allocated to the SVOD services based on the wholesale price of the Hulu SVOD Only, Disney+ and ESPN+ multi-product offering. In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third-party platforms.
Supplemental information about paid subscribers (1) :
(in millions) September 30, 2023 October 1, 2022 October 2, 2021
Domestic (U.S. and Canada) standalone 55.5 60.4 65.4
Domestic (U.S. and Canada) multi-product (1)
22.6 19.4 11.4
78.1 79.7 76.9
International standalone (excluding Disney+ Hotstar) (2)
55.3 49.2 34.8
International multi-product (3)
10.8 7.2 1.2
66.1 56.5 36.0
Total (4)
144.2 136.2 112.9
(1) At September 30, 2023, there were 20.3 million and 2.3 million subscribers to three-service and two-service multi-product offerings, respectively. At October 1, 2022, there were 18.7 million and 0.7 million subscribers to three-
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service and two-service multi-product offerings, respectively. At October 2, 2021, there were 11.4 million subscribers to three-service offerings and no subscribers to two-service offerings.
(2) Disney+ Hotstar is not included in any of the Company’s multi-product offerings.
(3) Consists of subscribers to Combo+.
(4) Total may not equal the sum of the column due to rounding.SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATIONOn March 20, 2019, as part of the acquisition of TFCF, The Walt Disney Company (“TWDC”) became the ultimate parent of TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company) (“Legacy Disney”). Legacy Disney and TWDC are collectively referred to as “Obligor Group”, and individually, as a “Guarantor”. Concurrent with the close of the TFCF acquisition, $16.8 billion of TFCF’s assumed public debt (which then constituted 96% of such debt) was exchanged for senior notes of TWDC (the “exchange notes”) issued pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an Indenture, dated as of March 20, 2019, between TWDC, Legacy Disney, as guarantor, and Citibank, N.A., as trustee (the “TWDC Indenture”) and guaranteed by Legacy Disney. On November 26, 2019, $14.0 billion of the outstanding exchange notes were exchanged for new senior notes of TWDC registered under the Securities Act, issued pursuant to the TWDC Indenture and guaranteed by Legacy Disney. In addition, contemporaneously with the closing of the March 20, 2019 exchange offer, TWDC entered into a guarantee of the registered debt securities issued by Legacy Disney under the Indenture dated as of September 24, 2001 between Legacy Disney and Wells Fargo Bank, National Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee).
Other subsidiaries of the Company do not guarantee the registered debt securities of either TWDC or Legacy Disney (such subsidiaries are referred to as the “non-Guarantors”). The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at September 30, 2023 was as follows:TWDC Legacy Disney
($ in millions)
Par Value Carrying Value Par Value Carrying ValueRegistered debt with unconditional guarantee $ 35,163 $ 35,393 $ 8,121 $ 7,880The guarantees by TWDC and Legacy Disney are full and unconditional and cover all payment obligations arising under the guaranteed registered debt securities. The guarantees may be released and discharged upon (i) as a general matter, the indebtedness for borrowed money of the consolidated subsidiaries of TWDC in aggregate constituting no more than 10% of all consolidated indebtedness for borrowed money of TWDC and its subsidiaries (subject to certain exclusions), (ii) upon the sale, transfer or disposition of all or substantially all of the equity interests or all or substantially all, or substantially as an entirety, the assets of Legacy Disney to a third party, and (iii) other customary events constituting a discharge of a guarantor’s obligations. In addition, in the case of Legacy Disney’s guarantee of registered debt securities issued by TWDC, Legacy Disney may be released and discharged from its guarantee at any time Legacy Disney is not a borrower, issuer or guarantor under certain material bank facilities or any debt securities.
Operations are conducted almost entirely through the Company’s subsidiaries. Accordingly, the Obligor Group’s cash flow and ability to service its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans or otherwise. Holders of the guaranteed registered debt securities have a direct claim only against the Obligor Group.
Set forth below are summarized financial information for the Obligor Group on a combined basis after elimination of (i) intercompany transactions and balances between TWDC and Legacy Disney and (ii) equity in the earnings from and investments in any subsidiary that is a non-Guarantor. This summarized financial information has been prepared and presented pursuant to the Securities and Exchange Commission Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with U.S. GAAP.
Results of operations ($ in millions)2023Revenues $ —
Costs and expenses —Net income (loss) from continuing operations (2,160)
Net income (loss) (2,160)
Net income (loss) attributable to TWDC shareholders (2,160)
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TABLE OF CONTENTSBalance Sheet ($ in millions)September 30, 2023 October 1, 2022
Current assets $ 8,544 $ 5,665
Noncurrent assets 2,927 1,948
Current liabilities 5,746 3,741
Noncurrent liabilities (excluding intercompany to non-Guarantors) 43,307 46,218
Intercompany payables to non-Guarantors 154,018 148,958
FY 2025-09-27 (later)
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CONSOLIDATED RESULTS
($ in millions, except per share data)2025 2024 % ChangeBetter (Worse)Revenues:Services $ 84,588 $ 81,841 3 %
Products 9,837 9,520 3 %
Total revenues 94,425 91,361 3 %Costs and expenses:Cost of services (exclusive of depreciation and amortization) ( 52,677 ) ( 52,509 ) — %
Cost of products (exclusive of depreciation and amortization) ( 6,089 ) ( 6,189 ) 2 %
Selling, general, administrative and other ( 16,501 ) ( 15,759 ) (5) %
Depreciation and amortization ( 5,326 ) ( 4,990 ) (7) %
Total costs and expenses (80,593) (79,447) (1) %
Restructuring and impairment charges ( 819 ) ( 3,595 ) 77 %
Other expense — ( 65 ) 100 %
Interest expense, net ( 1,305 ) ( 1,260 ) (4) %
Equity in the income of investees, net 295 575 (49) %
Income before income taxes
12,003 7,569 59 %
Income taxes
1,428 ( 1,796 ) nm
Net income 13,431 5,773 >100 %
Net income attributable to noncontrolling interests
( 1,027 ) ( 801 ) (28) %
Net income attributable to Disney $ 12,404 $ 4,972 >100 %Diluted earnings per share attributable to Disney$ 6.85 $ 2.72 >100 %Organization of Information
Management’s Discussion and Analysis provides a narrative on the Company’s financial performance and condition that should be read in conjunction with the accompanying financial statements. It includes the following sections:
• Consolidated Results and Non-Segment Items
• Business Segment Results
• Corporate and Unallocated Shared Expenses• Liquidity and Capital Resources• Trends and Uncertainties• Critical Accounting Policies and Estimates• Entertainment DTC Product Descriptions and Key Definitions• Supplemental Guarantor Financial InformationIn Item 7, we discuss fiscal 2025 and 2024 results and comparisons of fiscal 2025 results to fiscal 2024 results. Discussions of fiscal 2023 results and comparisons of fiscal 2024 results to fiscal 2023 results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2024.
Star India
On November 14, 2024, the Company and RIL completed the Star India Transaction (see Note 4 to the Consolidated Financial Statements). The Company recognizes its 37% share of the India joint venture’s results in “Equity in the income of investees.” Star India results through November 14, 2024 were consolidated in the Company’s financial results and reported in the Entertainment and Sports segments.
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CONSOLIDATED RESULTS AND NON-SEGMENT ITEMSRevenues for fiscal 2025 increased 3%, or $3.1 billion, to $94.4 billion; net income attributable to Disney increased $7.4 billion to income of $12.4 billion compared to $5.0 billion in the prior year; and diluted earnings per share (EPS) from continuing operations attributable to Disney increased to $6.85 compared to $2.72 in the prior year. The net income and EPS increases were due to a lower effective tax rate in the current year compared to the prior year and the comparison to impairments related to the Star India Transaction and goodwill in the prior year. In addition, the increases in net income and EPS were due to higher operating income at Entertainment and Experiences. The lower effective tax rate was due to a non-cash tax benefit recognized in the current year upon a change in Hulu’s U.S. income tax classification (see Note 9 to the Consolidated Financial Statements).RevenuesService revenues for fiscal 2025 increased 3%, or $2.7 billion, to $84.6 billion, which included an approximate 3 percentage point decrease from the Star India Transaction. Aside from this impact, service revenues increased due to higher subscription revenue, growth at our parks and experiences businesses and an increase in content sales.
Product revenues for fiscal 2025 increased 3%, or $0.3 billion, to $9.8 billion, driven by growth at our parks and experiences businesses, partially offset by lower physical home entertainment distribution revenue due to a shift to licensing of physical distribution rights to third parties.Costs and expensesCost of services for fiscal 2025 increased $0.2 billion to $52.7 billion, which included an approximate 4 percentage point decrease from the Star India Transaction. Aside from this impact, cost of services increased due to higher programming and production costs and, to a lesser extent, the impact of inflation at our parks and experiences businesses.
Cost of products for fiscal 2025 decreased 2%, or $0.1 billion to $6.1 billion, due to a shift to licensing of physical home entertainment distribution, partially offset by the impact of inflation at our theme parks and resorts.
Selling, general, administrative and other costs for fiscal 2025 increased 5%, or $0.7 billion, to $16.5 billion, which included approximately 2 percentage point decrease from the Star India Transaction. Aside from this impact, selling, general, administrative and other costs increased driven by higher marketing costs.
Depreciation and amortization for fiscal 2025 increased 7%, or $0.3 billion, to $5.3 billion primarily due to higher depreciation at our parks and experiences businesses.Restructuring and Impairment Charges($ in millions) 2025 2024
Impairments:
Equity investments (1)
$ 635 $ 165
Content (2)
109 187
Star India
143 1,545
Goodwill (3)
— 1,287
Retail assets
— 328
Severance — 83
Other
(68) —
$ 819 $ 3,595
(1) Primarily related to A+E (fiscal 2025 and 2024) and Tata Play Limited (fiscal 2025).
(2) Related to strategic changes in our approach to content curation.
(3) Related to general entertainment linear networks.
Other expense
In the prior year, the Company recorded a charge of $65 million related to a legal ruling.
33TABLE OF CONTENTSInterest Expense, net
($ in millions)2025 2024 % Change Better (Worse)
Interest expense $ ( 1,812 ) $ ( 2,070 ) 12 %
Interest income, investment income and other 507 810 (37) %
Interest expense, net $ (1,305) $ (1,260) (4) %
The decrease in interest expense was due to lower average rates and debt balances, partially offset by a decrease in capitalized interest.
The decrease in interest income, investment income and other was driven by a lower benefit from pension and postretirement benefit costs, other than service cost, and the impact of lower average cash and cash equivalent balances and lower average rates.Equity in the Income of InvesteesEquity in the income of investees decreased $280 million to $ 295 million in the current year from $ 575 million in the prior year due to losses from the India joint venture in the current year and lower income from A+E.Effective Income Tax Rate
($ in millions)2025 2024
Income before income taxes
$ 12,003 $ 7,569
Income tax expense
(1,428) 1,796
Effective income tax rate
(11.9) % 23.7%
The effective income tax rate was negative 11.9% in the current year compared to a positive effective income tax rate of 23.7% in the prior year. Items impacting the effective income tax rate include the following:
• The current year included a non-cash tax benefit of approximately 26 percentage points due to a change in Hulu’s U.S. income tax classification
• The prior year reflected an unfavorable impact of approximately 6 percentage points from impairments that are not tax deductible
• The current and prior year reflected favorable adjustments related to prior-year tax matters of 10 percentage points and 3 percentage points, respectively
• The current year included a non-cash tax expense of approximately 2 percentage points and the prior year included a non-cash tax benefit of approximately 1 percentage point in connection with the Star India TransactionNoncontrolling Interests
($ in millions)2025 2024 % Change Better (Worse)
Net income attributable to noncontrolling interests
$ ( 1,027 ) $ ( 801 ) (28) %
The increase in net income attributable to noncontrolling interests was due to an incremental payment to acquire Hulu, partially offset by the accretion of NBC Universal’s interest in Hulu in the prior year.Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.
Certain Items Impacting Results in the YearResults for fiscal 2025 were impacted by the following:
• Hulu Transaction Impacts consisting of a $3,277 million benefit in “Income taxes” and a $462 million charge in “Net income attributable to noncontrolling interests”
• TFCF and Hulu acquisition amortization of $1,576 million
• Favorable resolution of a prior-year tax matter of $1,016 million
• Restructuring and impairment charges of $819 million ($748 million after tax) and a non-cash tax expense of $244 million related to the Star India Transaction34
TABLE OF CONTENTSResults for fiscal 2024 were impacted by the following:
• Restructuring and impairment charges of $3,595 million
• TFCF and Hulu acquisition amortization of $1,677 million
• Other expense of $65 million related to a legal ruling
• Favorable adjustments related to prior year tax matters of $418 millionA summary of the impact of these items on EPS is as follows:
($ in millions, except per share data)
Pre-Tax Income (Loss) Tax Benefit (Expense) (1)
After-Tax Income (Loss) EPS Favorable (Adverse) (2)Year Ended September 27, 2025:
Hulu Transaction Impacts $ — $ 3,277 $ 3,277 $ 1.55
Resolution of a prior-year tax matter
— 1,016 1,016 0.56TFCF and Hulu acquisition amortization (3)(1,576) 366 (1,210) (0.64)
Restructuring and impairment charges
(819) (173) (992) (0.55)
Total $ (2,395) $ 4,486 $ 2,091 $ 0.92
Year Ended September 28, 2024:
Restructuring and impairment charges
$ (3,595) $ 293 $ (3,302) $ (1.78)TFCF and Hulu acquisition amortization (3)(1,677) 391 (1,286) (0.68)
Other expense
(65) 11 (54) (0.03)
Favorable adjustments related to prior-year tax matters
— 418 418 0.23
Total $ (5,337) $ 1,113 $ (4,224) $ (2.26)(1) Tax benefit (expense) is determined using the tax rate applicable to the individual item.
(2) EPS is net of noncontrolling interest, where applicable. Total may not equal the sum of the column due to rounding.
(3) Includes amortization of intangibles related to TFCF equity investees.
BUSINESS SEGMENT RESULTS
The Company evaluates the performance of its operating segments based on segment revenue and segment operating income.
Below is a discussion of the major revenue and expense categories for our business segments. Costs and expenses for each segment consist of operating expenses, selling, general, administrative and other costs, and depreciation and amortization. Selling, general, administrative and other costs include third-party and internal marketing expenses.Entertainment
The Entertainment segment generates revenue from film, episodic and other content that is produced and distributed across three lines of business:
• Linear Networks, which primarily generates revenue from affiliate fees and advertising• Direct-to-Consumer, which primarily generates revenue from subscription fees and advertising• Content Sales/Licensing, which primarily generates revenue from the distribution of films in the theatrical market, sale of film and episodic content in the TV/VOD and home entertainment markets, licensing of our music rights, sales of tickets to stage play performances and licensing of our IP for use in stage plays. Revenues also include an intersegment allocation of revenues from the Experiences segment, which is meant to reflect royalties on consumer products merchandise licensing revenues generated on IP created by the Entertainment segment.
Operating expenses at the Entertainment segment consist of the following:
• Programming and production costs, which include:
• Amortization of capitalized production costs and the costs of licensed programming rights
• Subscriber-based fees for programming the Hulu Live TV service, including fees paid by Hulu to ESPN and the Entertainment linear networks business for the right to air their linear networks on Hulu Live TV• Production costs related to live programming (primarily news)• Participations and residual expenses
35TABLE OF CONTENTS• Fees paid to ESPN to program certain sports content on ABC Network and Disney+
• Other operating expenses, which include technology support costs and distribution costs
Amortization of capitalized production costs and costs of licensed programming rights is generally allocated across Entertainment’s businesses based on the estimated relative value of the distribution windows. The initial costs of marketing campaigns are generally recognized in the business of initial exploitation. Certain other costs, such as technology, shared services and certain labor related costs, are allocated based on metrics designed to correlate with consumption.
Sports
The Sports segment primarily generates revenue from affiliate and subscription fees, advertising, pay-per-view fees and sub-licensing of sports rights. Operating expenses consist of programming and production costs and other operating expenses. Programming and production costs include amortization of licensed sports rights and production costs related to live sports and other sports-related programming. Other operating expenses include technology support costs and distribution costs.
Experiences
The Experiences segment primarily generates revenue from the sale of tickets for admissions to theme parks, the sale of food, beverage and merchandise at our theme parks and resorts, charges for room nights at hotels, sales of cruise vacations, sales and rentals of vacation club properties, royalties from licensing our IP for use on consumer goods and the sale of branded merchandise. Revenues are also generated from sponsorships and co-branding opportunities, real estate rent and sales, and royalties earned on Tokyo Disney Resort revenues. Expenses consist of operating labor, infrastructure costs, costs of goods sold and distribution costs, depreciation and other operating expenses. Infrastructure costs include technology support costs, repairs and maintenance, utilities and fuel, property taxes, retail occupancy costs, insurance and transportation. Other operating expenses include costs for such items as supplies, commissions and entertainment offerings.
EliminationsThe following transactions are recognized in segment revenues and eliminated in total Company revenue:• Fees paid by Hulu to ESPN and the Entertainment linear networks business for the right to air their networks on Hulu Live TV
• Fees paid by ABC Network and Disney+ to ESPN to program certain sports content on ABC Network and Disney+, respectively
BUSINESS SEGMENT RESULTS - 2025 vs. 2024
The following table presents revenues from our operating segments:($ in millions)2025 2024 % Change Better (Worse)Entertainment$ 42,466 $ 41,186 3 %Sports17,672 17,619 — %Experiences36,156 34,151 6 %Eliminations(1,869) (1,595) (17) %Revenues$ 94,425 $ 91,361 3 %
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The following table presents income from our operating segments and other components of income before income taxes:($ in millions)2025 2024 % Change Better (Worse)Entertainment operating income$ 4,674 $ 3,923 19 %Sports operating income2,882 2,406 20 %Experiences operating income9,995 9,272 8 %
Corporate and unallocated shared expenses ( 1,646 ) ( 1,435 ) (15) %
Equity in the loss of India joint venture ( 202 ) — nm
Restructuring and impairment charges
( 819 ) ( 3,595 ) 77 %
Other expense — ( 65 ) 100 %Interest expense, net( 1,305 ) ( 1,260 ) (4) %
TFCF and Hulu acquisition amortization ( 1,576 ) ( 1,677 ) 6 %
Income before income taxes
$ 12,003 $ 7,569 59 %EntertainmentRevenue and operating results for the Entertainment segment are as follows:($ in millions)2025 2024 % Change Better (Worse)Revenues:
Linear Networks$ 9,364 $ 10,692 (12) %
Direct-to-Consumer 24,614 22,776 8 %
Content Sales/Licensing and Other 8,488 7,718 10 %
$ 42,466 $ 41,186 3 %
Segment operating income:Linear Networks$ 2,955 $ 3,452 (14) %
Direct-to-Consumer 1,327 143 >100 %
Content Sales/Licensing and Other 392 328 20 %
$ 4,674 $ 3,923 19 %
Revenues
The increase in Entertainment revenues was due to an increase in subscription fees and higher content sales. These increases were partially offset by decreases in advertising revenue and affiliate fees due to the Star India Transaction.
Operating income
The increase in Entertainment operating income was due to growth at Direct-to-Consumer and, to a lesser extent, Content Sales/Licensing and Other, partially offset by a decrease at Linear Networks.
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TABLE OF CONTENTSLinear Networks
Operating results for Linear Networks are as follows:
($ in millions)2025 2024 % Change Better (Worse)RevenuesAffiliate fees $ 6,348 $ 6,872 (8) %
Advertising 2,856 3,676 (22) %
Other 160 144 11 %
Total revenues 9,364 10,692 (12) %
Operating expenses (4,433) (5,083) 13 %
Selling, general, administrative and other (2,329) (2,644) 12 %
Depreciation and amortization (92) (52) (77) %
Equity in the income of investees 445 539 (17) %
Operating Income $ 2,955 $ 3,452 (14) %
Revenues - Affiliate fees($ in millions)2025 2024 % Change Better (Worse)Domestic$ 5,744 $ 5,826 (1) %International604 1,046 (42) %
$ 6,348 $ 6,872 (8) %
The decrease in domestic affiliate revenue was due to a decline of 9% from fewer subscribers, partially offset by an increase of 7% from higher effective rates.
Lower international affiliate revenue was attributable to decreases of 29% from the Star India Transaction, 9% from lower effective rates and 4% from fewer subscribers.
Revenues - Advertising($ in millions)2025 2024 % Change Better (Worse)Domestic$ 2,457 $ 2,705 (9) %International399 971 (59) %
$ 2,856 $ 3,676 (22) %
The decrease in domestic advertising revenue was due to a decline of 8% from fewer impressions attributable to lower average viewership.
Lower international advertising revenue was attributable to a decrease of 55% from the Star India Transaction.
Operating Expenses($ in millions)2025 2024 % Change Better (Worse)Programming and production costsDomestic $ (3,343) $ (3,463) 3 %
International (413) (706) 42 %Total programming and production costs(3,756) (4,169) 10 %
Other operating expenses (677) (914) 26 %
$ (4,433) $ (5,083) 13 %
The decrease in domestic programming and production costs was driven by lower average cost non-scripted programming, partially offset by higher fees paid to the Sports segment to program sports content. Lower average cost non-scripted programming included the comparison to costs for airing of political news coverage and the Emmy Awards show in the prior year.
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International programming and production costs decreased due to the Star India Transaction.
The decrease in other operating expenses was primarily due to lower technology costs and a decrease from the Star India Transaction.
Selling, general, administrative and other
Selling, general, administrative and other costs decreased $315 million to $2,329 million from $2,644 million, due to the Star India Transaction, lower marketing costs and a favorable Foreign Exchange Impact.
Depreciation and amortization
Depreciation and amortization increased $40 million from $52 million to $92 million due to new assets placed in service.Equity in the Income of InvesteesIncome from equity investees decreased $94 million, to $445 million from $539 million, due to lower income from A+E attributable to decreases in affiliate and advertising revenue, partially offset by lower general and administrative and marketing costs.Operating Income from Linear NetworksOperating income decreased 14%, to $2,955 million from $3,452 million due to lower results at our international business as a result of the Star India Transaction and lower income from equity investees.
Supplemental revenue and operating incomeThe following table provides supplemental revenue and operating income detail for Linear Networks:
($ in millions)2025 2024 % Change Better (Worse)Supplemental revenue detail
Domestic$ 8,309 $ 8,621 (4) %International1,055 2,071 (49) %
$ 9,364 $ 10,692 (12) %Supplemental operating income detail
Domestic$ 2,378 $ 2,387 — %International132 526 (75) %
Equity in the income of investees 445 539 (17) %
$ 2,955 $ 3,452 (14) %Direct-to-Consumer
Operating results for Direct-to-Consumer are as follows:
($ in millions)2025 2024 % Change Better (Worse)RevenuesSubscription fees $ 20,772 $ 18,796 11 %
Advertising 3,684 3,707 (1) %Other158 273 (42) %
Total revenues 24,614 22,776 8 %
Operating expenses (18,263) (17,748) (3) %
Selling, general, administrative and other (4,658) (4,574) (2) %
Depreciation and amortization (366) (311) (18) %
Operating Income
$ 1,327 $ 143 >100 %
Revenues - Subscription fees
Growth in subscription fees was due to increases of 8% attributable to higher effective rates reflecting increases in pricing and 4% from more subscribers, partially offset by decreases of 1% from an unfavorable movement of the U.S. dollar against major currencies (Foreign Exchange Impact) and 1% from the Star India Transaction.
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Revenues - Advertising
Advertising revenue was comparable to the prior year, as decreases of 9% from lower rates and 8% from the Star India Transaction were largely offset by an increase of 15% from higher impressions.
Revenues - Other
The decrease in other revenue was primarily due to lower recognition of minimum guarantee shortfalls from wholesale distributors and an unfavorable Foreign Exchange Impact.
Key Metrics (1)
Paid subscribers at:
(in millions) September 27, 2025 September 28, 2024 % Change Better (Worse)Disney+Domestic (U.S. and Canada) (2)
59.3 56.0 6 %
International (3)
72.4 69.3 4 %
Disney+ (3)(4)
131.6 125.3 5 %HuluSVOD Only 59.7 47.4 26 %
Live TV + SVOD 4.4 4.6 (4) %
Total Hulu (2)(4)
64.1 52.0 23 %
Average Monthly Revenue Per Paid Subscriber for the fiscal year ended:
2025 2024 % Change Better (Worse)Disney+Domestic (U.S. and Canada) $ 8.06 $ 7.89 2 %
International (3)
7.59 6.38 19 %
Disney+ (3)
7.81 7.04 11 %HuluSVOD Only 12.36 12.35 — %
Live TV + SVOD 99.85 95.12 5 %
(1) See discussion on page 55 —Entertainment DTC Product Descriptions and Key Definitions
(2) Includes 43.7 million and 27.1 million subscribers to bundles that have both Disney+ and Hulu as of September 27, 2025 and September 28, 2024, respectively.
(3) The prior year Paid Subscribers and Average Monthly Revenue per Paid Subscriber have been adjusted to include Disney+ subscribers in Southeast Asia. These subscribers were previously reported with Disney+ Hotstar, which is no longer presented as this business was included in the Star India Transaction.
(4) Total may not equal the sum of the column due to rounding.
Domestic Disney+ average monthly revenue per paid subscriber increased from $7.89 to $8.06 due to increases in pricing, partially offset by the impact of subscriber mix shifts.
International Disney+ average monthly revenue per paid subscriber increased from $6.38 to $7.59 due to increases in pricing, partially offset by the impact of subscriber mix shifts.
Hulu SVOD Only average monthly revenue per paid subscriber was comparable to the prior year as increases in pricing were offset by lower advertising revenue and the impact of subscriber mix shifts.
Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $95.12 to $99.85 due to increases in pricing, partially offset by the impact of subscriber mix shifts and lower advertising revenue.
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Operating Expenses($ in millions)2025 2024 % Change Better (Worse)Programming and production costsHulu $ (9,018) $ (8,582) (5) %
Disney+
(5,239) (5,499) 5 %
Total programming and production costs (14,257) (14,081) (1) %
Other operating expense (4,006) (3,667) (9) %
$ (18,263) $ (17,748) (3) %
Higher programming and production costs at Hulu were due to higher subscriber-based license fees, which reflected rate increases for Hulu Live TV programming and more subscribers to bundles with third-party offerings.
The decrease in programming and production costs at Disney+ was due to the impact of the Star India Transaction, partially offset by more hours of content available.
Other operating expenses increased due to higher technology and distribution costs.
Selling, general, administrative and other
Selling, general, administrative and other costs increased $84 million, to $4,658 million from $4,574 million, primarily attributable to increases in marketing and labor costs, partially offset by the impact of the Star India Transaction.
Depreciation and amortization
Depreciation and amortization increased $55 million, to $366 million from $311 million, due to increased investment in technology assets.
Operating Income from Direct-to-Consumer
Operating income from Direct-to-Consumer increased $1,184 million, to $1,327 million from $143 million due to increases at Disney+ and Hulu.Content Sales/Licensing and Other
Operating results for Content Sales/Licensing and Other are as follows:
($ in millions)2025 2024 % Change Better (Worse)RevenuesTV/VOD and home entertainment distribution
$ 3,458 $ 3,008 15 %
Theatrical distribution 2,592 2,266 14 %
Other 2,438 2,444 — %
Total revenues 8,488 7,718 10 %
Operating expenses (4,977) (4,901) (2) %
Selling, general, administrative and other (2,746) (2,108) (30) %
Depreciation and amortization (367) (371) 1 %
Equity in the loss of investees
(6) (10) 40 %
Operating Income
$ 392 $ 328 20 %
Revenues - TV/VOD and home entertainment distribution
The increase in TV/VOD and home entertainment distribution revenue was primarily due to higher TV/VOD sales of episodic content and an increase in home entertainment distribution revenue. The increase in home entertainment distribution revenue was due to higher electronic distribution revenue, partially offset by a decrease in physical distribution revenue attributable to a shift to licensing physical distribution rights.
Revenues - Theatrical distribution
The increase in theatrical distribution revenue was due to more releases in the current year compared to the prior year. Titles in the current year included Moana 2 , Lilo & Stitch , Mufasa: The Lion King , The Fantastic Four: First Steps , Captain
41TABLE OF CONTENTSAmerica: Brave New World , Thunderbolts* and Snow White compared to Inside Out 2, Deadpool & Wolverine , Kingdom of the Planet of the Apes , Alien: Romulus, Wish and The Marvels in the prior year.
Revenues - Other
Other revenue was comparable to the prior year as lower revenue from stage plays as a result of fewer performances was partially offset by a favorable Foreign Exchange Impact, higher music revenue and increased revenue from Lucasfilm’s special effects business driven by more projects.
Operating expenses
($ in millions)
2025 2024 % Change Better (Worse)
Programming and production costs $ (4,260) $ (4,135) (3) %
Other operating expenses
(717) (766) 6 %
$ (4,977) $ (4,901) (2) %
The increase in programming and production costs was due to higher production cost amortization attributable to the increases in distribution revenues, partially offset by lower film cost impairments and fewer stage play performances.
The decrease in other operating expenses reflected lower distribution costs and costs of goods sold due to the shift to licensing physical home entertainment distribution rights.
Selling, general, administrative and other
Selling, general, administrative and other costs increased $638 million, to $2,746 million from $2,108 million, primarily due to higher theatrical marketing costs.
Operating Income from Content Sales/Licensing and Other
Operating income increased $64 million, to $392 million from $328 million due to lower film cost impairments and higher TV/VOD and home entertainment distribution results, partially offset by a decrease in theatrical distribution results.Items Excluded from Segment Operating Income Related to Entertainment
The following table presents supplemental information for items related to Entertainment that are excluded from segment operating income:
($ in millions)2025 2024 % Change Better (Worse)
TFCF and Hulu acquisition amortization (1)
$ (1,273) $ (1,337) 5 %
Restructuring and impairment charges (2)
(744) (1,670) 55 %
(1) In fiscal 2025, amortization of step-up on film and television costs was $260 million and amortization of intangible assets was $1,004 million. In fiscal 2024, amortization of step-up on film and television costs was $271 million and amortization of intangible assets was $1,054 million.
(2) Fiscal 2025 includes $635 million for impairments of equity investments and $109 million for content impairments. Fiscal 2024 includes $1,287 million for goodwill impairments related to our general entertainment linear networks, $187 million for content impairments, $158 million for impairment of an equity investment and $38 million of severance.
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TABLE OF CONTENTSSportsOperating results for the Sports segment are as follows:($ in millions)2025 2024 % Change Better (Worse)RevenuesAffiliate and subscription fees
$ 11,944 $ 12,068 (1) %
Advertising 4,444 4,388 1 %Other1,284 1,163 10 %
Total revenues 17,672 17,619 — %
Operating expenses (13,478) (13,934) 3 %
Selling, general, administrative and other (1,331) (1,298) (3) %
Depreciation and amortization (48) (39) (23) %
Equity in the income of investees 67 58 16 %
Operating Income $ 2,882 $ 2,406 20 %
Revenues - Affiliate and subscription fees($ in millions)2025 2024 % Change Better (Worse)ESPNDomestic $ 10,837 $ 10,781 1 %
International 1,076 1,049 3 %
11,913 11,830 1 %
Star India
31 238 (87) %
$ 11,944 $ 12,068 (1) %
Domestic ESPN affiliate and subscription fees were comparable to the prior year as an increase of 7% from higher effective rates was offset by a decrease of 7% from fewer subscribers.
International ESPN affiliate fees reflected higher effective rates, partially offset by decreases from an unfavorable Foreign Exchange Impact and fewer subscribers.
The decrease in Star India affiliate fees was due to the Star India Transaction.
Revenues - Advertising
($ in millions)
2025 2024 % Change Better (Worse)
ESPN
Domestic $ 4,273 $ 3,763 14 %
International 167 181 (8) %
4,440 3,944 13 %
Star India
4 444 (99) %
$ 4,444 $ 4,388 1 %
The increase in domestic ESPN advertising revenue was due to an increase of 13% from higher rates. The increase in advertising revenue included the benefit of expanded college football programming including four additional College Football Playoff (CFP) games.43
TABLE OF CONTENTSRevenues - Other
Other revenue increased $121 million, to $1,284 million from $1,163 million, due to higher fees received from the Entertainment segment to program sports content on Disney+ and ABC. Sub-licensing fees were comparable to the prior year as the comparison to fees from Star India sub-licensing of ICC programming in the prior year was offset by fees from sub-licensing CFP programming rights for two games in the current year.
Operating expenses($ in millions)2025 2024 % Change Better (Worse)Programming and production costs
ESPNDomestic $ (11,240) $ (10,435) (8) %
International (1,235) (1,194) (3) %
(12,475) (11,629) (7) %
Star India (17) (1,354) 99 %
(12,492) (12,983) 4 %
Other operating expenses (986) (951) (4) %
$ (13,478) $ (13,934) 3 %
Domestic ESPN programming and production costs increased primarily due to expanded college football programming rights and contractual rate increases.
The increase in international ESPN programming and production costs was attributable to higher soccer rights costs.
The increase in other operating expense was attributable to higher technology costs.
Selling, general, administrative and other
Selling, general, administrative and other costs increased $33 million, to $1,331 million from $1,298 million, due to higher marketing costs and the write-off of an investment, partially offset by the Star India Transaction. The increase in marketing costs was driven by the August 2025 launch of the ESPN DTC service.
Operating Income from Sports
Segment operating income increased $476 million, to $2,882 million from $2,406 million, due to the Star India Transaction and an improvement at international ESPN, partially offset by a decrease at domestic ESPN.44
TABLE OF CONTENTSSupplemental revenue and operating income
The following table provides supplemental revenue and operating income (loss) detail for the Sports segment:($ in millions)2025 2024 % Change Better (Worse)Supplemental revenue detail
ESPNDomestic $ 16,085 $ 15,339 5 %
International 1,548 1,439 8 %
17,633 16,778 5 %
Star India
39 841 (95) %
$ 17,672 $ 17,619 — %Supplemental operating income (loss) detail
ESPNDomestic $ 2,801 $ 3,056 (8) %
International 5 (72) nm
2,806 2,984 (6) %
Star India
9 (636) nm
Equity in the income of investees 67 58 16 %
$ 2,882 $ 2,406 20 %Items Excluded from Segment Operating Income Related to Sports
The following table presents supplemental information for items related to Sports that are excluded from segment operating income:
($ in millions)2025 2024 % Change Better (Worse)TFCF acquisition amortization (1)$ (296) $ (333) 11 %
Restructuring and impairment charges
— (12) 100 %(1) Represents amortization of intangible assets.ExperiencesOperating results for the Experiences segment are as follows:($ in millions)2025 2024 % Change Better (Worse)RevenuesTheme park admissions $ 11,707 $ 11,171 5 %
Resorts and vacations 9,210 8,375 10 %
Parks & Experiences merchandise, food and beverage 8,491 8,039 6 %
Merchandise licensing and retail 4,387 4,307 2 %
Parks licensing and other 2,361 2,259 5 %
Total revenues 36,156 34,151 6 %
Operating expenses (19,224) (18,356) (5) %
Selling, general, administrative and other (4,114) (3,944) (4) %
Depreciation and amortization (2,823) (2,579) (9) %
Operating Income $ 9,995 $ 9,272 8 %
Revenues - Theme park admissions
The increase in theme park admissions revenue was due to an increase of 4% from higher average per capita ticket revenue.
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Revenues - Resorts and vacations
Growth in resorts and vacations revenue was primarily attributable to increases of 5% from additional passenger cruise days, 2% from higher occupied hotel room nights and 1% from increased unit sales at Disney Vacation Club. The increase in passenger cruise days reflected the launch of the Disney Treasure in the first quarter of the current year.
Revenues - Parks & Experiences merchandise, food and beverage
Parks & Experiences merchandise, food and beverage revenue growth was primarily due to increases of 3% from higher average guest spending and 1% from volume growth.
Revenues - Merchandise licensing and retail
Higher merchandise licensing and retail revenue was due to an increase of 3% from merchandise licensing, partially offset by a decrease of 1% from an unfavorable Foreign Exchange Impact.
Revenues - Parks licensing and other
The increase in parks licensing and other revenue was driven by sponsorship and co-branding revenue growth, higher real estate sales and an increase in royalties from Tokyo Disney Resort, partially offset by an unfavorable Foreign Exchange Impact.
Key MetricsIn addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our theme parks and resorts, and we believe these metrics are useful to investors in analyzing the business :
Domestic International (1)2025 2024 2025 2024Parks
Increase (decrease)
Attendance (2)(1) % 1 % 1 % 9 %Per Capita Guest Spending (3)5 % 3 % 2 % 4 %Hotels
Occupancy (4)87 % 85 % 87 % 82 %Available Room Nights (in thousands) (5)10,236 10,193 3,173 3,178Change in Per Room Guest Spending (6)3 % 3 % 6 % 2 %(1) Per capita guest spending growth rate and per room guest spending growth rate exclude the impact of changes in foreign currency exchange rates.(2) Attendance is used to analyze volume trends at our theme parks and is based on the number of unique daily entries, i.e. a person visiting multiple theme parks in a single day is counted only once. Our attendance count includes complimentary entries but excludes entries by children under the age of three.(3) Per capita guest spending is used to analyze guest spending trends and is defined as total revenue from ticket sales and sales of food, beverage and merchandise in our theme parks, divided by total theme park attendance.
(4) Occupancy is used to analyze the usage of available capacity at hotels and is defined as the number of room nights occupied by guests as a percentage of available hotel room nights.
(5) Available hotel room nights are defined as the total number of room nights that are available at our hotels and at DVC properties located at our theme parks and resorts that are not utilized by DVC members. Available hotel room nights include rooms temporarily taken out of service.(6) Per room guest spending is used to analyze guest spending at our hotels and is defined as total revenue from room rentals and sales of food, beverage and merchandise at our hotels, divided by total occupied hotel room nights.
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Operating expenses($ in millions)2025 2024 % Change Better (Worse)
Operating labor $ (8,948) $ (8,392) (7) %
Infrastructure costs (3,511) (3,363) (4) %
Cost of goods sold and distribution costs (3,253) (3,319) 2 %
Other operating expenses (3,512) (3,282) (7) %
$ (19,224) $ (18,356) (5) %
The increase in operating labor was due to inflation, new guest offerings and higher volumes. Higher infrastructure costs were primarily attributable to higher technology spending, new guest offerings and an increase in operations support costs, partially offset by cost management initiatives. The increase in other operating expenses was primarily attributable to new guest offerings, higher volumes and increased operations support costs, partially offset by cost management initiatives.
Selling, general, administrative and other
Selling, general, administrative and other costs increased $170 million from $3,944 million to $4,114 million, primarily due to higher marketing costs.
Depreciation and amortization
Depreciation and amortization increased $244 million from $2,579 million to $2,823 million, primarily due to higher depreciation at our domestic parks and experiences driven by an increase at Disney Cruise Line.
Operating Income from Experiences
Segment operating income increased $723 million, from $9,272 million to $9,995 million due to growth at domestic parks and experiences and, to a lesser extent, consumer products and international parks and experiences.
Supplemental revenue and operating incomeThe following table presents supplemental revenue and operating income detail for the Experiences segment:
($ in millions)2025 2024 % Change Better (Worse)Supplemental revenue detail
Parks & ExperiencesDomestic $ 25,191 $ 23,596 7 %
International 6,520 6,183 5 %Consumer Products4,445 4,372 2 %
$ 36,156 $ 34,151 6 %Supplemental operating income detailParks & ExperiencesDomestic $ 6,375 $ 5,878 8 %
International 1,442 1,354 6 %Consumer Products2,178 2,040 7 %
$ 9,995 $ 9,272 8 %Items Excluded from Segment Operating Income Related to Experiences
The following table presents supplemental information for items related to Experiences that are excluded from segment operating income:
($ in millions)2025 2024 % Change Better (Worse)TFCF acquisition amortization$ (7) $ (7) — %
Restructuring and impairment charges (1)
— (331) 100 %
Charge related to a legal ruling
— (65) 100 %
(1) Charges for the prior year were due to an impairment of assets at our retail business.
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CORPORATE AND UNALLOCATED SHARED EXPENSES
Corporate and unallocated shared expenses are as follows:($ in millions)2025 2024 % Change Better (Worse)
Corporate and unallocated shared expenses $ (1,646) $ (1,435) (15) %
The increase in corporate and unallocated shared expenses was primarily due to legal settlements, higher compensation and human resource-related costs, partially offset by a gain on a land sale.LIQUIDITY AND CAPITAL RESOURCES
The change in cash, cash equivalents and restricted cash is as follows:
($ in millions)2025 2024
Cash provided by operations
$ 18,101 $ 13,971
Cash used in investing activities
( 8,043 ) ( 6,881 )
Cash used in financing activities
( 10,366 ) ( 15,288 )Impact of exchange rates on cash, cash equivalents and restricted cash5 65
Change in cash, cash equivalents and restricted cash $ (303) $ (8,133)Operating ActivitiesCash provided by operations increased 30% or $4.1 billion to $18.1 billion in the current year compared to $14.0 billion in the prior year. The increase was due to lower tax payments in the current year compared to the prior year and higher operating cash flows at Entertainment and, to a lesser extent, Experiences. Tax payments in the prior year reflected the payment of fiscal 2023 U.S. federal and California state income taxes that had been deferred pursuant to relief related to 2023 winter storms in California. In addition, payments for fiscal 2025 U.S. federal and California state income tax liabilities were deferred until October 2025 pursuant to relief related to the 2025 wildfires in California. The increase in operating cash flows at Entertainment was primarily due to higher cash receipts, primarily attributable to higher revenue, and to a lesser extent, lower spending on content due to the impact of the Star India Transaction, partially offset by higher operating cash disbursements attributable to higher operating expenses. The increase in operating cash flows at Experiences was due to higher cash receipts attributable to higher revenue, partially offset by higher operating cash disbursements primarily due to higher operating expenses.Depreciation expense is as follows:
($ in millions)2025 2024Entertainment$ 773 $ 681Sports48 39ExperiencesDomestic 1,933 1,744
International 782 726Total Experiences2,715 2,470
Corporate 323 244
Total depreciation expense $ 3,859 $ 3,434Amortization of intangible assets is as follows:
($ in millions)2025 2024Entertainment$ 52 $ 53Experiences108 109
TFCF and Hulu 1,307 1,394
Total amortization of intangible assets $ 1,467 $ 1,556Produced and licensed content costsThe Entertainment and Sports segments incur costs to produce and license film, episodic, sports and other content. Production costs include spend on content internally produced at our studios such as live-action and animated films and
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episodic series. Production costs also include original content commissioned from third-party studios. Programming costs include content rights licensed from third parties for use on the Company’s sports and general entertainment networks and DTC streaming services. Programming assets are generally recorded when the programming becomes available to us with a corresponding increase in programming liabilities.
The Company’s production and programming activity for fiscal 2025 and 2024 are as follows:($ in millions)2025 2024Beginning balances:Production and programming assets $ 34,409 $ 36,593
Programming liabilities (3,692) (3,792)
30,717 32,801Spending:Licensed programming and rights 12,887 13,619
Produced content 9,822 9,816
22,709 23,435Amortization:Licensed programming and rights (12,876) (14,027)
Produced content (10,410) (10,454)
(23,286) (24,481)
Change in production and programming costs (577) (1,046)
Content impairment
(109) (187)
Produced and licensed content reclassified to assets held for sale
— (1,084)
Other non-cash activity 6 233Ending balances:Production and programming assets 33,390 34,409
Programming liabilities (3,353) (3,692)
$ 30,037 $ 30,717
The Company currently expects its fiscal 2026 spend on produced and licensed content to be approximately $24 billion including sports rights. See Note 14 to the Consolidated Financial Statements for information regarding the Company’s contractual commitments to acquire sports and broadcast programming.Commitments and guarantees
The Company has various commitments and guarantees, such as long-term leases, purchase commitments and other executory contracts, that are disclosed in the footnotes to the financial statements. See Notes 14 and 15 to the Consolidated Financial Statements for further information regarding these commitments.
Legal and Tax Matters
As disclosed in Notes 9 and 14 to the Consolidated Financial Statements, the Company has exposure for certain tax and legal matters.49
TABLE OF CONTENTSInvesting ActivitiesInvesting activities, which consist principally of investments in parks, resorts and other property and acquisition and divestiture activity, for fiscal 2025 and 2024 are as follows:($ in millions)2025 2024Entertainment$ (1,155) $ (977)Sports(3) (10)ExperiencesDomestic (5,271) (2,710)
International (1,158) (949)Total Experiences(6,429) (3,659)
Corporate (437) (766)
Total investments in parks, resorts and other property
(8,024) (5,412)
Cash used in other investing activities, net
(19) (1,469)
Cash used in investing activities
$ (8,043) $ (6,881)
Investments in Parks, Resorts and Other Property
Capital expenditures at Entertainment primarily reflect investments in technology and in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities.
Capital expenditures at Experiences are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and systems infrastructure. The increase in capital expenditures in fiscal 2025 compared to fiscal 2024 was due to higher spending on cruise ship fleet expansion, theme park and resort expansion and new attractions.
Capital expenditures at Corporate primarily reflect investments in facilities, information technology infrastructure and equipment. The decrease in fiscal 2025 compared to fiscal 2024 was due to lower spending on facilities.
The Company currently expects its fiscal 2026 capital expenditures to total approximately $9 billion compared to fiscal 2025 capital expenditures of $8 billion. The projected increase in capital expenditures is primarily due to higher spending at Experiences, attributable to theme park and resort expansion and new attractions, partially offset by lower spending on cruise ship fleet expansion.
Other Investing Activities
Cash used in other investing activities was $1.5 billion in fiscal 2024 reflecting an investment in Epic Games, Inc.Financing ActivitiesFinancing activities for fiscal 2025 and 2024 are as follows:($ in millions)2025 2024Change in borrowings$ (3,621) $ (1,400)
Dividends
( 1,803 ) ( 1,366 )
Repurchases of common stock
( 3,500 ) ( 2,992 )
Activities related to noncontrolling and redeemable noncontrolling interests (1)
(1,032) (9,156)
Cash used in other financing activities, net (2)
(410) (374)
Cash used in financing activities
$ (10,366) $ (15,288)
(1) Activities related to noncontrolling and redeemable noncontrolling interests in the current year were due to $0.6 billion of dividend payments to noncontrolling interest holders and $0.4 billion related to an incremental amount paid by the Company for Hulu based on the final appraisal of Hulu’s fair value. Activities in the prior year were due to an $8.6 billion payment for Hulu’s redeemable noncontrolling interest and $0.5 billion of dividend payments to noncontrolling interest holders (see Note 4 to the Consolidated Financial Statements for additional information on Hulu).
(2) Primarily consists of equity award activity.
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Borrowings activities and otherDuring the year ended September 27, 2025, the Company’s borrowing activity was as follows:($ in millions)September 28, 2024 Borrowings Payments Other Activity September 27, 2025Commercial paper with original maturities less than three months (1)$ 727 $ 1,232 $ — $ 4 $ 1,963Commercial paper with original maturities greater than three months2,313 1,129 ( 3,304 ) ( 39 ) 99U.S. dollar denominated notes (2)40,496 1,057 (2,742) (153) 38,658Asia Theme Parks borrowings (3)1,292 — (68) (149) 1,075Foreign currency denominated debt and other (4)987 — (925) 169 231
$ 45,815 $ 3,418 $ (7,039) $ (168) $ 42,026(1) Borrowings and reductions of borrowings are reported net.
(2) The other activity is primarily due to the amortization of purchase accounting adjustments and debt issuance fees.
(3) See Note 6 to the Consolidated Financial Statements for information regarding commitments to fund the Asia Theme Parks.(4) The other activity is attributable to market value adjustments for debt with qualifying hedges.
See Note 8 to the Consolidated Financial Statements for a summary of the Company’s borrowing activities in fiscal 2025 and information regarding the Company’s bank facilities. The Company may use cash balances, operating cash flows, commercial paper borrowings up to the amount of its unused $12.25 billion bank facilities and incremental term debt issuances to retire or refinance other borrowings before or as they come due.
See Note 11 to the Consolidated Financial Statements for a summary of dividends and share repurchases in fiscal 2025 and 2024. On November 13, 2025, the Company declared a dividend of $1.50 per share (or approximately $2.6 billion), payable in two semi-annual installments of $0.75 per share on January 15, 2026 and July 22, 2026. The Company is targeting a total of $7 billion in share repurchases in fiscal 2026.
The redeemable noncontrolling interest activity in the current and prior year was attributable to the acquisition of NBCU’s interest in Hulu. In June 2025, the Company paid an incremental amount for Hulu based on a final appraisal of Hulu’s fair value (see Note 4 to the Consolidated Financial Statements).
The Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its control. We believe that the Company’s financial condition is strong and that its cash balances, other liquid assets, operating cash flows, access to debt and equity capital markets and borrowing capacity under current bank facilities, taken together, provide adequate resources to fund ongoing operating requirements, contractual obligations, upcoming debt maturities as well as future capital expenditures related to the expansion of existing businesses and development of new projects. In addition, the Company could undertake other measures to ensure sufficient liquidity, such as raising additional financing, reducing or not declaring future dividends; reducing or stopping share repurchases; reducing capital spending; reducing film and episodic content investments; or implementing further cost-saving initiatives.
The Company’s borrowing costs can also be impacted by short- and long-term debt ratings assigned by nationally recognized rating agencies, which are based, in significant part, on the Company’s performance as measured by certain credit metrics such as leverage and interest coverage ratios. As of September 27, 2025, Moody’s Ratings’ long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, and S&P Global Ratings’ long- and short-term debt ratings for the Company were A and A-1 (Stable). On September 29, 2025, Fitch Ratings’ affirmed the long- and short-term debt ratings for the Company of A- and F2 (Stable), respectively, withdrew the debt ratings for commercial reasons and will no longer provide ratings for the Company. The Company’s bank facilities contain only one financial covenant, relating to interest coverage of three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs. On September 27, 2025, the Company met this covenant by a significant margin. The Company’s bank facilities also specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default.
TRENDS AND UNCERTAINTIES
To drive growth at our sports and entertainment businesses, we are, among other things, making strategic investments in our DTC offerings. Although there can be no assurances these investments will be successful, we expect that they will lead to growth in subscription fees and advertising revenues that will more than offset impacts on affiliate fees and advertising revenue from declines in linear network subscribers and the related decrease in average viewership, which we expect will continue.
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In addition, the future effects of evolving macroeconomic, trade and travel conditions, including as a result of evolving international political developments, trade policies and consumer spending dynamics are unknown and, depending on how these conditions develop, could adversely affect demand for and availability of our products and services, increase our costs to provide products and services and have a negative impact on our results of operations.
See also Item 1A - Risk Factors.CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We believe that the application of the following accounting policies, which are important to our financial position and results of operations, require significant judgments and estimates on the part of management. For a summary of our significant accounting policies, including the accounting policies discussed below, see Note 2 to the Consolidated Financial Statements.
Produced and Acquired/Licensed Content Costs
We amortize and test for impairment capitalized film and television production costs based on whether the content is predominantly monetized individually or as a group. See Note 2 to the Consolidated Financial Statements for further discussion.
Production costs that are classified as individual are amortized based upon the ratio of the current period’s revenues to the estimated remaining total revenues (Ultimate Revenues).With respect to produced films intended for theatrical release, the most sensitive factor affecting our estimate of Ultimate Revenues is theatrical performance. Revenues derived from other markets subsequent to the theatrical release are generally highly correlated with theatrical performance. Theatrical performance varies primarily based upon the public interest and demand for a particular film, the popularity of competing films at the time of release and the level of marketing effort. Upon a film’s release and determination of the theatrical performance, the Company’s estimates of revenues from succeeding windows and markets, which may include imputed license fees for content that is used on our DTC streaming services, are revised based on historical relationships and an analysis of current market trends.
With respect to capitalized television production costs that are classified as individual, the most sensitive factor affecting estimates of Ultimate Revenues is program ratings of the content on our licensees’ platforms. Program ratings, which are an indication of market acceptance, directly affect the program’s ability to generate advertising and subscriber revenues and are correlated with the license fees we can charge for the content in subsequent windows and for subsequent seasons.
Ultimate Revenues are reassessed each reporting period and the impact of any changes on amortization of production cost is accounted for as if the change occurred at the beginning of the current fiscal year. If our estimate of Ultimate Revenues decreases, amortization of costs may be accelerated or result in an impairment. Conversely, if our estimate of Ultimate Revenues increases, cost amortization may be slowed.
Production costs classified as individual are tested for impairment at the individual title level by comparing that title’s unamortized costs to the present value of discounted cash flows directly attributable to the title. To the extent the title’s unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess.
Produced content costs that are part of a group and acquired/licensed content costs are amortized based on projected usage, typically resulting in an accelerated or straight-line amortization pattern. The determination of projected usage requires judgment and is reviewed on a regular basis for changes. Adjustments to projected usage are applied prospectively in the period of the change. Historical viewing patterns are the most significant input into determining the projected usage, and significant judgment is required in using historical viewing patterns to derive projected usage. If projected usage changes we may need to accelerate or slow the recognition of amortization expense.Cost of content that is predominantly monetized as a group is tested for impairment whenever events or changes in circumstances indicate that the fair value of the group may be less than its unamortized costs by comparing the present value of the discounted cash flows of the group to the aggregate unamortized costs of the group. The group is established by identifying the lowest level for which cash flows are independent of the cash flows of other produced and licensed content. If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group. If there are no plans to continue to use an individual film or television program that is part of a group, the unamortized cost of the individual title is written down to its estimated fair value. Licensed content is included as part of the group within which it is monetized for purposes of impairment testing.
The amortization of multi-year sports rights is based on projections of revenues for each season relative to projections of total revenues over the contract period (estimated relative value). Projected revenues include advertising revenue and an allocation of affiliate revenue. If the annual contractual payments related to each season approximate each season’s estimated
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relative value, we expense the related contractual payments during the applicable season. If estimated relative values by year were to change significantly, amortization of our sports rights costs may be accelerated or slowed.Revenue Recognition
The Company has revenue recognition policies for its various operating segments that are appropriate to the circumstances of each business. Refer to Note 2 to the Consolidated Financial Statements for our revenue recognition policies.
Pension and Postretirement Medical Plan Actuarial Assumptions
The Company’s pension and postretirement medical benefit obligations and related costs are calculated using a number of actuarial assumptions. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and/or liability measurement, which we evaluate annually. Other assumptions include the healthcare cost trend rate and employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increase.The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date. A lower discount rate increases the present value of benefit obligations and increases pension and postretirement medical expense. The guideline for setting this rate is a high-quality long-term corporate bond rate. We increased our discount rate to 5.45% at the end of fiscal 2025 from 5.06 % at the end of fiscal 2024 to reflect market interest rate conditions at our fiscal 2025 year-end measurement date. The Company’s discount rate was determined by considering yield curves constructed of a large population of high-quality corporate bonds and reflects the matching of the plans’ liability cash flows to the yield curves. A one percentage point decrease in the assumed discount rate would increase total benefit expense for fiscal 2026 by approximately $0.1 billion and would increase the projected benefit obligation at September 27, 2025 by approximately $2.1 billion. A one percentage point increase in the assumed discount rate would have a negligible impact on total benefit expense and decrease the projected benefit obligation by approximately $1.9 billion.
To determine the expected long-term rate of return on the plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. Our expected return on plan assets is 7.25%. A lower expected rate of return on plan assets will increase pension and postretirement medical expense. A one percentage point change in the long-term asset return assumption would impact fiscal 2026 annual expense by approximately $ 177 million.Goodwill, Other Intangible Assets, Long-Lived Assets and Investments
The Company is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and if current events or circumstances require, on an interim basis. The Company performs its annual test of goodwill and indefinite-lived intangible assets for impairment in its fiscal fourth quarter.
Goodwill is allocated to various reporting units, which are an operating segment or one level below the operating segment. To test goodwill for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of a reporting unit exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows of the reporting unit.The quantitative assessment compares the fair value of each reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the amount of goodwill allocated to the reporting unit.
The impairment test for goodwill requires judgment related to the identification of reporting units, determining whether reporting units should be aggregated, the assignment of assets and liabilities including goodwill to reporting units, and the determination of fair value of the reporting units.
When performing a quantitative assessment, we generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate to determine the fair value of our reporting units. The discounted cash flow analyses are sensitive to our estimated projected future cash flows as well as the discount rates used to calculate their present value. Our future cash flows are based on internal forecasts for each reporting unit, which consider projected inflation and other economic indicators, as well as industry growth projections. Discount rates are determined based on the inherent risks of the underlying operations.
Significant judgments and assumptions in the discounted cash flow model used to determine fair value relate to future revenues and certain operating expenses, operating margins, terminal growth rates and discount rates. We believe our estimates are consistent with how a marketplace participant would value our businesses. Changes to these assumptions and shifts in market trends or macroeconomic events could impact test results in the future.
53TABLE OF CONTENTSIn fiscal 2025, the Company performed a qualitative assessment of goodwill for impairment. Based on this assessment, we concluded that it was more likely than not that the estimated fair values of our reporting units were higher than their carrying values and that the performance of a quantitative impairment test was not required.
As discussed in Note 18 to the Consolidated Financial Statements, in fiscal 2024, the Company recorded non-cash goodwill impairment charges of $1.3 billion related to our entertainment linear networks reporting unit.
To test other indefinite-lived intangible assets for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of each of its indefinite-lived intangible assets exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows.
The quantitative assessment compares the fair value of an indefinite-lived intangible asset to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess. Fair values of indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate.
The Company tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to hold the asset for sale. The impairment test for assets held for use requires a comparison of the estimated undiscounted future cash flows expected to be generated over the useful life of the significant assets of an asset group to the carrying amount of the asset group. An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the asset group and the carrying amount of the asset group. For assets held for sale, to the extent the carrying amount is greater than the asset’s fair value less costs to sell, an impairment loss is recognized for the difference. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, estimates of future cash flows and the discount rate used to determine fair values.As discussed in Note 4 to the Consolidated Financial Statements, the Company recorded non-cash impairment charges of $0.1 billion and $1.5 billion related to the Star India Transaction in fiscal 2025 and 2024, respectively, to reflect Star India at its estimated fair value less costs to sell.The Company has investments in equity securities. For equity securities that do not have a readily determinable fair value, we consider forecasted financial performance of the investee companies, as well as volatility inherent in the external markets for these investments. If these forecasts are not met, impairment charges may be recorded.The Company tested its indefinite-lived intangible assets, long-lived assets and investments for impairment and recorded non-cash impairment charges of $0.8 billion and $0.7 billion in fiscal 2025 and 2024, respectively. The fiscal 2025 charges related to impairments of equity investments and content assets. The fiscal 2024 charges related to impairments of retail assets, content assets and equity investments. See Note 18 to the Consolidated Financial Statements for additional information.Allowance for Credit LossesWe evaluate our allowance for credit losses and estimate collectability of accounts receivable based on historical bad debt experience, our assessment of the financial condition of individual companies with which we do business, current market conditions, and reasonable and supportable forecasts of future economic conditions. In times of economic turmoil our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods. If our estimate of uncollectible accounts is too low, costs and expenses may increase in future periods, and if it is too high, costs and expenses may decrease in future periods. See Note 2 to the Consolidated Financial Statements for additional discussion.Contingencies and LitigationWe are currently involved in certain legal proceedings and, as required, have accrued estimates of the probable and estimable losses for the resolution of these proceedings. These estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and have been developed in consultation with outside counsel as appropriate. From time to time, we are also involved in other contingent matters for which we accrue estimates for a probable and estimable loss. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to legal proceedings or our
54TABLE OF CONTENTSassumptions regarding other contingent matters. See Note 14 to the Consolidated Financial Statements for more information on litigation exposure.
Income Tax
As a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. From time to time, these audits result in proposed assessments. Our determinations regarding the recognition of income tax benefits are made in consultation with outside tax and legal counsel, where appropriate, and are based upon the technical merits of our tax positions in consideration of applicable tax statutes and related interpretations and precedents and upon the expected outcome of proceedings (or negotiations) with taxing and legal authorities. The tax benefits ultimately realized by the Company may differ from those recognized in our future financial statements based on a number of factors, including the Company’s decision to settle rather than litigate a matter, relevant legal precedent related to similar matters and the Company’s success in supporting its filing positions with taxing authorities. See Note 9 to the Consolidated Financial Statements for additional discussion.New Accounting Pronouncements
See Note 19 to the Consolidated Financial Statements for information regarding new accounting pronouncements.ENTERTAINMENT DTC PRODUCT DESCRIPTIONS AND KEY DEFINITIONS
Entertainment DTC Product Offerings
In the U.S., Disney+ and Hulu SVOD Only are each offered as a standalone service or as part of various bundled offerings, which may include one of the ESPN DTC plans. Hulu Live TV + SVOD includes Disney+ and ESPN Select. Disney+ is available in more than 150 countries and territories outside the U.S. Depending on the market, our services can be purchased on our websites or through third-party platforms/apps or are available via wholesale arrangements.
Paid Subscribers for Entertainment DTC services
Paid subscribers for Entertainment DTC services reflect subscribers for which we recognized subscription revenue. Certain product offerings provide the option for an extra member to be added to an account (extra member add-on). These extra members are not counted as paid subscribers. Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method. Subscribers to bundled offerings in the U.S. are counted as a paid subscriber for each of the Company's services included in the bundled offering and subscribers to Hulu Live TV + SVOD are counted as one paid subscriber for each of the Hulu Live TV + SVOD and Disney+ services. Subscribers include those who receive an entitlement to a service through wholesale arrangements, including those for which the service is available to each subscriber of an existing content distribution tier. When we aggregate the total number of paid subscribers across our Entertainment DTC streaming services, we refer to them as paid subscriptions.
International Disney+
International Disney+ includes the Disney+ service outside the U.S. and Canada.
Average Monthly Revenue Per Paid Subscriber for Entertainment DTC services
Hulu average monthly revenue per paid subscriber is calculated based on the average of the monthly average paid subscribers for each month in the period. The monthly average paid subscribers is calculated as the sum of the beginning of the month and end of the month paid subscriber count, divided by two. Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period. Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses), premium and feature add-on revenue and extra member add-on revenue. Advertising revenue generated by content on one DTC streaming service that is accessed through another DTC streaming service by subscribers to both streaming services is allocated between both streaming services. The average revenue per paid subscriber is net of discounts on offerings that carry more than one service. Revenue is allocated to each service based on the relative retail or wholesale price of each service on a standalone basis. Hulu Live TV + SVOD revenue is allocated to the SVOD services based on the wholesale price of the Hulu SVOD Only, Disney+ and ESPN Select bundled offering. In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third-party platforms.SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATIONOn March 20, 2019, as part of the acquisition of TFCF, The Walt Disney Company (“TWDC”) became the ultimate parent of TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company) (“Legacy Disney”). Legacy Disney and TWDC are collectively referred to as “Obligor Group”, and individually, as a “Guarantor”. Concurrent with the close of the TFCF acquisition, $16.8 billion of TFCF’s assumed public debt (which then constituted 96% of such debt) was exchanged for senior notes of TWDC (the “exchange notes”) issued pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an Indenture, dated as of March 20, 2019, between TWDC, Legacy Disney, as guarantor, and Citibank, N.A., as trustee (the “TWDC Indenture”) and guaranteed by Legacy Disney. On November
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26, 2019, $14.0 billion of the outstanding exchange notes were exchanged for new senior notes of TWDC registered under the Securities Act, issued pursuant to the TWDC Indenture and guaranteed by Legacy Disney. In addition, contemporaneously with the closing of the March 20, 2019 exchange offer, TWDC entered into a guarantee of the registered debt securities issued by Legacy Disney under the Indenture dated as of September 24, 2001 between Legacy Disney and Wells Fargo Bank, National Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee).
Other subsidiaries of the Company do not guarantee the registered debt securities of either TWDC or Legacy Disney (such subsidiaries are referred to as the “non-Guarantors”). The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at September 27, 2025 was as follows:TWDC Legacy Disney
($ in millions)
Par Value Carrying Value Par Value Carrying ValueRegistered debt with unconditional guarantee $ 30,395 $ 31,231 $ 6,450 $ 6,387The guarantees by TWDC and Legacy Disney are full and unconditional and cover all payment obligations arising under the guaranteed registered debt securities. The guarantees may be released and discharged upon (i) as a general matter, the indebtedness for borrowed money of the consolidated subsidiaries of TWDC in aggregate constituting no more than 10% of all consolidated indebtedness for borrowed money of TWDC and its subsidiaries (subject to certain exclusions), (ii) upon the sale, transfer or disposition of all or substantially all of the equity interests or all or substantially all, or substantially as an entirety, the assets of Legacy Disney to a third party, and (iii) other customary events constituting a discharge of a guarantor’s obligations. In addition, in the case of Legacy Disney’s guarantee of registered debt securities issued by TWDC, Legacy Disney may be released and discharged from its guarantee at any time Legacy Disney is not a borrower, issuer or guarantor under certain material bank facilities or any debt securities.
Operations are conducted almost entirely through the Company’s subsidiaries. Accordingly, the Obligor Group’s cash flow and ability to service its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans or otherwise. Holders of the guaranteed registered debt securities have a direct claim only against the Obligor Group.
Set forth below are summarized financial information for the Obligor Group on a combined basis after elimination of (i) intercompany transactions and balances between TWDC and Legacy Disney and (ii) equity in the earnings from and investments in any subsidiary that is a non-Guarantor. This summarized financial information has been prepared and presented pursuant to the Securities and Exchange Commission Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with U.S. GAAP.
Results of operations ($ in millions)2025Revenues $ —
Costs and expenses —Net income (loss) (2,703)
Net income (loss) attributable to TWDC shareholders (2,703)Balance Sheet ($ in millions)September 27, 2025 September 28, 2024
Current assets $ 2,295 $ 2,767
Noncurrent assets 3,613 3,336
Current liabilities 9,592 7,640
Noncurrent liabilities (excluding intercompany to non-Guarantors) 36,314 40,608
Intercompany payables to non-Guarantors 167,091 157,925