What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-11-14 compared with 2023-11-21 · 304 added, 842 removed, 677 unchanged (63% of the section changed)

2 unchanged sentences

($ in millions, except per share data)

2024 2023 % Change

Better (Worse)

2023 2022 2021 2023

Services $ 81,841 $ 79,562 3 %

8 unchanged sentences

Restructuring and impairment charges ( 3,595 ) ( 3,892 ) 8 %

Other income (expense), net 96 ( 667 ) 201 nm nm

Other income (expense), net ( 65 ) 96 nm

Interest expense, net ( 1,260 ) ( 1,209 ) (4) %

Equity in the income of investees, net 575 782 (26) %

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

Income before income taxes

7,569 4,769 59 %

( 1,796 ) ( 1,379 ) (30) %

Net income 5,773 3,390 70 %

Net income from continuing operations attributable to noncontrolling and redeemable noncontrolling interests ( 1,036 ) ( 360 ) ( 512 ) >(100) % 30 %

Net income attributable to noncontrolling interests

( 801 ) ( 1,036 ) 23 %

Net income attributable to Disney $ 4,972 $ 2,354 >100 %

7 unchanged sentences

• Corporate and Unallocated Shared Expenses

• Restructuring Activities

• Liquidity and Capital Resources

• Developments and Trends

• Critical Accounting Policies and Estimates

1 unchanged sentence

• Supplemental Guarantor Financial Information

In Item 7, we discuss fiscal 2024 and 2023 results and comparisons of fiscal 2024 results to fiscal 2023 results.

Discussions of fiscal 2022 results and comparisons of fiscal 2023 results to fiscal 2022 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 30, 2023.

CONSOLIDATED RESULTS AND NON-SEGMENT ITEMS

In 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

Revenues for fiscal 2024 increased 3%, or $2.5 billion, to $91.4 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.

Service 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.

net income attributable to Disney increased $2.6 billion to income of $5.0 billion compared to $2.4 billion in the prior year;

and diluted earnings per share (EPS) from continuing operations attributable to Disney increased to $2.72 compared to $1.29 in the prior year.

The EPS increase was due to higher operating income at Entertainment.

Service revenues for fiscal 2024 increased 3%, or $2.3 billion, to $81.8 billion, due to higher subscription revenue, growth at our parks and experiences businesses, and, to a lesser extent, higher advertising revenue.

These increases were partially offset

by lower theatrical distribution revenue, a decrease in TV/VOD distribution sales and lower affiliate revenue.

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 expenses

Cost 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.

Cost of services for fiscal 2024 decreased 1%, or $0.6 billion, to $52.5 billion, primarily due to lower non-sports programming and production costs, partially offset by higher sports programming and production costs and the impact of inflation and increased volumes at our parks and experiences businesses.

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.

Depreciation and amortization decreased 7%, or $0.4 billion, to $5.0 billion due to lower depreciation at our domestic parks and resorts and lower TFCF and Hulu acquisition amortization.

Restructuring and Impairment Charges

Restructuring 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)

• $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.

($ in millions) 2024 2023

Retail assets

Equity investments 165 141

Severance 83 357

Costs to exit our Russia businesses and other

$ 3,595 $ 3,892

(1) In the current year, goodwill impairments related to our general entertainment linear networks.

In the prior year, goodwill impairments related to our general entertainment and international sports linear networks.

(2) In the current and prior years, content impairments related to strategic changes in our approach to content curation.

Other Income (expense), net

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Better (Worse)

DraftKings gain (loss)

$ 169 $ ( 663 ) nm

DraftKings gain

$ — $ 169 (100) %

Other, net (65) (73) 11 %

1 unchanged sentence

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.

(DraftKings), which was sold in fiscal 2023.

Interest Expense, net

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Interest expense, net $ (1,260) $ (1,209) (4) %

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.

The increase in interest expense was due to higher average rates, partially offset by lower average debt balances.

The increase in interest income, investment income and other was driven by a larger benefit from pension and postretirement benefit costs, other than service cost, and investments gains in the current year compared to losses in the prior year, partially offset by the impact of lower cash and cash equivalent balances.

Equity in the Income of Investees

Equity in the income of investees decreased $34 million to $ 782 million in the current year primarily due to lower income from A+E.

Equity in the income of investees decreased $207 million to $ 575 million in the current year due to lower income from A+E.

Effective Income Tax Rate

($ in millions)

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;

• 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.

Income before income taxes

$ 7,569 $ 4,769

Income tax expense

Effective income tax rate

The decrease in the effective income tax rate in the current year compared to the prior year was due to the recognition of a $418 million benefit in the current year related to prior years’ tax matters (Income Tax Reserve Adjustments) and a lower foreign effective tax rate.

These decreases were partially offset by higher non-tax deductible impairments in the current year compared to the prior year.

We recognized $2.9 billion of impairments in the current year and $0.7 billion of impairments in the prior year that are not tax deductible.

Noncontrolling Interests

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Better (Worse)

Net income from continuing operations attributable to noncontrolling interests

Net income attributable to noncontrolling interests

$ ( 801 ) $ ( 1,036 ) 23 %

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.

The decrease in net income attributable to noncontrolling interests reflected the comparison to the accretion of NBCU’s interest in Hulu and Major League Baseball’s interest in BAMTech LLC as well as lower results at our National Geographic business.

These decreases were partially offset by improved results at Hong Kong Disneyland Resort.

We had accreted to the redemption value for BAMTech LLC by November 2022 and to the guaranteed floor payment for Hulu by December 2023.

Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.

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Results for fiscal 2024 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 $3,595 million

Results for fiscal 2022 were impacted by the following:

• TFCF and Hulu acquisition amortization of $1,677 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

• Other expense of $65 million related to a legal ruling

• Income Tax Reserve Adjustments of $418 million

Results for fiscal 2023 were impacted by the following:

• Restructuring and impairment charges of $3,892 million

• TFCF and Hulu acquisition amortization of $1,998 million

• Other income, net of $96 million, primarily due to the DraftKings gain ($169 million), partially offset by a charge related to a legal ruling ($101 million)

A summary of the impact of these items on EPS is as follows:

7 unchanged sentences

(1,677) 391 (1,286) (0.68)

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)

Other expense

(65) 11 (54) (0.03)

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)

Income Tax Reserve Adjustments

— 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) 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.

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.

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.

Year Ended September 30, 2023:

Restructuring and impairment charges (4)

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.

Interest 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)

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

$ (3,836) $ 717 $ (3,119) $ (1.69)

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

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 October 1, 2022:

TFCF and Hulu acquisition amortization (3)

(1,998) 465 (1,533) (0.82)

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)

Other income, net

96 (13) 83 0.05

Restructuring and impairment charges (654) 152 (502) (0.27)

Other income (expense), net 201 (46) 155 0.08

Total $ (5,738) $ 1,169 $ (4,569) $ (2.46)

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(3) Includes amortization of intangibles related to TFCF equity investees.

(4) Restructuring and impairment charges in the prior year 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.

BUSINESS SEGMENT RESULTS

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Selling, general, administrative and other costs include third-party and internal marketing expenses.

The Entertainment segment comprises three significant lines of business:

Entertainment

The Entertainment segment generates revenue from film, episodic and other content that is produced and distributed across 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

1 unchanged sentence

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.

Operating expenses at the Entertainment segment primarily consist of programming and production costs, technology support costs, operating labor and distribution costs.

Programming and production costs include the following:

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• 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+

• Participations and residual expenses

• Fees paid to the Sports segment to program ESPN on ABC and certain sports content on Disney+

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 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.

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

production 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.

Operating expenses consist primarily of programming and production 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 sports-related 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.

Significant expenses include 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.

1 unchanged sentence

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+

• Fees paid by Hulu to ESPN and the Entertainment linear networks business for the right to air their networks on Hulu Live

• Fees paid by ABC Network and Disney+ to ESPN to program ESPN on ABC and certain sports content on Disney+, respectively

BUSINESS SEGMENT RESULTS - 2024 vs.

The following table presents revenues from our operating segments and other components of revenues:

The following table presents revenues from our operating segments:

($ in millions)

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(1,595) (1,397) (14) %

Content License Early Termination — ( 1,023 ) 100 %

$ 91,361 $ 88,898 3 %

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9,272 8,954 4 %

Content License Early Termination — ( 1,023 ) 100 %

Corporate and unallocated shared expenses ( 1,435 ) ( 1,147 ) (25) %

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Income from continuing operations before income taxes $ 7,569 $ 4,769 59 %

(1) Includes the A+E gain.

(1) Restructuring and impairment charges in the prior year i nclude the A+E gain.

Entertainment

Revenue and operating results for Entertainment are as follows:

Revenue and operating results for the Entertainment segment are as follows:

($ in millions)

9 unchanged sentences

$ 3,452 $ 4,119 (16) %

Direct-to-Consumer (2,496) (3,424) 27 %

Direct-to-Consumer 143 (2,496) nm

Content Sales/Licensing and Other 328 (179) nm

$ 3,923 $ 1,444 >100 %

The increase in Entertainment revenues was due to subscription revenue growth, partially offset by decreases in theatrical distribution, affiliate and TV/VOD distribution revenues.

Operating income

The increase in Entertainment operating income was due to improved results at Direct-to-Consumer and, to a lesser extent, Content Sales/Licensing and Other, partially offset by a decrease at Linear Networks.

Linear Networks

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Operating Income $ 3,452 $ 4,119 (16) %

Affiliate fees are as follows:

Revenues - Affiliate fees

($ in millions)

5 unchanged sentences

$ 6,872 $ 7,369 (7) %

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:

The decrease in domestic affiliate revenue was due to a decline of 11% from fewer subscribers, including the impact of the non-renewal of carriage of certain networks by an affiliate, partially offset by an increase of 6% from higher effective rates.

Lower international affiliate revenue was attributable to decreases of 8% from fewer subscribers driven by channel closures, 3% from lower effective rates and 3% from an unfavorable Foreign Exchange Impact.

Revenues - Advertising

($ in millions)

5 unchanged sentences

$ 3,676 $ 4,159 (12) %

The decrease in domestic advertising revenue was due to decreases of 12% from fewer impressions and 2% from lower rates.

The decrease in domestic advertising revenue was due to a decrease of 14% 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:

Lower rates were driven by a decrease in political advertising at the owned television stations.

International advertising revenue decreased modestly compared to the prior year as decreases of 3% from an unfavorable Foreign Exchange Impact and 3% from fewer impressions were partially offset by an increase of 4% from higher rates.

Operating Expenses

($ in millions)

8 unchanged sentences

$ (5,083) $ (5,577) 9 %

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.

The decrease in domestic programming and production costs was due to a lower average cost mix of programming, including fewer hours of scripted programming, which reflected the impact of production delays as a result of guild strikes in the prior year.

International programming and production costs were comparable to the prior year as the impact of channel closures and a favorable Foreign Exchange Impact were largely offset by inflation.

The decrease in other operating expenses was due to lower technology and distribution costs including the impact of international channel closures.

Equity in the Income of Investees

Income 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.

Income from equity investees decreased $151 million, to $539 million from $690 million, due to lower income from A+E attributable to decreases in advertising and affiliate revenue.

Operating Income from Linear Networks

Operating income decreased 21%, to $4,119 million from $5,198 million due to lower results both domestically and internationally.

Operating income decreased 16%, to $3,452 million from $4,119 million due to decreases at our domestic and international businesses and lower income from equity investees.

Supplemental revenue and operating income

The following table provides supplemental revenue and operating income detail for Linear Networks:

24 unchanged sentences

Depreciation and amortization (311) (355) 12 %

Operating Loss $ (2,496) $ (3,424) 27 %

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

Operating Income (Loss)

$ 143 $ (2,496) nm

Revenues - Subscription fees

Growth in subscription fees reflected increases of 10% attributable to higher effective rates due to increases in retail pricing and 6% from subscriber growth, partially offset by a decrease of 2% from an unfavorable Foreign Exchange Impact.

Revenues - Advertising

Higher advertising revenue reflected an increase of 26% from higher impressions, partially offset by a decrease of 12% from lower rates.

The increase in impressions was due to Disney+ and Disney+ Hotstar growth, in part reflecting the launches of the ad-supported Disney+ service domestically in December 2022 and internationally starting in November 2023 and airing more cricket programming on Disney+ Hotstar.

There were two significant International Cricket Council (ICC) tournaments in the current year compared to one in the prior year.

Revenues - Other

The increase in other revenue was due to a favorable Foreign Exchange Impact.

In addition to revenue, costs and operating income, management uses the following key metrics (1) to analyze trends and evaluate the overall performance of Disney+, Disney+ Hotstar and Hulu, and we believe these metrics are useful to investors in analyzing the business:

Paid subscribers at:

(in millions) September 28, 2024 September 30, 2023 % Change

Better (Worse)

17 unchanged sentences

6.60 5.93 11 %

Disney+ Core 6.39 6.22 3 %

7.18 6.39 12 %

Disney+ Hotstar 0.96 0.66 45 %

1 unchanged sentence

Live TV + SVOD 95.12 90.52 5 %

(1) S ee discussion on page 66 —DTC Product Descriptions, Key Definitions and Supplemental Information

(1) See discussion on page 55 —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:

Domestic Disney+ average monthly revenue per paid subscriber increased from $6.97 to $7.89 due to higher retail pricing, partially offset by a higher mix of subscribers to wholesale offerings.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.93 to $6.60 due to increases in retail pricing, partially offset by a higher mix of subscribers to ad-supported and promotional offerings and an unfavorable Foreign Exchange Impact.

Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.66 to $0.96 due to higher retail pricing and higher advertising revenue, partially offset by a higher mix of subscribers in lower-priced markets.

Hulu SVOD Only average monthly revenue per paid subscriber increased from $12.17 to $12.35 due to increases in retail pricing, partially offset by a lower mix of subscribers with premium add-ons and a higher mix of subscribers to multi-product and promotional offerings.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $90.52 to $95.12 due to higher retail pricing, partially offset by lower advertising, a lower mix of subscribers with premium add-ons and a higher mix of subscribers to promotional offerings.

Operating Expenses

($ in millions)

2 unchanged sentences

Programming and production costs

Disney+ $ (5,674) $ (4,466) (27) %

Hulu $ (8,582) $ (8,265) (4) %

Other (20) (25) 20 %

Disney+ and other

(5,499) (5,694) 3 %

Total programming and production costs (14,081) (13,959) (1) %

1 unchanged sentence

$ (17,748) $ (17,859) 1 %

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.

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.

Higher programming and production costs at Hulu were due to an increase in subscriber-based fees for programming the Hulu Live TV service primarily attributable to rate increases.

The decrease in programming and production costs at Disney+ and other was attributable to lower costs for non-sports content available on Disney+, partially offset by higher costs for cricket programming at Disney+ Hotstar.

The increase in cricket programming costs reflected two significant ICC tournaments in the current year compared to one in the prior year.

Other operating expenses decreased due to lower distribution costs.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $406 million, to $4,574 million from $4,168 million, primarily attributable to increases in marketing and labor costs.

Operating Income (Loss) from Direct-to-Consumer

Operating results from Direct-to-Consumer increased $2,639 million, to operating income of $143 million from an operating loss of $2,496 million due to improved results at Disney+.

Content Sales/Licensing and Other

13 unchanged sentences

Depreciation and amortization (371) (347) (7) %

Equity in the income (loss) of investees

Equity in the loss of investees

(10) (5) (100) %

Operating Income (Loss) $ 328 $ (179) nm

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.

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;

Love and Thunder;

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:

Revenues - TV/VOD distribution

The decrease in TV/VOD distribution revenue was due to lower sales of episodic and, to a lesser extent, film content.

Revenues - Theatrical distribution

The decrease in theatrical distribution revenue reflected fewer significant releases in the current year compared to the prior year.

The current year included Inside Out 2, Deadpool & Wolverine, Kingdom of the Planet of the Apes, Alien:

Romulus, Wish and The Marvels.

The prior year included Avatar:

The Way of Water, Black Panther:

Wakanda Forever, Guardians of the Galaxy Vol.

3, The Little Mermaid , Ant-Man and the Wasp:

Quantumania , Elemental and Indiana Jones and the Dial of Destiny.

Revenues - Home entertainment distribution

The decrease in home entertainment distribution revenue was due to lower unit sales.

Revenues - Other

Other revenue increased primarily due to higher revenue at Lucasfilm’s special effects business due to higher rates and more projects.

Operating expenses

($ in millions)

4 unchanged sentences

$ (4,901) $ (6,280) 22 %

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.

The decrease in programming and production costs was due to lower production cost amortization attributable to the decreases in theatrical and TV/VOD distribution revenues, partially offset by higher film cost impairments.

Lower distribution costs and cost of goods sold were driven by decreases in theatrical, home entertainment and TV/VOD distribution costs, partially offset by an increase at Lucasfilm’s special effects business due to more projects.

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $487 million, to $2,108 million from $2,595 million, driven by lower theatrical marketing costs reflecting fewer significant releases in the current year.

Operating 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.

Operating results from Content Sales/Licensing and Other increased $507 million, to income of $328 million from a loss of $179 million due to higher theatrical distribution results.

Items Excluded from Segment Operating Income Related to Entertainment

6 unchanged sentences

(1,337) (1,602) 17 %

Content License Early Termination — (1,023) 100 %

Gain on sale of a business

(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.

(1) Fiscal 2024 includes $1,287 million for goodwill impairments related to our general entertainment linear networks, $187 million for content impairments, a $158 million impairment of an equity investment and $38 million of severance.

Fiscal 2023 includes $2,521 million for content impairments (net of the A+E gain), $425 million for a goodwill impairment related to our general entertainment linear networks, $248 million of severance, a $141 million impairment of an equity investment and $96 million of charges primarily related to exiting our businesses in Russia.

(2) In fiscal 2024, amortization of step-up on film and television costs was $271 million and amortization of intangible assets was $1,054 million.

In fiscal 2023, amortization of step-up on film and television costs was $439 million and amortization of intangible assets was $1,151 million.

Operating results for Sports are as follows:

Operating results for the Sports segment are as follows:

($ in millions)

11 unchanged sentences

Operating Income $ 2,406 $ 2,465 (2) %

Affiliate fees are as follows:

Revenues - Affiliate fees

($ in millions)

6 unchanged sentences

$ 10,418 $ 10,590 (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.

Lower 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:

The decrease in domestic ESPN affiliate revenue was due to a decrease of 8% from fewer subscribers, partially offset by an increase of 7% from higher effective rates.

International ESPN affiliate revenue was comparable to the prior year, as decreases from an unfavorable Foreign Exchange Impact and fewer subscribers were largely offset by higher effective rates.

Lower Star India affiliate revenue was attributable to decreases of 7% from lower effective rates and 4% from fewer subscribers.

Revenues - Advertising

($ in millions)

5 unchanged sentences

$ 4,388 $ 3,920 12 %

$ 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

The increase in domestic ESPN advertising revenue was due to increases of 8% from higher rates and 3% from sponsorship revenue growth, partially offset by a decrease of 2% from lower average viewership.

The decrease in international ESPN advertising revenue was due to a decrease of 11% from an unfavorable Foreign Exchange Impact, partially offset by increases of 5% from higher rates and 2% from higher average viewership.

Higher Star India advertising revenue was attributable to airing two significant ICC cricket tournaments in the current year compared to one in the prior year.

Revenues - Subscription fees

Subscription fees increased $133 million, to $1,650 million from $1,517 million, due to higher rates attributable to increases in retail pricing.

Revenues - Other

Other revenue increased $79 million, to $1,163 million from $1,084 million, due to higher fees received from the Entertainment segment to program sports and an increase in revenue from licensing the ESPN brand, partially offset by an unfavorable Foreign Exchange Impact.

In addition to revenue, costs and operating income, management uses the following key metrics (1) to analyze trends and evaluate the overall performance of ESPN+, and we believe these metrics are useful to investors in analyzing the business:

September 28, 2024 September 30, 2023 % Change

Better (Worse)

3 unchanged sentences

$ 6.14 $ 5.49 12 %

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:

ESPN+ average monthly revenue per paid subscriber increased from $5.49 to $6.14 due to increases in retail pricing and higher advertising revenue.

(1) See discussion on page 55 —DTC Product Descriptions, Key Definitions and Supplemental Information

Operating expenses

($ in millions)

5 unchanged sentences

(11,629) (11,348) (2) %

Star (India) (1,025) (1,284) 20 %

(1,354) (1,025) (32) %

(12,983) (12,373) (5) %

Other operating expenses (951) (941) (1) %

$ (13,934) $ (13,314) (5) %

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 lower

costs 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:

Programming and production costs at domestic ESPN increased in the current year compared to the prior year due to contractual rate increases and higher production costs.

The increase in international ESPN programming and production costs was due to new soccer rights.

Higher Star India programming and production costs were attributable to an increase in cricket programming costs due to airing two significant ICC tournaments in the current year compared to one in the prior year.

This increase was partially offset by the comparison to costs for Board of Control for Cricket in India cricket programming in the prior year, which rights we did not renew for the current fiscal year.

Depreciation and amortization

Depreciation and amortization decreased $34 million, to $39 million from $73 million primarily due to technology assets that were fully depreciated in the prior year.

Operating Income from Sports

Operating income decreased $59 million, to $2,406 million from $2,465 million due to higher operating losses at Star India and, to a lesser extent, international ESPN, partially offset by an increase at domestic ESPN.

Supplemental revenue and operating income

The following table provides supplemental revenue and operating income (loss) detail for the Sports segment:

($ in millions)

6 unchanged sentences

$ 17,619 $ 17,111 3 %

$ 17,111 $ 17,270 (1) %

Supplemental operating income (loss) detail

Domestic $ 3,056 $ 2,881 6 %

International (39) 78 nm

International (72) (39) (85) %

2,984 2,842 5 %

13 unchanged sentences

(2) Fiscal 2023 includes $296 million for a goodwill impairment and $50 million for severance.

Operating results for Experiences are as follows:

Operating results for the Experiences segment are as follows:

($ in millions)

12 unchanged sentences

Operating Income $ 9,272 $ 8,954 4 %

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.

Revenues - Theme park admissions

The increase in theme park admissions revenue was due to increases of 5% from higher average per capita ticket revenue and 2% from attendance growth.

Revenues - Resorts and vacations

Growth in resorts and vacations revenue was primarily attributable to increases of 3% from higher average ticket prices for cruise line sailings, 1% from an increase in average daily hotel room rates and 1% from higher occupied hotel room nights, partially offset by a decrease of 1% from lower unit sales at Disney Vacation Club.

Revenues - Parks & Experiences merchandise, food and beverage

Parks & Experiences merchandise, food and beverage revenue growth was due to increases of 2% from higher volumes and 2% from higher average guest spending.

Revenues - Merchandise licensing and retail

Lower merchandise licensing and retail revenue was due to decreases of 1% from an unfavorable Foreign Exchange Impact and 1% from retail, partially offset by an increase of 1% from merchandise licensing.

Lower retail revenue was due to a decrease in online sales.

Growth in licensing revenue was due to higher royalties from merchandise sales, partially offset by lower minimum guarantee shortfall recognition.

Revenues - Parks licensing and other

The increase in parks licensing and other revenue was attributable to higher sponsorship revenues, a favorable Foreign Exchange Impact and higher 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 :

15 unchanged sentences

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.

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.

3 unchanged sentences

(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.

In the third quarter of the prior fiscal 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:

If we had applied the new method in the first six months of the prior year, the impact would have been a decrease of approximatel y $30 million i n the prior year.

Operating expenses

($ in millions)

5 unchanged sentences

$ (18,356) $ (17,129) (7) %

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 increase in operating labor was primarily due to inflation and higher volumes.

Higher infrastructure costs were primarily attributable to higher technology spending and an increase in operations support costs.

The increase in other operating expenses was primarily due to an unfavorable Foreign Exchange Impact, higher volumes and increased operations support costs.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $269 million from $3,675 million to $3,944 million, driven by inflation and increased marketing costs for new guest offerings, partially offset by the comparison to a loss in the prior year on the disposal of our ownership interest in Villages Nature.

Depreciation and amortization

Depreciation and amortization decreased $210 million from $2,789 million to $2,579 million, due to the comparison to depreciation in the prior year related to the closure of Star Wars:

Galactic Starcruiser.

Operating Income from Experiences

Segment operating income increased $318 million, from $8,954 million to $9,272 million primarily due to growth at international parks and experiences.

Supplemental revenue and operating income

The following table presents supplemental revenue and operating income detail for the Experiences segment:

9 unchanged sentences

$ 34,151 $ 32,549 5 %

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 %

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)

TFCF acquisition amortization

(1) Charges for the current year were due to severance.

BUSINESS SEGMENT RESULTS - 2022 vs.

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 %

17,270 15,960 8 %

28,085 15,961 76 %

(1,179) (992) (19) %

Content License Early Termination ( 1,023 ) — nm

$ 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)

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) %

Linear Networks

Operating results for Linear Networks are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

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) %

Affiliate fees are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

$ 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)

$ 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

$ (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 %

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

$ 10,073 $ 10,223 (1) %

International

2,755 3,293 (16) %

$ 12,828 $ 13,516 (5) %

Supplemental operating income detail

Domestic $ 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)

Subscription fees $ 14,178 $ 11,295 26 %

Advertising 3,614 3,284 10 %

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) %

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.

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)

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 %

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)

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 %

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.

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)

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) %

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 ,

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.

Operating results for Sports are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

Affiliate fees $ 10,796 $ 10,609 2 %

Advertising 4,370 3,720 17 %

Subscription fees 1,113 725 54 %

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 %

Affiliate fees are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

Domestic $ 9,437 $ 9,199 3 %

International 1,084 1,114 (3) %

10,521 10,313 2 %

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)

Domestic $ 3,424 $ 2,981 15 %

International 173 150 15 %

3,597 3,131 15 %

$ 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.

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

Domestic $ (10,003) $ (9,370) (7) %

International (998) (1,094) 9 %

(11,001) (10,464) (5) %

(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.

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

$ 14,636 $ 13,623 7 %

International

1,434 1,390 3 %

16,070 15,013 7 %

1,200 947 27 %

$ 17,270 $ 15,960 8 %

Supplemental operating income (loss) detail

$ 2,814 $ 2,610 8 %

International

2,892 2,596 11 %

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.

Operating results for Experiences are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

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

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

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

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.

Domestic International (1)

2022 2021 2022 2021 2022 2021

Increase (decrease)

>100 % (17) % 54 % (4) % 87 % (14) %

Per Capita Guest Spending

13 % 17 % 24 % (3) % 18 % 11 %

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.

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 detail

Parks & Experiences

4 unchanged sentences

$ 9,272 $ 8,954 4 %

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) nm

Items Excluded from Segment Operating Income Related to Experiences

5 unchanged sentences

$ (331) $ (25) >(100) %

Charge related to a legal ruling

(65) (101) 36 %

TFCF acquisition amortization

(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.

(1) Charges for the current year were due to an impairment of assets at our retail business.

CORPORATE AND UNALLOCATED SHARED EXPENSES

Corporate and unallocated shared expenses are as follows:

Better (Worse)

($ in millions)

2023 2022 2021 2023

2024 2023 % Change

Better (Worse)

Corporate and unallocated shared expenses $ (1,435) $ (1,147) (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.

The increase in corporate and unallocated shared expenses was primarily due to higher labor costs, increases in professional services and costs related to our proxy solicitation.

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

($ in millions)

Cash provided by operations

$ 13,971 $ 9,866

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) 9

Impact of exchange rates on cash, cash equivalents and restricted cash

Cash used in investing activities

( 6,881 ) ( 4,641 )

Cash used in financing activities

( 15,288 ) ( 2,724 )

Impact of exchange rates on cash, cash equivalents and restricted cash

Change in cash, cash equivalents and restricted cash $ (8,133) $ 2,574

Operating Activities

Cash 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 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.

Cash provided by operating activities increased 42% or $4.1 billion to $14.0 billion in the current year compared to $9.9 billion in the prior year.

The increase was driven by lower film and television production spending and the timing of payments for sports rights.

The increase also reflected collateral receipts related to our hedging program in the current year compared to collateral payments in the prior year, higher operating cash flows at Entertainment and the comparison to a payment in the prior year related to the termination of content licenses in fiscal 2022.

The increase in operating cash flows at Entertainment was driven by lower cash disbursements due to a decrease in operating expenses.

These increases were partially offset by higher cash tax payments in the current year compared to the prior year.

Fiscal 2023 U.S.

federal and California state tax payments were deferred and paid in fiscal 2024 pursuant to relief provided by the Internal Revenue Service and California State Board of Equalization as a result of 2023 winter storms in California.

In addition, a portion of fiscal 2024 U.S.

federal and Florida state taxes was paid in fiscal 2024 and the remainder has been deferred to fiscal 2025 pursuant to relief provided by the Internal Revenue Service and Florida Department of Revenue as a result of 2024 hurricanes in Florida.

Depreciation expense is as follows:

($ in millions)

2023 2022 2021

Entertainment

$ 669 $ 560 $ 513

Domestic 1,744 2,011

1 unchanged sentence

Total Experiences

2,680 2,342 2,269

Corporate 244 204

2 unchanged sentences

($ in millions)

2023 2022 2021

Entertainment

$ 87 $ 164 $ 174

TFCF and Hulu 1,394 1,547

8 unchanged sentences

($ in millions)

2023 2022 2021

Beginning balances:

11 unchanged sentences

Content impairment

(187) (2,266)

Produced and licensed content reclassified to assets held for sale

Other non-cash activity 233 (568)

3 unchanged sentences

$ 30,717 $ 32,801

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.

The Company currently expects its fiscal 2025 spend on produced and licensed content to be approximately $24 billion including sports rights but excluding Star India.

See Note 14 to the Consolidated Financial Statements for information regarding the Company’s contractual commitments to acquire sports and broadcast programming.

5 unchanged sentences

Investing Activities

Continuing 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:

Investing activities, which consist principally of investments in parks, resorts and other property and acquisition and divestiture activity, for fiscal 2024 and 2023 are as follows:

($ in millions)

2023 2022 2021

Entertainment

3 unchanged sentences

Total Experiences

3,025 3,447 2,272

Corporate 766 897

Total investments in parks, resorts and other property

Cash used in (provided by) other investing activities, net

Cash used in investing activities

$ 6,881 $ 4,641

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.

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.

The increase in capital expenditures in fiscal 2024 compared to fiscal 2023 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 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 decrease in fiscal 2024 compared to fiscal 2023 was due to lower spending on facilities.

The Company currently expects its fiscal 2025 capital expenditures to total approximately $8 billion compared to fiscal 2024 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.

The projected increase in capital expenditures is primarily due to higher spending at Experiences, attributable to continued investment in cruise ship fleet expansion and new guest offerings at our theme parks.

Other Investing Activities

Cash used in other investing activities was $1.5 billion in fiscal 2024 reflecting an investment in Epic Games, Inc.

Cash provided by other investing activities was $328 million for fiscal 2023 reflecting proceeds from the sale of investments.

Financing Activities

1 unchanged sentence

($ in millions)

2023 2022 2021

Change in borrowings

$ (1,400) $ (1,783)

Repurchases of common stock

Activities related to noncontrolling and redeemable noncontrolling interests (1)

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Cash used in other financing activities, net (2)

(234) (205) 188

Cash used in financing activities - continuing operations

Cash used in financing activities

$ (15,288) $ (2,724)

(1) Activities related to noncontrolling and redeemable noncontrolling interests in the current 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.

Activities in the prior year were due to a $0.9 billion payment for BAMTech LLC’s redeemable noncontrolling interest and $0.5 billion of dividend payments to noncontrolling interest holders, partially offset by a $0.7 billion contribution from Hearst to acquire a 20% interest in our DTC sports business.

(2) Primarily consists of equity award activity.

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($ in millions)

October 1, 2022 Borrowings Payments Other

September 30, 2023 Borrowings Payments Other

Activity September 28, 2024

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(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.

See Note 8 to the Consolidated Financial Statements for a summary of the Company’s borrowing activities in fiscal 2024 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 2024.

There were no dividends paid or share repurchases in fiscal 2023.

The Company is targeting a total of $3 billion in share repurchases in fiscal 2025.

The Company may be required to pay an incremental amount for Hulu depending on a final determination of Hulu’s fair value.

See Note 2 to the Consolidated Financial Statements for further discussion of the transactions with noncontrolling interest holders.

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;

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 furloughs or reductions in force.

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 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.

As of September 28, 2024, Moody’s Ratings’ long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, S&P Global Ratings’ long- and short-term debt ratings for the Company were A- and A-2 (Positive), respectively, and Fitch Ratings’ 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.

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The Company’s bank facilities also specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default.

DEVELOPMENTS AND TRENDS

Star India Transaction

The Company and RIL plan to close a transaction on or about November 14, 2024, which will form a joint venture that combines our Star-branded and other general entertainment and sports television channels and Disney+ Hotstar service in India (Star India) and certain media and entertainment businesses of RIL (see Note 4 of the Consolidated Financial Statements for additional information).

The Company will have a 37% interest in the joint venture.

The Company has consolidated, and will continue to consolidate, the income statement and cash flow activities of Star India through the closing date, at which time the Company will recognize on its balance sheet the 37% investment at fair value.

In addition, the Company will begin recognizing its proportional share of the joint venture’s results in “Equity in the income of investees, net” in the Consolidated Statement of Income.

The equity earnings of the joint venture will not be reported in our segments’ operating results.

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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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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.

We decreased our discount rate to 5.06 % at the end of fiscal 2024 from 5.94 % at the end of fiscal 2023 to reflect market interest rate conditions at our fiscal 2024 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.

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.

A one percentage point decrease in the assumed discount rate would increase total benefit expense for fiscal 2025 by approximately $0.2 billion and would increase the projected benefit obligation at September 28, 2024 by approximately $2.4 billion.

percentage point increase in the assumed discount rate would decrease total benefit expense and the projected benefit obligation by approximately $0.2 billion and $2.1 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.

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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.

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.

In fiscal 2024, we determined that our entertainment businesses, including DTC services, linear networks, and content sales/licensing, should be aggregated into a single reporting unit due to their interdependencies, including shared operating costs such as content, marketing, and technology, the similarity of products and services delivered, customers served and distribution channels used, and projected long term financial performance (e.g., operating margins).

For our annual impairment test, we bypassed the qualitative test and performed a quantitative assessment of goodwill for impairment.

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.

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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

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.

As discussed in Note 18 to the Consolidated Financial Statements, in the second and fourth quarters of fiscal 2024, the Company recorded non-cash goodwill impairment charges of $0.7 billion and $0.6 billion, respectively, related to our entertainment linear networks reporting unit prior to aggregating all of our entertainment reporting units into a single reporting unit in the fourth quarter of fiscal 2024.

The carrying amount of the aggregated entertainment reporting unit goodwill after these impairments is approximately $51 billion.

After the impairments, the fair value of the entertainment reporting unit exceeds its carrying amount by less than 10%.

An approximate 40 basis point increase in the discount rate or an approximate 6% reduction in projected annual cash flows used to determine the fair value of the entertainment reporting unit would effectively eliminate the excess fair value over carrying amount.

If it is, a quantitative assessment is required.

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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 $1.5 billion of non-cash impairment charges related to the Star India Transaction in fiscal 2024 to reflect Star India at its estimated fair value less costs to sell.

The Company has investments in equity securities.

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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 Company tested its indefinite-lived intangible assets, long-lived assets and investments for impairment and recorded non-cash impairment charges of $0.7 billion and $2.3 billion in fiscal 2024 and 2023, respectively.

The fiscal 2024 charges related to impairments of retail assets, content assets, and equity investments.

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 Losses

We 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.

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.

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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.

See Note 14 to the Consolidated Financial Statements for more information on litigation exposure.

As a matter of course, the Company is regularly audited by federal, state and foreign tax authorities.

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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.

In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or as part of various multi-product offerings.

Hulu Live TV + SVOD includes Disney+ and ESPN+.

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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+).

In certain Latin American countries prior to July 2024, we offered Disney+ as well as Star+, a general entertainment SVOD service, which was available on a standalone basis or together with Disney+ (Combo+).

At the end of June 2024, we merged these services into a single Disney+ product offering.

Depending on the market, our services can be purchased on our websites or through third-party platforms/apps or are available via wholesale arrangements.

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Paid subscribers 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 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.

are counted as a paid subscriber for each of the Company's services 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 prior to July 2024, if a subscriber had either the standalone Disney+ or Star+ service or subscribed to Combo+, the subscriber was counted as one Disney+ paid subscriber.

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 DTC streaming services, we refer to them as paid subscriptions.

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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

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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.

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 but excludes Pay-Per-View 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.

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(in millions) September 28,

2023 October 1,

2022 October 2,

2024 September 30,

Domestic (U.S.

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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)

66.1 56.5 36.0

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-

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+.

Domestic (U.S.

and Canada) (2)

International (3)(4)

(1) At September 28, 2024, there were 19.7 million and 7.4 million subscribers to multi-product offerings with two and three of the Company’s services, respectively.

At September 30, 2023, there were 20.3 million and 2.3 million subscribers to multi-product offerings with two and three of the Company’s services, respectively.

(2) Total may not equal the sum of the column due to rounding.

(3) Disney+ Hotstar is not included in any of the Company’s multi-product offerings.

(4) The services within the Combo+ multi-product offering were merged into a single Disney+ product offering in fiscal 2024.

The Combo+ subscribers at September 30, 2023 were 10.8 million.

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

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Costs and expenses —

Net income (loss) from continuing operations (2,160)

Net income (loss) (2,497)

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Balance Sheet ($ in millions)

September 30, 2023 October 1, 2022

September 28, 2024 September 30, 2023

Current assets $ 2,767 $ 8,544

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis