Play-by-play of Q2 Conference Call

Sorry I didn’t get this up sooner, car accident on the way home kept me from getting home in time to listen live, so this is from the re-cast which you can listen to on the Investor Relations website at http://www.disney.com/investors.

The prepared comments were short, taking up only 11 minutes of the 1 hour. The rest was open to questions.

Bob and Tom from New York:

Bob prepared remarks -

• 2nd quarter performance off as expected, with the Studio’s taking the largest year-over-year loss off over 20% from a already weak last year
• some stabilization of business, but no firm predictions yet in sight of overall large improvement
• continue to move to media online
• joining Hulu.com as an equity partner that helps combat piracy and doesn’t believe that it will impact current distribution methods or windows
• treating online media as a ‘not going away’ opportunity
• Media Networks (ABC, ESPN, etc.) continued to do well (Ed: they actually improved and made a 2 gain over previous year quarter)
• Studio performance off, but hoping to stay with strong slate going forward.
• UP! to be the first animated feature to open the Cannes film festival
• Parks & Resorts staying focused on keeping numbers up (which it has) to the loss of margin (Ed: the quarter was off 12% from the previous year quarter and the margins of course were worse than past)

Tom prepared remarks -

• Studio Entertainment off, with a large amount from home entertainment
• Q3 also to be tough for Studio
• WDW attendance off only 1%, Disneyland up 2%, but overall guest spending is off 6% despite Easter being in a different quarter this year over last
• Room occupancy at WDW increased to 89% from 88%, but per room spending was down 17%
• 69% occupancy in California, off 14% from last year, with per room spending off 6%
• International parks are essentially flat as a whole from what Tom said
• DVC continues good sales, though off from credit market issues and other one time incomes from last year (Old Key West extensions, etc.)
• Room reservations are on par to slightly ahead for the rest of the year due to promotions (Ed: in other words, expect those line to continue!)
• Consumer Products was up in revenue but down in income because of the soft consumer market, especially at the re-owned Disney Company Stores
• Ad revenue is still off, with the window from booking ads to the actual broadcast getting smaller

Highlights from the questions -

• Restructuring European operations
• Bob views being in the online space as a better option than to NOT be in that space. This despite the fact that monetization (i.e. making money) isn’t as robust as the traditional modes of DVD, etc.
• Interesting that they don’t consider Internet methods to be cannibalistic to other methods because the age demographic seems to be different than the other methods (i.e. internet is younger), and these online groups also consumer MORE media than the others.
• Will continue to offer a variety of methods to distribute media, left in general to each business unit. Hulu.com for instance doesn’t cover ESPN or many Disney Channel shows. Likewise, will continue to provide TV (i.e. ad supported), streaming (i.e. ad supported) and sell through product (i.e. iTunes). Long term they expect these to all make money.
• No projected changes for offers at the Parks, especially until the existing ones end at WDW in Q4 (i.e. July, August, September of this year).
• Attendance seems to be doing better at Hong Kong and they feel good about making progress
• Bob mentioned a brief discussion about the framework with the Shanghai government and that they await word from the central Chinese government.
• There are now 93 Disney Channels around the world!

So there you go. Not pretty, but not a continued ‘bottom falling out’ situation. Bob mentioned that they feel many of the business parts are starting to stabilize, but there are several that are still challenging.

As for those of you who are park dwellers like we are, there is a new promotion coming at some point to Disneyland to get attendance and hotel bookings back up (probably more towards hotels I'd guess).

WDW is basically baked into whatever it’s going to do through the end of the fiscal year and bookings are inline to slightly above last year, so no new deals coming there and expect attendance to stay high (i.e. crowded).

No new news about Disney Cruise Line or Disney Adventures nor anything about DVC.