UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 2, 2021September 30, 2023
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 001-38842
 twdcimagea02a19.jpg
Delaware 83-0940635
State or Other Jurisdiction of I.R.S. Employer Identification
Incorporation or Organization
500 South Buena Vista Street
Burbank, California 91521
Address of Principal Executive Offices and Zip Code
(818) 560-1000
Registrant’s Telephone Number, Including Area Code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueDISNew York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  ☐ No  x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes  ☐ No x
The aggregate market value of common stock held by non-affiliates (based on the closing price on the last business day of the registrant’s most recently completed second fiscal quarter as reported on the New York Stock Exchange-Composite Transactions) was $343.0$182.9 billion. All executive officers and directors of the registrant and all persons filing a Schedule 13D with the Securities and Exchange Commission in respect to registrant’s common stock have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant.
There were 1,817,655,9481,830,315,921 shares of common stock outstanding as of November 17, 2021.15, 2023.
Documents Incorporated by Reference
Certain information required for Part III of this report is incorporated herein by reference to the proxy statement for the 20222024 annual meeting of the Company’s shareholders.


THE WALT DISNEY COMPANY AND SUBSIDIARIES
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PART I
ITEM 1.
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ITEM 1A.
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ITEM 1B.
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ITEM 2.
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PART II
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ITEM 9C
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PART III
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ITEM 12.
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ITEM 14.
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PART IV
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ITEM 16.
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Cautionary Note on Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance and may include statements concerning, among other things, financial results, business plans (including statements regarding new services and products and future expenditures, costs and investments), future liabilities or other obligations, impairments and amortization, estimates of the financial impact of certain items, accounting treatment, events or circumstances; competition and seasonality. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “would,” “should,” “expects,” “plans,” “could,” “intends,” “target,” “projects,” “believes,” “estimates,” “anticipates,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These statements reflect our current views with respect to future events and are based on assumptions as of the date of this report. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.
Such differences may result from actions taken by the Company, including restructuring or strategic initiatives (including capital investments, asset acquisitions or dispositions, new or expanded business lines or cessation of certain operations), our execution of our business plans (including the content we create and IP we invest in, our pricing decisions and our cost structure) or other business decisions, as well as from developments beyond the Company’s control, including:
•further deterioration in domestic and global economic conditions;
•deterioration in or pressures from competitive conditions, including competition to create or acquire content;
•consumer preferences and acceptance of our content, offerings, pricing model and price increases and the market for advertising sales on our direct-to-consumer services and linear networks;
•health concerns and their impact on our businesses and productions;
•international, regulatory, legal, political, or military developments;
•technological developments;
•labor markets and activities;
•adverse weather conditions or natural disasters; and
•availability of content;
each such risk includes the current and future impacts of, and is amplified by, COVID-19 and related mitigation efforts.
Such developments may further affect entertainment, travel and leisure businesses generally and may, among other things, affect (or further affect, as applicable):
•our operations, business plans or profitability;
•demand for our products and services;
•the performance of the Company’s content;
•our ability to create or obtain desirable content at or under the value we assign the content;
•the advertising market for programming;
•income tax expense; and
•performance of some or all Company businesses either directly or through their impact on those who distribute our products.
Additional factors include those described in this Annual Report on Form 10-K, including under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” in our subsequent quarterly reports on Form 10-Q, including under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in our subsequent filings with the Securities and Exchange Commission.
A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances. You should not place undue reliance on the forward-looking statements. Unless required by federal securities laws, we assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made.
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PART I
ITEM 1. Business
The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in twothree segments: Disney MediaEntertainment, Sports and Entertainment Distribution (DMED) and Disney Parks, Experiences and Products (DPEP).Experiences.
The terms “Company”, “we”, “our” and “us” are used in this report to refer collectively to the parent company and the subsidiaries through which businesses are conducted.
COVID-19 Pandemic
Since early 2020, the world has been, and continues to be, impacted by the novel coronavirus (COVID-19) and its variants. COVID-19 and measures to prevent its spread has impacted our segments in a number of ways, most significantly at the DPEP segment where our theme parks and resorts were closed and cruise ship sailings and guided tours were suspended. These operations resumed, generally at reduced capacity, at various points since May 2020. We have delayed, or in some cases, shortened or cancelled theatrical releases, and stage play performances were suspended as of March 2020. Stage play operations resumed, generally at reduced capacity, in the first quarter of fiscal 2021. Theaters have been subject to capacity limitations and shifting government mandates or guidance regarding COVID-19 restrictions. We experienced significant disruptions in the production and availability of content, including the delay of key live sports programming during fiscal 2020 and fiscal 2021, as well as the suspension of most film and television production in March 2020. Although film and television production generally resumed beginning in the fourth quarter of fiscal 2020, we continue to see disruption of production activities depending on local circumstances. Fewer theatrical releases and production delays have limited the availability of film content to be sold in distribution windows subsequent to the theatrical release.
The impact of these disruptions and the extent of their adverse impact on our financial and operating results will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unknowable duration and severity of the impacts of COVID-19 and its variants, and among other things, the impact of governmental actions imposed in response to COVID-19 and individuals’ and companies’ risk tolerance regarding health matters going forward. We have incurred and will continue to incur additional costs to address government regulations and the safety of our employees, guests and talent.
Human Capital
The Company’s key human capital management objectives are to attract, retain and develop the highest quality talent. To support these objectives, the Company’s human resources programs are designed to develop talent to prepare them for critical roles and leadership positions for the future; reward and support employees through competitive pay, benefit and perquisite programs; enhance the Company’s culture through efforts aimed at making the workplace more engaging and inclusive; acquire talent and facilitate internal talent mobility to create a high-performing, diverse workforce; engage employees as brand ambassadors of the Company’s content, products and experiences; and evolve and invest in technology, tools and resources to enable employees at work.
The Company employed approximately 190,000225,000 people as of October 2, 2021.September 30, 2023, of which approximately 167,000 were employed in the U.S. and approximately 58,000 were employed outside the U.S. Our global workforce is comprised of approximately 80%77% full time and 15%16% part time employees, with another 5%7% being seasonal employees. A significant number of employees in various parts of our businesses, including employees of our theme parks, and writers, directors, actors and production personnel for our productions are covered by collective bargaining agreements. In addition, some of our employees outside the U.S. are represented by works councils, trade unions or other employee associations.
Some examples of our key programs and initiatives that are focused to attract, develop and retain our diverse workforce include:
•Diversity, Equity, and Inclusion (DE&I): Our DE&I objectives are to build teams that reflect the life experiences of our audiences, while employing and supporting a diverse array of voices in our creative and production teams.
◦Announced the Company’s Reimagine Tomorrow endeavor, which builds on Disney’s longstanding commitment to diversity, equity and inclusion. Launched the Reimagine Tomorrow digital destination, Disney’s first large-scale platform for amplifying underrepresented voices
◦Created a pipeline of next-generation creative executives from underrepresented backgrounds through programs such as the Executive Incubator, Creative Talent Development and Inclusion, and the Disney Launchpad: Shorts Incubator
◦Championed targeted development programs for underrepresented talent
◦Hosted a series of innovative learning opportunities to spark dialogue among employees, leaders, Disney talent and external experts
◦Sponsored over 75 employee-led Business Employee Resource Groups (BERGs) that represent and support the diverse communities that make up our workforce. The BERGs facilitate networking and connections with peers, outreach and mentoring, leadership and skill development and cross-cultural business innovation
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◦Added an Inclusion Key to the core set of values to serve as a catalyst for culture change and strengthen DPEP’s traditional Four Keys, Safety, Courtesy, Show and Efficiency
◦Reimagined The Disney Look appearance guidelines to cultivate a more inclusive environment that encourages and celebrates authentic expressions of belonging among employees
•Health, wellness, family resources and other benefits: Disney’s benefit offerings are designed to meet the varied and evolving needs of a diverse workforce across businesses and geographies while helping our employees care for themselves and their families. We provide:
◦Healthcare options aimed at improving quality of care while reducinglimiting out-of-pocket costs
◦ChildFamily care resources, such as childcare and senior care programs for employees, including access to onsite/community centers, enhanced back-up care choices to include personal caregivers, child carechildcare referral assistance and center discounts, homework help, andcollege preparation, support for students with special needs, a variety of parenting educational resources, long-term care coverage and a family building benefit supporting fertility treatments, adoptions or surrogacy
◦Free mental health and behavioral healthwell-being resources, including onsite and virtual on-demand access to the Employee Assistance Program (EAP) for employees and their dependents and access to digital applications to manage stress and encourage movement
◦Two Centers for Living Well facilities that offer convenient, on-demand access to board-certified physicians and counselors
•◦Continued responseGlobal Well-Being Week (introduced in 2022), a dedicated week for employees around the world to COVID-19: Our deliberate, phased,celebrate, learn and multi-layered approach to respond to COVID-19 continued,engage in well-being through in-person and Disney was one of the first companies outside of the healthcare industry to institute a vaccination mandate for its employees, announced in July 2021. We:virtual events and activities focused on physical, emotional, financial and social well-being
◦Provided the ability for our employees to get vaccinated by offering on-site distribution in California, Florida, and Connecticut. Our Florida distribution center distributed approximately 1,000 doses weekly
◦Covered all COVID-19 testing and treatment under all Company medical plans at no cost to the employees and dependents
◦Introduced a process for those with medical or religious accommodation needs
◦Partnered with TrustAssureTM to help verify employee vaccination status
◦Provided employees with 24/7 accessAccess to a variety of educational resources aboutwell-being focused apps and platforms including our newest offering, Thrive Global, which is an innovative app that helps employees create long-term healthy habits and behaviors while improving their overall well-being and productivity
•Diversity, Equity and Inclusion (DE&I): Our DE&I objectives are to build teams that reflect the pandemic, including wayslife experiences of our audiences, while employing and supporting a diverse array of voices in our creative and production teams. Our DE&I initiatives and programs include:
◦Reimagine Tomorrow, which is the Company’s digital destination for amplifying underrepresented voices and features some of Disney’s DE&I commitments and actions
◦Executive Incubator, Creative Talent Development and Inclusion, and the Disney Launchpad: Shorts Incubator, which are designed to help stopcreate a pipeline of next-generation creative executives from underrepresented backgrounds
◦Employee development programs and fellowships for underrepresented talent
◦Innovative learning opportunities, which spark dialogue among employees, leaders, Disney talent and external experts
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◦Over 100 employee-led groups, which represent and support the spreaddiverse communities that make up our global workforce
◦The Disney Look appearance guidelines, which were updated to cultivate a more inclusive environment that encourages and celebrates authentic expressions of the virus and to learn more about vaccination options. Due to increasing demand, a number of these resources were available to the public through a partnership with the Health Alliance, sobelonging among employees could share them with friends and family
•Disney Aspire: We support the long-term career aspirations of our hourly employees and further our commitment to strengthening the communities in which we work through our education investment program, Disney Aspire. We pay 100% of the tuition costs upfront for eligible participating employees at a variety of in-network learning providers and universities and reimburse employees for applicable books and fees. The program helps our employees achieve their goals professionally - whether at Disney or beyond - by equipping them with the skills they need to succeed in the rapidly changing 21st century career landscape. More than 12,00015,000 current employees are currently enrolled in Disney Aspire, and more than half of our3,800 current employees have graduated since the program launched in 2018. More than 3,100 current students and graduates have earned an Associate, Bachelor or Master’s degree. Through Disney Aspire, we:
◦Pay 100% of tuition costs upfront at a variety of in-network learning providers and universities and reimburse employees for applicable books and fees
◦Provide access to a wide variety of degree, certificate, high school completion, college start, language learning and skilled trades programs
◦Offer employees flexibility to explore growth opportunities bothbeen internally and externally
◦Enable employees to choosepromoted across the field they’re most passionate about - fields of study do not have to be related to an employee’s current position, nor do they have to stay at the Company upon completion of their studies
◦Offer exclusive access to the Disney Aspire Alumni Association, a support and networking group that connects graduates with leaders in their field of interestCompany.
•Talent Development: We prioritize and invest in creating opportunities to help employees grow and build their careers through a multitude of training and development programs. These include online, instructor-led and on-the-job learning formats as well as executive talent and succession planning paired with an individualized development approachapproach.
•Sustainability and Social Responsibility and Community:Impact: The Walt Disney Company’s longstanding commitmentcommitments to Corporate Social Responsibility (CSR)sustainability and social impact helps differentiate the Company as an employer that supports talent acquisitionemployer. Our priorities include operating responsibly; investing in our people’s development and retention. This year, we refreshed our CSR strategy to connect it more closely with the Company’s mission and environmental and social issues relevant to our business and employees. Our CSR priorities includeemployee experience; diversity, equity and inclusion; environmental stewardship and conservation; human capital management; operating responsibly; and giving back tosupporting our communities, with a special focus on supporting children and families. The refreshed strategy providesOur approach seeks to connect these priorities with the Company’s businesses and employees
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with a path to embedding these CSR priorities into our offerings and operations in addition to our philanthropy. For example, employees on our creative teams are embracing inclusive storytelling while employeesis reflected in our operational areas are embracing sustainable design.philanthropic giving. The Company also supports employees who give back to our communities with a generous U.S. matching gifts program, and a unique employee volunteering program,as well as Disney VoluntEARS, which rewards employees for their volunteer hours with the opportunity to direct not-for-profit donations byfrom the Company.Company to qualified non-profits of their choosing.
Environmental and Sustainability
The Company has developed measurable environmental and sustainability goals for 2030, grounded in science and anbased on our assessment of where the Company’s operations have the most significant impact on the environment, as well as the areasenvironmental impacts and where itwe can most effectively mitigate that impact. These includethose impacts. The Company’s goals to reach net zeroencompass science-based targets for Scope 1, 2 and 2 greenhouse gas3 emissions, forwater stewardship, waste reduction, sustainable design in construction and use of more sustainable materials in our direct operations and zero waste to landfill at our wholly owned and operated parks and resorts by 2030.products.
DISNEY MEDIA AND ENTERTAINMENT DISTRIBUTION
The DMEDEntertainment segment generally encompasses the Company’s non-sports focused global film, television and episodic televisiondirect-to-consumer (DTC) video streaming content production and distribution activities. Content is distributed by a single organization across three
The significant lines of business: Linear Networks, Direct-to-Consumer and Content Sales/Licensing and content is generally created by three production/content licensing groups: Studios, Generalbusiness within Entertainment and Sports. The distribution organization has full accountability for the financial results of the entire media and entertainment business.
The operations of DMED’s significant lines of business are as follows:
•Linear Networks
◦Domestic Channels:Domestic: ABC Television Network (ABC)(ABC Network); Disney, Freeform, FX and National Geographic (owned 73% by the Company) branded television channels; and eight owned ABC television stations (Broadcasting), and Disney, ESPN, Freeform, FX and National Geographic branded domestic television networks (Cable)
◦International Channels:International: Disney, ESPN, Fox (which will be rebranded in fiscal 2024, primarily to FX or Star), FX, National Geographic (owned 73% by the Company) and Star branded general entertainment television networkschannels outside of the U.S.
◦A 50% equity investment in A+E Television Networks (A+E), which operates a variety of cable channels including A&E, HISTORY and Lifetime
•Direct-to-Consumer
◦Disney+: a global DTC service that primarily offers general entertainment and family programming. In certain Latin American countries, we offer Disney+ as well as Star+, a general entertainment service that also has sports programming
◦Disney+ Hotstar, ESPN+, Hotstar: a DTC service primarily in India that offers general entertainment, family and sports programming
◦Hulu (owned 67% by the Company): a U.S. DTC service that offers general entertainment and Star+ direct-to-consumer (DTC) streaming servicesfamily programming and a digital over-the-top (OTT) service that includes live linear streams of cable networks and the major broadcast networks
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•Content Sales/Licensing
◦Sale/licensing of film and televisionepisodic content to third-party television and subscription video-on-demand (TV/SVOD)VOD) services
◦Theatrical distribution
◦Home entertainment distribution (DVD,distribution: DVD and Blu-ray discs, and electronic home video licenses)
◦Music distributionlicenses and video-on-demand (VOD) rentals
◦Staging and licensing of live entertainment events on Broadway and around the world (Stage Plays)
DMED◦Intersegment allocation of revenues from the Experiences segment, which is meant to reflect royalties on consumer products merchandise licensing revenues generated on intellectual property (“IP”) created by the Entertainment segment
◦Music distribution
◦Post-production services by Industrial Light & Magic and Skywalker Sound
Entertainment also includes the following activities that are reported with Content Sales/Licensing:
•Post-production servicesNational Geographic magazine and online business (owned 73% by Industrial Light & Magic and Skywalker Soundthe Company)
•A 30% ownership interest in Tata SkyPlay Limited, which operates a direct-to-home satellite distribution platform in India
The significant revenues of DMEDEntertainment are as follows:
•Affiliate fees - Fees charged by our Linear Networks to multi-channel video programming distributors (i.e. cable, satellite, telecommunications and digital over-the-top (e.g. YouTube TV) service providers) (MVPDs) and television stations affiliated with ABC for the right to deliver our programming to their customers
•Advertising - Sales of advertising time/space atcustomers. Linear Networks and Direct-to-Consumeralso generates revenues from fees charged to television stations affiliated with ABC Network.
•Subscription fees - Fees charged to customers/subscribers for our DTC streaming services
•Advertising - Sales of advertising time/space
•TV/SVODVOD distribution - Licensing fees and other revenue for the right to use our film and television productions and revenue from fees charged to customers to view our sports programming (“pay-per-view”) and streaming access to films that are also playing in theaters (“Premier Access”). TV/SVOD distribution revenue is primarily reported in Content Sales/Licensing, except for pay-per-view and Premier Access revenue, which is reported in Direct-to-Consumerepisodic content
•Theatrical distribution - Rentals from licensing our film productionsfilms to theaters
•Home entertainment distribution - SaleSales and rentals of our film and televisionepisodic content to retailers and through distributors in home video formats
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•Other content sales/licensing revenue - Revenues from licensing our music, ticket sales from stage play performances, and fees from licensing our intellectual properties (“IP”)IP for use in stage plays,
•Other revenue - Fees from sub-licensing of sports programming rights (reported in Linear Networks) and sales of post-production services (reported with Content Sales/Licensing)and the allocation of consumer products merchandise licensing revenues
The significant expenses of DMEDEntertainment are as follows:
•Operating expenses, consistconsisting primarily of programming and production costs, technicaltechnology support costs, operating labor, distribution costs and costs of sales. Operating expenses also includesProgramming and production costs include the following:
◦Amortization of capitalized production costs
◦Amortization of the costs of licensed programming rights
◦Subscriber-based fees for programming our Hulu Live service, including fees paid by Hulu to Linear Networks fromthe Sports segment and other DMEDEntertainment segment businesses for the right to air ourtheir linear networks and related services. Programming and production costs include amortization of acquired licensed programming rights (including sports rights), amortization of capitalized production costs (including participations and residuals) and productionon Hulu Live
◦Production costs related to live programming such as news and sports. Programming and production costs are generally allocated across the DMED businesses based on the estimated relative value of the distribution windows. These costs are largely incurred across three content creation groups, as follows:(primarily news)
◦Studios - Primarily capitalized production costs related to films produced under the Walt Disney Pictures, Twentieth Century Studios, Marvel, Lucasfilm, PixarAmortization of participations and Searchlight Pictures bannersresidual obligations
◦General Entertainment - Primarily acquisition of rightsFees paid to the Sports segment to program ESPN on ABC and internal production of episodic television programs and news content. Internalcertain sports content is generally produced by the following television studios: ABC Signature; 20th Television; Disney Television Animation; FX Productions; and various studios for which we commission productions for our branded channels and DTC streaming services
◦Sports - Primarily acquisition of professional and college sports programming rights and related production costson Star+
•Selling, general and administrative costs, including marketing costs
•Depreciation and amortization
Media and Entertainment Distribution Strategy
Shifting consumer preferences for consumption of video content, and in particular the increasingly widespread adoption of video streaming technology, has significantly disrupted the traditional means and patterns of distribution for film and television content. In general, film content was traditionally distributed first in the theatrical market, followed by the home entertainment market and then in the TV/SVOD market. Episodic television content was traditionally distributed at linear networks and then in the TV/SVOD market.
In response to these changes, the Company has significantly increased its focus on distribution of content via our own DTC streaming services relative to distribution along traditional patterns. Although the Company continues to monetize a significant amount of its content in the traditional manner, our focus on our own DTC distribution has had a number of impacts including but not limited to:
•in some cases, we are producing exclusive content for our DTC streaming services;
•rather than selling our content in the TV/SVOD market, we may choose to distribute it on our DTC streaming services;
•in part because of the impact of COVID-19 on theatrical markets around the world, we may alter our traditional theatrical distribution approach, for example by making a film available on our DTC streaming services at the same time it is in theaters; and
•we may choose to offer our content in pay-per-view format on our own DTC streaming services (e.g. Premier Access) in addition to distributing it in traditional home entertainment markets.
Over time, all else being equal, these impacts will tend to increase revenue at Direct-to-Consumer and reduce revenue at Linear Networks and Content Sales/Licensing.
A more detailed discussion of our distribution businesses and production groups follows.
Linear Networks
The majority of Linear Networks revenue is derived from affiliate fees and advertising sales. Generally, theadvertising. The Company’s networksLinear Networks businesses provide programming under multi-year licensing agreements with MVPDs and/or affiliated television stations that includeare generally based on contractually specified rates on a per subscriber basis. The amounts that we can charge to MVPDs for our networks isare largely dependent on the quality and quantity of programming that we can provide and the competitive market for programming services. The ability to sell advertising time and the rates received are primarily dependent on the size and nature of the audience that the network can deliver to the advertiser as well as overall advertiser demand.
Linear Networks consist of our domestic and international branded television channels.
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Domestic ChannelsLinear Networks
Our domestic channels include Cable operations comprising Disney, ESPN, Freeform, FXABC Network
ABC Network distributes programming to approximately 240 local affiliated television stations and National Geographic branded channels and Broadcasting operations comprising ABC andto our eight owned television stations, which collectively reach almost 100% of U.S. television households. ABC affiliated television stations.Network programming is aired in the primetime, daytime, late night, news and sports “dayparts”. ESPN programs the sports daypart on the ABC Network, which is branded ESPN on ABC.
CableABC Network produces a variety of primetime specials, news and daytime programming.
Disney Channels
Branded television channels include: Disney Channel; Disney Junior; and Disney XD (collectively Disney Channels). Disney Channels also includes the DisneyNOW App and website.
Disney Channel - the Disney Channel airs original series and movie programming 24 hours a day targeted to kids ages 2 to 14. The channel features live-action comedy series, animated programming and preschool series as well as original movies and theatrical films.
Disney Junior - the Disney Junior channel airs programming 24 hours a day targeted to kids ages 2 to 7 and their parents and caregivers. The channel features animated and live-action programming that blends Disney’s storytelling and characters with learning. Disney Junior also airs as a programming block on the Disney Channel.
Disney XD - the Disney XD channel airs programming 24 hours a day targeted to kids ages 6 to 11. The channel features a mix of live-action and animated programming.
ESPN
Branded television channels include nine 24-hour domestic television sports channels: ESPN and ESPN2 (both of which are dedicated to professional and college sports as well as sports news and original programming); ESPNU (which is devoted to college sports); ESPNEWS (which simulcasts weekday ESPN Radio programming, re-airs select ESPN studio shows and airs a variety of other programming); SEC Network (which is dedicated to Southeastern Conference college athletics); ESPN Classic (which airs rebroadcasts of famous sporting events, sports documentaries and sports-themed movies); Longhorn Network (which is dedicated to The University of Texas athletics); ESPN Deportes (which airs professional and college sports as well as studio shows in Spanish); and ACC Network (which is dedicated to Atlantic Coast Conference college athletics). In addition, ESPN programs the sports schedule on ABC, which is branded ESPN on ABC.
ESPN also includes the following:
•ESPN.com, which delivers sports news, information and video on internet-connected devices, with approximately 20 editions in five languages across six countries globally. In the U.S., ESPN.com also features live video streams of ESPN channels to authenticated MVPD subscribers. Non-subscribers have limited access to certain content.
•ESPN App, which delivers scores, news, stories, highlights, short form video, podcasts and live audio, with fourteen editions in three languages globally. In the U.S., the ESPN App also features live video streams of ESPN’s linear channels and exclusive events to authenticated MVPD subscribers. Non-subscribers have limited access to certain content. The ESPN App is available for download on various internet-connected devices.
•ESPN Radio, which is the largest sports radio network in the U.S. and includes four ESPN owned stations in New York, Los Angeles, Chicago and Dallas.
In addition, ESPN owns and operates the following events: ESPYs (annual awards show); X Games (winter and summer action sports competitions); and a portfolio of collegiate sporting events including: bowl games, basketball games, softball games and post-season award shows.
ESPN is owned 80% by the Company and 20% by Hearst Corporation (Hearst).
Freeform
Freeform is a channel targeted to viewers ages 18 to 34 that airs original, Company owned (“library”) and licensed television series, films and holiday programming events. Freeform also includes the Freeform App and website.
FX Channels
Branded general entertainment television channels include: FX; FXM; and FXX (collectively FX Channels), which air a mix of original, library and licensed television series and films.
National Geographic Channels
Branded television channels include: National Geographic; Nat Geo Wild; and Nat Geo Mundo (collectively National Geographic Channels). National Geographic Channels air scripted and documentary programming on such topics as natural history, adventure, science, exploration and culture.
National Geographic, including the magazine and online business reported in Content Sales/licensing, is owned 73% by the Company and 27% by the National Geographic Society.
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The number of domestic subscribers (in millions) for the Company’s significant cabledomestic branded channels as estimated by Nielsen Media Research(1) as of September 2021 (except where noted) are as follows:
Subscribers(2)(1)
Disney
Disney Channel7671
Disney Junior(2)
5752
Disney XD
56(2)
ESPN
ESPN76
ESPN276
ESPNU51
ESPNEWSFreeform(3)(2)
59
SEC Network(3)
55
ACC Network(3)
42
Freeform7671
FX Channels
FX77
FXX72
FXX(2)
68
FXM(2)
4743
National Geographic Channels
National Geographic7671
National Geographic Wild(2)
5142
(1)As a result of COVID-19, we understand there have been disruptions inBased on Nielsen Media Research’s ability to collect in-home data, which may have had an impact on the estimated subscriber counts atResearch estimates as of September 2020 and September 2021. We believe these disruptions were more significant at September 2020 than at September 2021.
(2)2023. Estimates include traditional MVPD and the majority of digital OTT subscriber counts.
(3)(2)BecauseThe Company renewed its MVPD agreement with an affiliate during September 2023, under which the affiliate will no longer distribute these channels. Nielsen Media Research does not measure this channel, estimated subscribers are according to SNL Kaganestimates as of December 2020.September 2023 do not reflect the impact of this agreement.
Broadcasting
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As of October 2, 2021, ABC had affiliation agreements with approximately 240 local television stations reaching almost 100% of U.S. television households. ABC broadcasts programs in the primetime, daytime, late night, news and sports “dayparts”. ABC is also available digitally through the ABC App and website to authenticated MVPD subscribers. Non-subscribers have more limited access to on-demand episodes.
ABC also produces a variety of primetime specials, national news and daytime programming.
ABC provides online access to in-depth worldwide news and certain other programming through various Company operated and third party distribution platforms.
Domestic Television Stations
The Company owns eight television stations, six of which are located in the top ten television household markets in the U.S. All of ourOur television stations are affiliated with ABC and collectively reach approximately 20% of the nation’sU.S. television households.
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The stations we own are as follows:
TV StationMarket
Television Market
Ranking(1)
WABCNew York, NY1
KABCLos Angeles, CA2
WLSChicago, IL3
WPVIPhiladelphia, PA4
KTRKHouston, TX7
KGOSan Francisco, CA6
KTRKHouston, TX810
WTVDRaleigh-Durham, NC2423
KFSNFresno, CA5553
(1)Based on Nielsen Media Research, U.S. Television Household Estimates, January 1, 2021.2023
International ChannelsLinear Networks
Our International Channels focus on General Entertainment, Sports and/or Family programming and operate under four significant brands: Disney; ESPN; Fox; and Star. The channels air programmingLinear Networks use content from the Company’s various studios, including library titles, as well as content production groups, locally produced content and licensed programming.
The Company’s increased focus on DTC distribution in international markets is expected to negatively impact the International Channels business as we shift the primary means of monetizing our contentacquired from licensing of linear channels to distribution on our DTC platforms.
General Entertainment
third parties. The Company operates approximately 245 General Entertainment285 general entertainment and family channels outside the U.S. in approximately 40 languages and 190 countries/territories.
General Entertainment
General Entertainment channels include Fox (which will be rebranded in fiscal 2024, primarily under the Fox,to FX or Star), FX, National Geographic and Star brands, which are broadcast in approximately 45 languages and 180 countries/territories.
Fox branded channels, which air a variety of scripted, reality and documentary programming. Channels are often thematically branded, focusing on such topics as comedy, cooking, crime, movies and travel, and are broadcast in most regions internationally.
National Geographic branded channels air scripted and documentary programming on such topics as natural history, adventure, science, exploration and culture, and are broadcast in most regions internationally.
Star branded channels air a variety of scripted, reality and documentary programming primarily in India. Channels are also broadcast in other countries in Asia Pacific.
In addition, the Company operates UTV and Bindass branded channels principally in India. UTV Action and UTV Movies offer Bollywood movies as well as Hollywood, Asian and Indian regional movies dubbed in Hindi. Bindass is a youth entertainment channel.
Sports
The Company operates approximately 55 Sports channels outside the U.S. under the ESPN, Fox and Star brands, which are broadcast in approximately 10 languages and 100 countries/territories.
ESPN branded channels primarily operate in Latin America, Asia Pacific and Europe. In the Netherlands, the ESPN branded channels are operated by Eredivisie Media & Marketing CV (EMM), which has the media and sponsorship rights of the Dutch Premier League for soccer. The Company owns 51% of EMM.
Fox branded sports channels primarily operate in Latin America, Asia Pacific and Europe. Fox Sports Premium, a pay television service in Argentina, airs the matches of the professional soccer league in Argentina.
Star branded sports channels primarily operate in India and certain other countries in Asia Pacific. Star has rights to various sports programming including cricket, soccer, tennis and field hockey.
Family
The Company operates approximately 85 Family channels outside the U.S. primarily under the Disney brand, which are broadcast in approximately 30 languages and 180 countries/territories.
Disney branded television channels include Disney Channel, Disney Junior, Disney XD and Disney International HD.
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As of September 2021,2023 and 2022, the estimated number of internationalunique subscribers (in millions) for the Company’s significantour general entertainment channels, based on internal management reports, are as follows:270 million and 315 million, respectively.
Subscribers
Disney
Disney Channel162
Disney Junior154
Disney XD83
ESPN(1)
64
Fox(1)
184
National Geographic(1)
320
Star
General Entertainment(1)
132
Sports(1)
84
Family
(1)ReflectsFamily channels include Disney Channel and Disney Junior, which air a variety of animated and live action original series and movies targeted to kids ages 2 to 14 and their parents and caregivers. As of September 2023 and 2022, the estimated number of unique subscribers for our estimate of each unique subscriber that has access to one or more of these branded channels.family channels, based on internal management reports, are 225 million and 220 million, respectively.
Equity Investments
The Company has investments in media businesses that are accounted for under the equity method, the most significant of which areequity investment at Linear Networks is A+E and CTV.E. The Company’s share of theA+E’s financial results for these investments isare reported as “Equity in the income (loss) of investees, net” in the Company’s Consolidated Statements of Operations.
A+E
A+E is owned 50% by the Company and 50% by Hearst. A+E operates a variety of cable channels:
•A&E – which generally offers unscripted entertainment programming including original reality and scripted series
•HISTORY – which offers original unscripted series and event-driven specials
•Lifetime and Lifetime Real WomenMovie Network (LMN) – which offer female-focused programming
•Lifetime Movie Network (LMN) – which offers female-focused movies
•FYI – which offers contemporary lifestyle programming
A+E also has a 50% ownership interest in Viceland, a channel offering lifestyle-oriented documentaries and reality series aimed at millennial audiences.
A+E programming is available in approximately 200 countries and territories. A+E’s networks are distributed internationally under multi-year licensing agreements with MVPDs. A+E programming is also sold to international television broadcasters and SVODTV/VOD services.
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The number of domestic subscribers (in millions) for A+E channels as estimated by Nielsen Media Research(1) are as follows:
Subscribers(2)(1)
A&E7565
HISTORY7665
Lifetime7565
LMN5649
FYI4637
(1)As a result of COVID-19, we understand there have been disruptions inBased on Nielsen Media Research’s ability to collect in-home data, which may have had an impact on the estimated subscriber counts atResearch estimates as of September 2020 and September 2021. We believe these disruptions were more significant at September 2020 than at September 2021.
(2)2023. Estimates include traditional MVPD and the majority of digital OTT subscriber counts.
CTV
ESPN holds a 30% equity interest in CTV Specialty Television, Inc., which owns television channels in Canada, including The Sports Networks (TSN) 1-5, Le Réseau des Sports (RDS), RDS2, RDS Info, ESPN Classic Canada, Discovery Canada and Animal Planet Canada.
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Direct-to-Consumer
Our DTC businesses consist ofDisney+, Disney+ Hotstar and Hulu are subscription services that provide video streaming of general entertainment and family programming. Disney+ and Disney+ Hotstar also provide video streaming of international sports programming (servicesprogramming. The services are offered individually or in a bundle) and digital content distribution services. The subscription services are offeredvarious bundles, which may include ESPN+ (see Sports segment discussion), to customers directly or through third-party distributors on mobile and internet connected devices. The majority of Direct-to-Consumer revenue is derived from subscription fees and advertising.
Disney+ Services (includes Disney+ Hotstar and(including Star+) in Latin America)
Disney+ is a subscription basedsubscription-based DTC video streaming service with Disney, Pixar, Marvel, Star Wars and National Geographic branded programming, which are all top leveltop-level selections or “tiles” within the Disney+ interface. Programming includes approximately 33,000 episodes and 1,850 movies from the Company’s produced and acquired television and film library and approximately 75 exclusive original series and 40 exclusive original movies and specials. Disney+ launched in November 2019 inOutside the U.S. and four other countries and launched in other Western European countries in the Spring of 2020. In April 2020, paid subscribers of the Hotstar streamingLatin America, Disney+ also includes a Star branded tile, which features general entertainment programming.
Star+ is a standalone DTC service in India were convertedLatin America with a variety of general entertainment and family content and live sports programming.
Disney+ (including Star+) is also referred to as Disney+ Core.
As of September 30, 2023, the estimated number of paid Disney+ Core subscribers, based on internal management reports, was approximately 113 million.
Disney+ Hotstar subscribers, and in June 2020, current subscribers of the Disney Deluxe service in Japan were converted to Disney+ subscribers. In September 2020, Disney+ was launched in additional European countries and Disney+ Hotstar was launched in Indonesia. In November 2020, Disney+ was launched in Latin America. Additional launches are planned for various Asia Pacific territories by the end of calendar 2021.
Disney+ Hotstar is a subscription basedsubscription-based DTC video streaming service withavailable in India, Indonesia, Malaysia, Philippines and Thailand. Programming includes television shows, movies, sports news and original series in approximately ten languages. The service incorporateslanguages, in addition to gaming and social features. Disney+ Hotstar has exclusive streaming rights to Home Box Office, Inc.’s original programming in Indiacertain cricket programming.
As of September 30, 2023, the estimated number of paid Disney+ Hotstar subscribers, based on internal management reports, was approximately 38 million.
Disney+ Core and also carriesDisney+ Hotstar offer content from Showtime.the Company’s various studios, including library titles, as well as content acquired from third parties.
The majority of Disney+ Core and Disney+ Hotstar revenue is availablederived from subscription fees and, to a lesser extent, Advertising. The Company launched an ad-supported Disney+ service in India, Indonesia, Malaysia and Thailand.
In February 2021, Disney+ expanded its general entertainment content offerings outside of the U.S. in December 2022 and Latin America with thein select European markets and in Canada in November 2023. The Company plans to launch of a STAR tile. In August 2021, STAR+ launched as a standalone DTC streamingan ad-supported Disney+ service in Latin America.additional international markets in calendar 2024.
STAR and STAR+ programming includesHulu
Hulu is a variety ofdomestic subscription-based DTC service with general entertainment content from Disney’sthe Company’s various studios as well as content licensed from third parties. STAR+ also includes live sports.
The majority of Disney+ revenue is derived from subscription fees. In addition, Disney+ Hotstar generates advertising revenue and Disney+ generates Premier Access fees.
As of October 2, 2021, the estimated number of paid Disney+, Disney+ Hotstar and STAR+ subscribers, based on internal management reports, was approximately 118 million.
ESPN+
ESPN+ is a subscription based DTC video streaming service offering thousands of live sporting events, on-demand sports content and original programming. ESPN+ revenue is derived from subscription fees, pay-per-view fees and, to a lesser extent, advertising sales. Live events available through the service include mixed martial arts, soccer, hockey, boxing, baseball, college sports, tennis and cricket. ESPN+ is currently the exclusive distributor for UFC pay-per-view events in the U.S. As of October 2, 2021, the estimated number of paid ESPN+ subscribers, based on internal management reports, was approximately 17 million.
Hulu
Hulu is a subscription based DTC video streaming service with content that is internally produced, commissioned or licensed. Hulu’s revenue is primarily derived from subscription fees and advertising sales.Advertising. Hulu offers two SVODsubscription VOD (SVOD) services with either limited commercial announcements or with no commercial announcements, and offerswithout advertising in addition to a digital OTT MVPD (Live TV) service. The Live TV service that can be combinedis available with either of theHulu’s SVOD services. Hulu’s Live TV serviceservices and includes live linear streams of cable networks and the major broadcast networks. In addition, Hulu offers subscriptions to premium services such as HBOMax,Max, Cinemax, Starz and Showtime, which can be added to the Hulu service. Certain programming from ABC Network, Freeform and FX Channels is also available on the Hulu SVOD service one day after the linear airing on these channels. As of October 2, 2021,September 30, 2023, the estimated number of paid Hulu subscribers, based on internal management reports, was approximately 4449 million.
The Company has a 67% ownership interest in and full operational control of Hulu. NBC Universal (NBCU) owns the remaining 33% of Hulu. The Company has a put/call agreement withIn November 2023, NBCU which provides NBCU the optionexercised its put right to require the Company to purchase NBCU’s interest in Hulu and the Company the option to require NBCU to sell its interest in Hulu to the Company, in both cases, beginning in January 2024 (see Note 4 of the Consolidated Financial Statements for additional information).
Digital Content Distribution Services
BAMTech LLC (BAMTech) operates the Company’s DTC sports business, which includes ESPN+. BAMTech also provides streaming technology services to third parties. BAMTech is owned 85% by the Company and 15% by Major League
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Baseball (MLB), which has the right to sell its shares to the Company in the future (see Note 2 of the Consolidated Financial Statements for additional information). Hearst has a 20% interest in the Company’s DTC sports business.
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Content Sales/Licensing and Other
The majority of Content Sales/Licensing revenue is derived from TV/SVOD,VOD, theatrical and home entertainment distribution. In addition, revenue is generated from music distribution, and stage plays.
The Company also publishes National Geographic magazineplays and provides post-production services through Industrial Light & Magic and Skywalker Sound. These activities are
The Company also publishes National Geographic magazine, which is reported with Content Sales/Licensing.
TV/SVODVOD Distribution
Our film and televisionWe license our content is licensed to third-party television networks, television stations and other video service providers for distribution to viewers on television or a variety of internet-connected devices, including through SVOD services (such as Netflix and Amazon). For films released theatrically, the television distribution market generally comprises multiple pay and free TV windows, which have license periods of various lengths, generally following the home entertainment distribution window.
The Company’s film library includes content from approximately 100 years of production history, as well as acquired film libraries and totals approximately 4,900 live-action titles and 400 animation titles.
The Company’s television programming library includes content from approximately 70 years of production history. Series with four or more seasons include approximately 75 one-hour dramas, 50 half-hour comedies, 5 half-hour non-scripted series, 25 one-hour non-scripted series, 15 half-hour animated series and 10 half-hour live-action series.other DTC services.
Theatrical Distribution
The Company licenses full-length live-action and animated films from the Company’s Studio production group to theaters globally. Cumulatively through October 2, 2021,September 30, 2023, the Company has released approximately 1,100 full-length live-action films and 100 full-length animated films. In the domestic and most major international markets, we generally distribute and market our films directly. In certain international markets our films are distributed by independent companies. In some territories, certain films may be exclusively distributed on our DTC streaming services. During fiscal 2022,2024, we expect to release approximately 2015 films, although the timing andultimate number of these releases could be impacted by COVID-19, and certain films intended for theatrical release may be made availablewill depend on our DTC streaming services in certain territories.when productions resume following the writers/actors’ work stoppages.
The Company incurs significant marketing and advertising costs before and throughout the theatrical release of a film in an effort to generate public awareness of the film, to increase the public’s intent to view the film and to help generate consumer interest in the subsequent home entertainment and other ancillary markets. These costs are expensed as incurred, which may result in a loss on a film in the theatrical markets, including in periods prior to the theatrical release of the film.
Home Entertainment Distribution
We distribute the Company’s film and episodic television content in home entertainment markets in physical (DVDon DVD and Blu-ray disc)disc, through electronic home video licenses and electronic formatsVOD rentals globally.
Domestically films and episodic television content are distributedinternationally, we distribute directly to retailers wholesalers and consumers. Internationally, films and episodic television content are distributed directly and through independent distribution companies. PhysicalElectronic formats of our filmsfilm and episodic television content are generally sold to retailers, such as Walmart and Target, and electronic formats are soldmay be purchased through e-tailers such as Apple and Amazon, and MVPDs, such as Comcast and DirectTV.DirecTV, and physical formats are generally sold to retailers, such as Walmart and Target. The Company also operates Disney Movie Club, which sells DVD/Blu-ray discs directly to consumers in the U.S. and Canada.
Distribution of film content in the home entertainment window generally starts two to fourwithin three months after the theatrical release. Electronic formats may be released upare typically available approximately four to foureight weeks ahead of the physical release. We also license titles to VOD e-tailers concurrent with physical home entertainment distribution.
Distribution of episodic television content in the home entertainment window includes electronic sales of season passes that can be purchased prior to, during and after the broadcast season with individual episodes typically available to season pass customers shortly after the initial airing of the show in each territory. IndividualAccess to individual episodes areis also available for electronic purchase shortly after theirthe initial airing in each territory.
As of October 2, 2021, we have approximately 2,500 produced and acquired film titles that are actively distributed in the home entertainment window, including approximately 2,200 live-action titles and approximately 300 animated titles.
Concurrently with physical home entertainment distribution, we license titles to video-on-demand (VOD) services for electronic delivery to consumers for a specified rental period.
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Disney Theatrical Group
Disney Theatrical Group develops, produces and licenses live entertainment events on Broadway and around the world. Productions include The Lion King, Aladdin,Frozen, The Little MermaidAladdin ,and Beauty and the Beast, The Hunchback of Notre Dame, Mary Poppins (a co-production with Cameron Mackintosh Ltd), Newsies, Aida and TARZAN®.
Disney Theatrical Group also licenses the Company’s IP to Feld Entertainment, the producer of Disney On Ice and Marvel Universe Live!.
Disney Music DistributionGroup
The Disney Music Group (DMG) commissions new music for the Company’s motion pictures and television programs and develops, produces, markets and distributesencompasses all aspects of the Company’s music worldwide either directly or through license agreements. DMGcommercialization and marketing including: recorded music (Walt Disney Records and Hollywood Records); music publishing; and concerts. Disney Music Group distributes music both physically and digitally and also licenses music throughout the songsworld in various forms of media, including: television; print; gaming; and recording copyrights to third parties for printed music, records, audio-visual devices, public performances and digital distribution and produces live musical concerts. DMG includes Walt Disney Records, Hollywood Records, Disney Music Publishing and Disney Concerts.consumer products.
Equity Investment
The Company has a 30% effective interest in Tata SkyPlay Limited, which operates a direct-to-home satellite distribution platform in India.
StudiosContent Production and Acquisition
The Studios produce motion pictures under the Walt Disney Pictures, Twentieth Century Studios, Marvel, Lucasfilm, Pixar and Searchlight Pictures banners. Costs to produce the films are generally capitalized and allocated to the distribution platform utilizing the content.
Marvel licensed rights to produce and distribute Spider-Man films to Sony Pictures Entertainment (Sony) prior to the Company’s fiscal 2010 acquisition of Marvel. In general, Sony incurs the costs to produce and distribute Spider-Man films and the Company licenses the merchandise rights to third parties. The Company pays Sony a licensing fee based on each film’s box office receipts, subject to specified limits. In general, the Company distributes all other Marvel-produced films.
In fiscal 2022, the Studios plan to produce approximately 50 titles, which include films and episodic television programs, for distribution theatrically and/or on our DTC platforms. The timing and number of productions could be impacted by COVID-19.
General Entertainment
Content produced by General EntertainmentProduced content primarily consists of original films and episodic television programs, and network news content. General Entertainment also acquiresand daytime/nighttime content and licensed content includes acquired episodic television programming rights. Original content is generally produced byunder the following Company owned television studios:banners: ABC Signature; 20th Television; Disney Branded Television; FX Productions; andLucasfilm; Marvel; National Geographic Studios.Studios; Pixar;
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Searchlight Pictures; Twentieth Century Studios; 20th Television; and Walt Disney Pictures. Original content is also commissioned by General Entertainment and produced by various other third-party studios. Costs to produce original content are generally capitalized and allocated to the distribution platform utilizing the content. Program development is carried out in collaboration with writers, producers and creative teams.
We estimateCosts to produce content are generally capitalized and allocated across Entertainment’s businesses based on the estimated relative value of the distribution windows.
Generally, the Company has full production and distribution rights to its IP. However, prior to the Company’s acquisition of Marvel, Sony Pictures Entertainment licensed from Marvel the rights to produce and distribute Spider-Man films in all windows except for the merchandise rights, which the Company retains.
The Company has a significant library of content spanning approximately 100 years of production history as well as acquired libraries. The library of content includes approximately 5,100 live-action film titles and 400 animated film titles, as well as episodic series with four or more seasons (approximately 75 dramas, 55 comedies, 35 non-scripted series, 15 animated series and 10 live-action series). In addition, the library includes approximately 100 series and 65 films that were produced for initial distribution on our DTC platforms.
In fiscal 2024, the Company plans to produce or commission approximately 225 episodic and film titles, although the ultimate number will depend on when productions resume following the writers/actors’ work stoppages. The vast majority of original programs thatour productions will be distributed on our Linear Networks and/or DTC platforms or theatrically. Programming is also produced or commissioned by General Entertainment for use by the Company’s various distribution platforms in fiscal 2022 is as follows, although the timing and number of productions could be impacted by COVID-19:
•60 unscripted series
•30 comedy series
•25 drama series
•15 docuseries/limited series
•10 animated series
•5 made for TV movies
•Numerous specials and shorts
Programming produced by our television studios for third-party platforms include eight returning and three new one-hour dramas; seven returning and one new half-hour comedies; and two new limited series. For many of these productions, the third parties, which typically have domestic linear distribution rights andwhile the Company has SVODretains domestic VOD and international distribution rights.
Sports
The Company has We also license, acquire or produce local content for use in various professional and college sports programming rights, which the Sports group uses to produce content aired on our Linear Networks and distributed on our DTC platforms including live events, sports news and original content. In the U.S., rights include college football (including bowl games and the College Football Playoff) and basketball, the
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National Basketball Association (NBA), the National Football League (NFL), MLB, US Open Tennis, the Professional Golfers’ Association (PGA) Championship, the Women’s National Basketball Association (WNBA), soccer, Top Rank Boxing, the Wimbledon Championships, the Masters golf tournament, mixed martial arts and the National Hockey League (NHL) (beginning with the 2021-2022 season). Internationally, rights include various cricket events (for which the Company has the global distribution rights to certain events), soccer (including English Premier League, La Liga, Bundesliga and multiple UEFA leagues), motorsports, tennis, combat sports, the NFL and MLB.countries/territories.
Competition and Seasonality
The Company’s Linear Networks and DTC streaming servicesDirect-to-Consumer compete for viewersviewers’ attention and audience share primarily with other television networks, independent television stations and other media, such as other DTC streaming services, social media and video games. With respect to the sale of advertising time, we compete with other television networks, independent television stations, MVPDs, other DTC streaming services and other advertising media such as digital content, newspapers, magazines, radio and billboards. Our television and radio stations primarily compete for audiences and advertisers in local market areas.
Linear Networks compete with other networks for carriage by MVPDs. The Company’s contractual agreements with MVPDs are renewed or renegotiated from time to time in the ordinary course of business. Consolidation and other market conditions in the cable, satellite and telecommunication distribution industry, including subscriber trends, and other factors may adversely affect the Company’s ability to obtain and maintain contractual terms for the distribution of its various programming services that are as favorable as those currently in place.
Content Sales/Licensing businesses compete with all forms of entertainment and a significant number of companies produce and/or distribute theatrical and episodic content, distribute products in the home entertainment market, provide pay TV/VOD services, and produce music and live theater.
The operating results of Content Sales/Licensing fluctuate due to the timing and performance of releases in the theatrical, home entertainment and television markets. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods.
We also compete with other media and entertainment companies, independent production companies and VOD services for creative and performing talent, story properties, show concepts, scripted and other programming, advertiser support, production facilities and exhibition outlets that are essential to the success of our Entertainment businesses.
Advertising revenues at Linear Networks and Direct-to-Consumer are subject to seasonal advertising patterns and changes in viewership levels. In general, domestic advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months. Affiliate revenues vary with the subscriber trends of MVPDs.
Sports
The Sports segment generally encompasses the Company’s sports-focused global television and DTC video streaming content production and distribution activities.
The significant lines of business within Sports are as follows:
•ESPN (generally owned 80% by the Company)
◦Domestic:
▪Eight ESPN-branded television channels
▪ESPN on ABC (sports programmed on the ABC Network by ESPN)
▪ESPN+ DTC video streaming service
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◦International: ESPN-branded channels outside of the U.S.
•Star: Star-branded sports channels in India
The significant revenues of Sports are as follows:
•Affiliate fees
•Advertising
•Subscription fees
•Other revenue - Fees from the following activities: pay-per-view events on ESPN+, sub-licensing of sports rights, programming ESPN on ABC and licensing the ESPN brand
The significant expenses of Sports are as follows:
•Operating expenses, consisting 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.
•Selling, general and administrative costs, including marketing costs
•Depreciation and amortization
Domestic ESPN
Branded television channels include eight 24-hour domestic television sports channels: ESPN and ESPN2 (both of which are dedicated to professional and college sports as well as sports news and original programming); ESPNU (which is dedicated to college sports); ESPNEWS (which re-airs select ESPN studio shows and airs a variety of other programming); SEC Network (which is dedicated to Southeastern Conference college athletics); ACC Network (which is dedicated to Atlantic Coast Conference college athletics); ESPN Deportes (which airs professional and college sports as well as studio shows in Spanish); and Longhorn Network (which is dedicated to The University of Texas athletics). In addition, ESPN programs ESPN on ABC and recognizes the direct revenues and costs for this programming and receives a fee from the ABC Network, which is eliminated in consolidation.
The Company has various sports programming rights, which are used to produce content aired on ESPN television networks and ESPN+, including live events and sports news. Rights include the National Football League (NFL), college football (including bowl games and the College Football Playoff) and basketball, the National Basketball Association (NBA), mixed martial arts, Major League Baseball (MLB), the National Hockey League (NHL), soccer, Top Rank Boxing, US Open Tennis, the Masters golf tournament, the Wimbledon Championships, the Professional Golfers’ Association (PGA) Championship and the Women’s National Basketball Association (WNBA).
The number of subscribers (in millions) for the significant domestic branded channels are as follows:
Subscribers
ESPN(1)
71
ESPN2(1)
71
ESPNU(1)
50
ESPNEWS(2)
53
SEC Network(2)
48
ACC Network(2)
46
(1)Based on Nielsen Media Research estimates as of September 2023. Estimates include traditional MVPD and the majority of digital OTT subscriber counts.
(2)Because Nielsen Media Research does not measure this channel, estimated subscribers are according to SNL Kagan as of December 2022.
ESPN+ is a domestic subscription-based DTC service offering thousands of live sporting events, on-demand sports content and other original programming. The service is offered individually or in various bundles with Disney+ and Hulu to customers directly or through third-party distributors on mobile and internet connected devices. ESPN+ revenue is derived from subscription fees, pay-per-view fees and, to a lesser extent, advertising. Live events available through the service include mixed martial arts, soccer, hockey, boxing, baseball, college sports, golf, tennis and cricket. ESPN+ is currently the exclusive distributor for Ultimate Fighting Championship (UFC) pay-per-view events in the U.S. As of September 30, 2023, the estimated number of paid ESPN+ subscribers, based on internal management reports, was approximately 26 million.
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International ESPN
The Company operates approximately 40 ESPN branded sports channels outside the U.S. in 4 languages and approximately 105 countries/territories. Channels previously branded Fox are now branded ESPN. In the Netherlands, the ESPN branded channels are operated by Eredivisie Media & Marketing CV (EMM) (owned 51% by the Company), which has the media and sponsorship rights of the Dutch Premier League for soccer. Rights include various soccer leagues (including English Premier League, LaLiga, Bundesliga and multiple UEFA leagues). As of September 2023, the estimated number of subscribers to ESPN branded channels outside the U.S., based on internal management reports, was approximately 59 million.
Star
The Company operates 10 Star branded sports channels in India, in 4 languages. Star has rights to various sports programming, primarily cricket and soccer. As of September 2023, the estimated number of subscribers to Star branded channels, based on internal management reports, was 82 million.
Equity Investments
The most significant equity investment at Sports is a 30% interest in CTV Specialty Television, Inc. (CTV). The Company’s share of CTV’s financial results is reported as “Equity in the income (loss) of investees, net” in the Company’s Consolidated Statements of Operations. CTV operates television networks in Canada, including The Sports Networks (TSN) 1-5, Le Réseau des Sports (RDS), RDS2, RDS Info, Discovery Canada, Discovery Science and Animal Planet Canada.
Investments
In fiscal 2023, the Company entered into an agreement with PENN Entertainment, Inc. (PENN), under which the Company will earn advertising and licensing revenues from providing promotional services and the ESPN BET trademark to PENN in connection with its operation of a sportsbook. In addition, the Company received warrants to purchase equity in PENN, which vest over the term of the agreement. The warrants are recorded at fair market value and adjustments to fair market value are reported as “Interest expense, net” in the Company’s Consolidated Statements of Operations.
Competition and Seasonality
Sports competes for viewers’ attention and audience share primarily with other television networks, independent television stations and other media, such as other DTC streaming services, social media and video games. With respect to the sale of advertising time, we compete with other television networks, independent television stations, MVPDs and other advertising media such as digital content, newspapers, magazines, radio and billboards. Our television and radio stations primarily compete for audiences and advertisers in local market areas.
The Company’s Linear NetworksSports television networks compete with other networks for carriage by MVPDs. The Company’s contractual agreements with MVPDs are renewed or renegotiated from time to time in the ordinary course of business. Consolidation and other market conditions in the cable, satellite and telecommunication distribution industry and other factors may adversely affect the Company’s ability to obtain and maintain contractual terms for the distribution of its various programming services that are as favorable as those currently in place.
The Content Sales/Licensing businesses compete with all forms of entertainment. A significant number of companies produce and/or distribute theatrical and television content, distribute products in the home entertainment market, provide pay television and SVOD services, and produce music and live theater.
The operating results of Content Sales/Licensing fluctuate due to the timing and performance of releases in the theatrical, home entertainment and television markets. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods.
The Company’s websites and digital products compete with other websites and entertainment products.
We also compete with other media and entertainment companies independent production companies, SVOD providers and DTC streamingVOD services for the acquisition of sports rights, creative and performing talent story properties, show concepts, scripted and other programming, advertiser support and exhibition outletsproduction facilities that are essential to the success of our DMEDSports businesses.
Advertising revenues at Linear Networks and Direct-to-Consumer are subject to seasonal advertising patterns, changes in viewership levels and the demand for sports programming. In general, domestic advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months. In addition, advertisingAdvertising revenues generated from sports programming are also impacted by the timing of sports seasons and events, which variestiming may vary throughout the year or may take place periodically (e.g. biannually, quadrennially). Affiliate revenues vary with the subscriber trends of MVPDs.
In addition, operating results at all of our businesses may fluctuate in response to business closures or disruptions, such as those described under COVID-19 Pandemic.
Federal Regulation
Television and radio broadcasting are subject to extensive regulation by the Federal Communications Commission (FCC) under federal laws and regulations, including the Communications Act of 1934, as amended. Violation of FCC regulations can result in substantial monetary fines, limited renewals of licenses and, in egregious cases, denial of license renewal or revocation of a license. FCC regulations that affect our DMED segment include the following:
•Licensing of television and radio stations. Each of the television and radio stations we own must be licensed by the FCC. These licenses are granted for periods of up to eight years, and we must obtain renewal of licenses as they expire in order to continue operating the stations. We (and the acquiring entity in the case of a divestiture) must also obtain FCC approval whenever we seek to have a license transferred in connection with the acquisition or divestiture of a station. The FCC may decline to renew or approve the transfer of a license in certain circumstances and may delay renewals while permitting a licensee to continue operating. Although we have received such renewals and approvals in the past or have been permitted to continue operations when renewal is delayed, there can be no assurance that this will be the case in the future.
•Television and radio station ownership limits. The FCC imposes limitations on the number of television stations and radio stations we can own in a specific market, on the combined number of television and radio stations we can own in
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a single market and on the aggregate percentage of the national audience that can be reached by television stations we own. Currently:
◦FCC regulations may restrict our ability to own more than one television station in a market, depending on the size and nature of the market. We do not own more than one television station in any market.
◦Federal statutes permit our television stations in the aggregate to reach a maximum of 39% of the national audience. Pursuant to the most recent decision by the FCC as to how to calculate compliance with this limit, our eight stations reach approximately 20% of the national audience.
◦FCC regulations in some cases impose restrictions on our ability to acquire additional radio or television stations in the markets in which we own radio stations. We do not believe any such limitations are material to our current operating plans.
•Dual networks. FCC rules currently prohibit any of the four major broadcast television networks — ABC, CBS, Fox and NBC — from being under common ownership or control.
•Regulation of programming. The FCC regulates broadcast programming by, among other things, banning “indecent” programming, regulating political advertising and imposing commercial time limits during children’s programming. Penalties for broadcasting indecent programming can be over $400,000 per indecent utterance or image per station.
Federal legislation and FCC rules also limit the amount of commercial matter that may be shown on broadcast or cable channels during programming designed for children 12 years of age and younger. In addition, broadcast stations are generally required to provide an average of three hours per week of programming that has as a “significant purpose” meeting the educational and informational needs of children 16 years of age and younger. FCC rules also give television station owners the right to reject or refuse network programming in certain circumstances or to substitute programming that the licensee reasonably believes to be of greater local or national importance.
•Cable and satellite carriage of broadcast television stations. With respect to MVPDs operating within a television station’s Designated Market Area, FCC rules require that every three years each television station elect either “must carry” status, pursuant to which MVPDs generally must carry a local television station in the station’s market, or “retransmission consent” status, pursuant to which the MVPDs must negotiate with the television station to obtain the consent of the television station prior to carrying its signal. The ABC owned television stations have historically elected retransmission consent.
•Cable and satellite carriage of programming. The Communications Act and FCC rules regulate some aspects of negotiations regarding cable and satellite retransmission consent, and some cable and satellite distribution companies have sought regulation of additional aspects of the carriage of programming on cable and satellite systems. New legislation, court action or regulation in this area could have an impact on the Company’s operations.EXPERIENCES
The foregoing is a brief summary of certain provisions of the Communications Act, other legislation and specific FCC rules and policies. Reference should be made to the Communications Act, other legislation, FCC rules and public notices and rulings of the FCC for further information concerning the nature and extent of the FCC’s regulatory authority.
FCC laws and regulations are subject to change, and the Company generally cannot predict whether new legislation, court action or regulations, or a change in the extent of application or enforcement of current laws and regulations, would have an adverse impact on our operations.
DISNEY PARKS, EXPERIENCES AND PRODUCTS
The operations of DPEP’s significant lines of business within Experiences are as follows:
•Parks & Experiences:
◦Domestic:
▪Theme parks and resorts, which include: resorts:
•Walt Disney World Resort in Florida; Florida
•Disneyland Resort in California; California
▪Experiences:
•Disney Cruise Line
•Disney Vacation Club
•National Geographic Expeditions (owned 73% by the Company) and Adventures by Disney
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•Aulani, a Disney Resort & Spa in Hawaii
◦International:
▪Theme parks and resorts:
•Disneyland Paris; Paris
•Hong Kong Disneyland Resort (48% ownership interest);interest and consolidated in our financial results)
•Shanghai Disney Resort (43% ownership interest), all of which areinterest and consolidated in our results. Additionally,financial results)
•In addition, the Company licenses ourits IP to a third party to operate Tokyo Disney Resort.
◦Disney Cruise Line, Disney Vacation Club, National Geographic Expeditions (73% ownership interest), Adventures by Disney and Aulani, a Disney Resort & Spa in Hawaii
•Consumer Products:
◦Licensing of our trade names, characters, visual, literary and other IP to various manufacturers, game developers, publishers and retailers throughout the world, for use on merchandise, published materials and games
◦Sale of branded merchandise through online, retail online and wholesale businesses, and development and publishing of books, comic books and magazines (except National Geographic magazine, which is reported in DMED)Entertainment)
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The significant revenues of DPEPExperiences are as follows:
•Theme park admissions - Sales of tickets for admission to our theme parks
•Parks & Experiences merchandise, food and beverage - Sales of merchandise, foodfor premium access to certain attractions (e.g. Genie+ and beverages at our theme parks and resorts and cruise shipsLightning Lane)
•Resorts and vacations - Sales of room nights at hotels, sales of cruise and other vacations and sales and rentals of vacation club properties
•Parks & Experiences merchandise, food and beverage - Sales of merchandise, food and beverages at our theme parks and resorts and cruise ships
•Merchandise licensing and retail:
◦Merchandise licensing - Royalties from licensing our IP for use on consumer goods
◦Retail - Sales of merchandise at The Disney Store and through internet shopping sites generally(generally branded shopDisney,shopDisney) and at The Disney Store, as well as to wholesalers (including books, comic books and magazines)
•Parks licensing and other - Revenues from sponsorships and co-branding opportunities, real estate rent and sales and royalties earned on Tokyo Disney Resort revenues.revenues
The significant expenses of DPEPExperiences are as follows:
•Operating expenses, consisting primarily of operating labor, costs of goods sold, infrastructure costs, supplies, commissions and entertainment offerings. Infrastructure costs include information systems expense,technology support costs, repairs and maintenance, property taxes, utilities and fuel, retail occupancy costs, insurance and transportation
•Selling, general and administrative costs, including marketing costs
•Depreciation and amortization
Significant capital investments:
•In recent years, the majority of the Company’s capital spend has been at our parks and experiences business, which is principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and systems infrastructure. The various investment plans discussed in the “Parks & Experiences” section are based on management’s current expectations. Actual investment may differ.
Parks & Experiences
Walt Disney World Resort
The Walt Disney World Resort is located approximately 20 miles southwest of Orlando, Florida, on approximately 25,000 acres of land. The resort includes theme parks (the Magic Kingdom, EPCOT, Disney’s Hollywood Studios and Disney’s Animal Kingdom); hotels; vacation club properties; a retail, dining and entertainment complex (Disney Springs); a sports complex; conference centers; campgrounds; golf courses; water parks; and other recreational facilities designed to attract visitors for an extended stay.
The Walt Disney World Resort is marketed through a variety of international, national and local advertising and promotional activities. A number of attractions and restaurants in each of the theme parks are sponsored or operated by other corporationscompanies under multi-year agreements.
Magic Kingdom — The Magic Kingdom consists of six themed areas: Adventureland, Fantasyland, Frontierland, Liberty Square, Main Street USA and Tomorrowland. Each land provides a unique guest experience featuring themed attractions, restaurants, merchandise shops and entertainment experiences.
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EPCOT — EPCOT consists of four major themed areas: World Showcase, World Celebration, World Nature and World Discovery. All areas feature themed attractions, restaurants, merchandise shops and entertainment experiences. Countries represented with pavilions include Canada, China, France, Germany, Italy, Japan, Mexico, Morocco, Norway, the United Kingdom and the U.S. EPCOT is undergoingThe Journey of Water, inspired by Moana, opened in October 2023 as part of a multi-year transformation which includes the addition of Remy’s Ratatouille Adventure attraction and the Harmonious nighttime spectacular, which both opened in October 2021, and Guardians of the Galaxy: Cosmic Rewind, which is expected to open in summer 2022.at EPCOT.
Disney’s Hollywood Studios — Disney’s Hollywood Studios consists of eight themed areas: Animation Courtyard, Commissary Lane, Echo Lake, Grand Avenue, Hollywood Boulevard, Star Wars: Galaxy’s Edge, Sunset Boulevard and Toy Story Land. The areas provide behind-the-scenes glimpses of Hollywood-style action through various shows and attractions and offer themed food service, merchandise shops and entertainment experiences.
Disney’s Animal Kingdom — Disney’s Animal Kingdom consists of a 145-foot tall Tree of Life centerpiece surrounded by five themed areas: Africa, Asia, DinoLand USA, Discovery Island and Pandora - The World of Avatar. Each themed area contains attractions, restaurants, merchandise shops and entertainment experiences. The park features more than 300 species of live mammals, birds, reptiles and amphibians and 3,000 varieties of vegetation.
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Hotels, Vacation Club Properties and Other Resort Facilities — As of October 2, 2021,September 30, 2023, the Company owned and operated 18 resort hotels and vacation club facilities at the Walt Disney World Resort, with approximately 24,00023,000 rooms and 3,5003,600 vacation club units. Resort facilities include 500,000 square feet of conference meeting space and Disney’s Fort Wilderness camping and recreational area, which offers approximately 800 campsites. The Company is constructing the Star Wars: Galactic Starcruiser, a new hotel at the Walt Disney World Resort scheduled to open in March 2022.
Disney Springs is an approximately 120-acre retail, dining and entertainment complex and consists of four areas: Marketplace, The Landing, Town Center and West Side. The areas are home to more than 150 venues including the 64,000-square-foot World of Disney retail store. Most of the Disney Springs facilities are operated by third parties that pay rent to the Company.
NineTen independently-operated hotels with approximately 6,0007,000 rooms are situated on property leased from the Company.
ESPN Wide World of Sports Complex is a 230-acre center that hosts professional caliber training and competitions, festival and tournament events and interactive sports activities. The complex, which welcomes both amateur and professional athletes, accommodates multiple sporting events, including baseball, basketball, football, soccer, softball, tennis and track and field. It also includes a stadium, as well as two venues designed for cheerleading, dance competitions and other indoor sports. In 2020, the complex hosted the remainder of the previously suspended NBA season, including the playoffs and finals.
Other recreational amenities and activities available at the Walt Disney World Resort include three championship golf courses, miniature golf courses, full-service spas, tennis, sailing, swimming, horseback riding and a number of other sports and leisure time activities. The resort also includes two water parks: Disney’s Blizzard Beach and Disney’s Typhoon Lagoon.
Disneyland Resort
The Company owns 486489 acres and has rights under a long-term lease for use of an additional 5552 acres of land in Anaheim, California. The Disneyland Resort includes two theme parks (Disneyland and Disney California Adventure), three resort hotels and a retail, dining and entertainment complex (Downtown Disney).
The Disneyland Resort is marketed through a variety of international, national and local advertising and promotional activities. A number of the attractions and restaurants in the theme parks are sponsored or operated by other corporationscompanies under multi-year agreements.
Disneyland — Disneyland consists of nine themed areas: Adventureland, Critter Country, Fantasyland, Frontierland, Main Street USA, Mickey’s Toontown, New Orleans Square, Star Wars: Galaxy’s Edge and Tomorrowland. These areas feature themed attractions, restaurants, merchandise shops and entertainment experiences.
Disney California Adventure — Disney California Adventure is adjacent to Disneyland and includes eight themed areas: Avengers Campus, Buena Vista Street, Cars Land, Grizzly Peak, Hollywood Land, Pacific Wharf, Paradise Gardens Park, Pixar Pier and Pixar Pier.San Fransokyo Square. These areas include themed attractions, restaurants, merchandise shops and entertainment experiences.
Hotels, Vacation Club Units and Other Resort Facilities — Disneyland Resort includes three Company owned and operated hotels and vacation club facilities with approximately 2,400 rooms, 50180 vacation club units and 180,000 square feet of conference meeting space.
Downtown Disney is a themed 15-acre retail, entertainment and dining complex with approximately 30 venues located adjacent to both Disneyland and Disney California Adventure. Most of the Downtown Disney facilities are operated by third parties that pay rent to the Company.
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Aulani, a Disney Resort & Spa
Aulani, a Disney Resort & Spa is a Company-operated family resort on a 21-acre oceanfront property on Oahu, Hawaii featuring approximately 350 hotel rooms, an 18,000-square-foot spa and 12,000 square feet of conference meeting space. The resort also has approximately 480 vacation club units.
Disneyland Paris
Disneyland Paris is located on a 5,510-acre developmentapproximately 5,200-acres in Marne-la-Vallée, approximately 20 miles east of Paris, France. The land is being developed pursuant to a master agreement with French governmental authorities. Disneyland Paris includes two theme parks (Disneyland Park and Walt Disney Studios Park); seven themed resort hotels; two convention centers; a shopping, dining and entertainment complex (Disney Village); and a 27-hole golf facility. Of the 5,5105,200 acres comprising the site, approximately half have been developed to date, including a planned community (Val d’Europe) and an eco-tourism destination (Villages Nature).
Disneyland Park — Disneyland Park consists of five themed areas: Adventureland, Discoveryland, Fantasyland, Frontierland and Main Street USA. These areas include themed attractions, restaurants, merchandise shops and entertainment experiences.
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Walt Disney Studios Park — Walt Disney Studios Park includes fourfive themed areas: Front Lot, Production Courtyard, Toon Studio, and Worlds of Pixar.Pixar and Avengers Campus. These areas each include themed attractions, restaurants, merchandise shops and entertainment experiences. Walt Disney Studios Park is undergoing a multi-year expansion that will include Avengers Campus, which is expected to open in summer 2022, and a new themethemed area based on Frozen.
Hotels and Other Facilities — Disneyland Paris operates seven resort hotels, with approximately 5,750 rooms and 250,000 square feet of conference meeting space. In addition, eightfive on-site hotels that are owned and operated by third parties provide approximately 2,5751,500 rooms.
Disney Village is an approximately 500,000-square-foot retail, dining and entertainment complex located between the theme parks and the hotels. A number of the Disney Village facilities are operated by third parties that pay rent to the Company.
Val d’Europe is a planned community near Disneyland Paris that is being developed in phases. Val d’Europe currently includes a regional train station, hotels and a town center consisting of a shopping center as well as office, commercial and residential space. Third parties operate these developments on land leased or purchased from the Company.
Villages Nature is a European eco-tourism resort that consists of recreational facilities, restaurants and 900 vacation units. The resort is a 50% joint venture between the Company and Pierre & Vacances-Center Parcs, who manages the venture.
Hong Kong Disneyland Resort
The Company owns a 48% interest in Hong Kong Disneyland Resort and the Government of the Hong Kong Special Administrative Region (HKSAR) owns a 52% interest. The resort is located on 310 acres on Lantau Island and is in close proximity to the Hong Kong International Airport and the Hong Kong-Zhuhai-Macau Bridge. Hong Kong Disneyland Resort includes one theme park and three themed resort hotels. A separate Hong Kong subsidiary of the Company is responsible for managing Hong Kong Disneyland Resort. The Company is entitled to receive royalties and management fees based on the operating performance of Hong Kong Disneyland Resort.
Hong Kong Disneyland — Hong Kong Disneyland consists of seveneight themed areas: Adventureland, Fantasyland, Grizzly Gulch, Main Street USA, Mystic Point, Tomorrowland, and Toy Story Land.Land and World of Frozen, which opened in November 2023. These areas feature themed attractions, restaurants, merchandise shops and entertainment experiences. The park is in the midst of a multi-year expansion project that includes a Frozen-themed area.
Hotels — Hong Kong Disneyland Resort includes three themed hotels with a total ofapproximately 1,750 rooms and approximately 16,000 square feet of conference meeting space.
Shanghai Disney Resort
The Company owns a 43% interest in Shanghai Disney Resort and Shanghai Shendi (Group) Co., Ltd (Shendi) owns a 57% interest. The resort is located in the Pudong district of Shanghai on approximately 1,000 acres of land, which includes the Shanghai Disneyland theme park; two themed resort hotels; a retail, dining and entertainment complex (Disneytown); and an outdoor recreation area. A management company, in which the Company has a 70% interest and Shendi has a 30% interest, is responsible for operating the resort and receives a management fee based on the operating performance of Shanghai Disney Resort. The Company is also entitled to royalties based on the resort’s revenues.
Shanghai Disneyland — Shanghai Disneyland consists of seven themed areas: Adventure Isle, Fantasyland, Gardens of Imagination, Mickey Avenue, Tomorrowland, Toy Story Land and Treasure Cove. These areas feature themed attractions, shows, restaurants, merchandise shops and entertainment experiences. The Company is constructing an eighth themed area based on the animated film Zootopia., which is scheduled to open in late calendar 2023.
Hotels and Other Facilities — Shanghai Disneyland Resort includes two themed hotels with a total of 1,220approximately 1,200 rooms. Disneytown is an 11-acre outdoor complex of dining, shopping and entertainment venues located adjacent to Shanghai Disneyland. Most Disneytown facilities are operated by third parties that pay rent to Shanghai Disney Resort. The Company is currently constructing a third themed hotel, which will have approximately 400 rooms.
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Tokyo Disney Resort
Tokyo Disney Resort is located on 494 acres of land, six miles east of downtown Tokyo, Japan. The Company earns royalties on revenues generated by the Tokyo Disney Resort, which is owned and operated by Oriental Land Co., Ltd. (OLC), a third-party Japanese corporation. The resort includes two theme parks (Tokyo Disneyland and Tokyo DisneySea); fourfive Disney-branded hotels; six other hotels (operated by third parties other than OLC); a retail, dining and entertainment complex (Ikspiari); and Bon Voyage, a Disney-themed merchandise location.
Tokyo Disneyland — Tokyo Disneyland consists of seven themed areas: Adventureland, Critter Country, Fantasyland, Tomorrowland, Toontown, Westernland and World Bazaar.
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Tokyo DisneySea — Tokyo DisneySea is divided into seven “ports of call,” including American Waterfront, Arabian Coast, Lost River Delta, Mediterranean Harbor, Mermaid Lagoon, Mysterious Island and Port Discovery. OLC is expanding Tokyo DisneySea to include an eighth themed port, Fantasy Springs.Springs expected to open in spring 2024.
Hotels and Other Resort Facilities — Tokyo Disney Resort includes fourfive Disney-branded hotels with a total of more than 2,4003,000 rooms and a monorail, which links the theme parks and resort hotels with Ikspiari. OLC is currently constructing an approximate 600-room Toy Story themed hotel that is expected to open in April 2022 and an approximatea 475-room Disney-branded hotel at Tokyo DisneySea that is expected to open in 2023.spring 2024.
Disney Vacation Club (DVC)
DVC offers ownership interests in 1516 resort facilities located at the Walt Disney World Resort; Disneyland Resort; Aulani; Vero Beach, Florida; and Hilton Head Island, South Carolina. Available units are offered for sale under a vacation ownership plan and are operated as hotel rooms when not occupied by vacation club members. The Company’s vacation club units range from deluxe studios to three-bedroom grand villas. Unit counts in this document are presented in terms of two-bedroom equivalents. DVC had approximately 4,3004,500 vacation club units as of October 2, 2021.September 30, 2023, including The Villas at Disneyland Hotel, which opened in September 2023. The Company also plans to convert certain existing hotel roomsopen The Cabins at Disney’s Grand FloridianFort Wilderness Resort & Spa into approximately 70 DVC- A Disney Vacation Club Resort and additional units at Disney’s Polynesian Village Resort in 2024.
Storyliving by summer 2022 and build a new DVC property at Disneyland Resort with 135 units thatDisney
The Company is expected to opendeveloping its first Storyliving by Disney residential community, Cotino, in 2023.Rancho Mirage, California.
Disney Cruise Line
Disney Cruise Line is a four-shipfive-ship vacation cruise line, which operates out of ports in North America, Europe and Europe.the South Pacific. The Disney Magic and the Disney Wonder are approximately 85,000-ton 875-stateroom ships, andships; the Disney Dream and the Disney Fantasy are approximately 130,000-ton 1,250-stateroom ships.ships; and the Disney Wish is a 140,000-ton 1,250-stateroom ship. The ships cater to families, children, teenagers and adults, with distinctly-themedthemed areas and activities for each group. Many cruise vacations include a visit to Disney’s Castaway Cay, a 1,000-acre private Bahamian island.
The CompanyDisney Cruise Line is expanding its cruise business by adding three new ships. The first ship, the Disney WishTreasure, isthe Disney Adventure and an eighth ship. The Disney Treasure and the Disney Adventure are scheduled to launch in June 2022 with the other two ships to be delivered from the shipyard in 2024fiscal 2025 and 2025. Each newthe eighth ship canis scheduled to be powered by liquefied natural gasdelivered in fiscal 2026. The Disney Treasure and eighth ship will be approximately 140,000 tons with 1,250 staterooms. The Disney Adventure will be approximately 200,000 tons with approximately 2,100 staterooms and will operate in Southeast Asia.
The Company has an agreement with the Government of The Bahamas to create and manage a destinationDisney Lookout Cay at Lighthouse Point on the island of Eleuthera which is scheduled to open as a Disney Cruise Line destination in the summer of 2024.
Adventures by Disney and National Geographic Expeditions
Adventures by Disney and National Geographic Expeditions offer guided tour packages predominantly at non-Disney sites around the world.
Walt Disney Imagineering
Walt Disney Imagineering provides master planning, real estate development, attraction, entertainment and show design, engineering support, production support, project management and research and development for the DPEP segment.development.
Consumer Products
Licensing
The Company’s merchandise licensing operations cover a diverse range of product categories, the most significant of which are: toys, apparel, games, home décor and furnishings, accessories, health and beauty, food, books, food,stationery, footwear, stationery,magazines and consumer electronics and magazines.electronics. The Company licenses characters from its film, television and other properties for use on third-party products in these categories and earns royalties, which are usually based on a fixed percentage of the wholesale or retail selling price of the products. Some of the major properties licensed by the Company include: Mickey and Minnie,Friends, Star Wars, Frozen,Spider-Man, Disney Princess, Avengers, Spider-Man,Frozen, Toy Story, Disney Classics, Winnie the Pooh and Cars.Lilo & Stitch.
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Retail
The Company sells Disney-, Marvel-, Pixar- and Lucasfilm-branded products through retail stores andshopDisney branded internet sites globally. During 2021, the Company announced plans to focus on its e-commerce business and significantly reduced its brick-and-mortar footprint in North America and Europe.Disney Store branded retail locations. At October 2, 2021,September 30, 2023, the Company owns and operates approximately 40 stores in Japan, 20 stores in North America, 15two stores in Europe and two storesone store in China. Retail stores operate under The Disney Store name and are generally located in leading shopping malls and other retail complexes. Internet sites are generally branded shopDisney.
The Company creates, distributes and publishes a variety of products in multiple countries and languages based on the Company’s branded franchises. The products include children’s books and comic books, digital comics and ebooks, learning products and storytelling apps.
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books.
Competition and Seasonality
The Company’s theme parks and resorts as well as Disney Cruise Line and Disney Vacation Club compete with other forms of entertainment, lodging, tourism and recreational activities. The profitability of the leisure-time industry may be influenced by various factors that are not directly controllable, such as economic conditions including business cycle and exchange rate fluctuations, health concerns, the political environment, travel industry trends, amount of available leisure time, oil and transportation prices, weather patterns and natural disasters. The licensing and retail business competes with other licensors, retailers and publishers of character, brand and celebrity names, as well as other licensors, publishers and developers of game software, online video content, websites, other types of home entertainment and retailers of toys and kids merchandise.
All of the theme parks and the associated resort facilities are operated on a year-round basis. Typically, theme park attendance and resort occupancy fluctuate based on the seasonal nature of vacation travel and leisure activities, the opening of new guest offerings and pricing and promotional offers. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early winter and spring holiday periods. In addition, theme park and resort revenues may be higher during significant celebrations such as theme park or character anniversaries and lower in the periods following such celebrations. The licensing, retail and wholesale businesses are influenced by seasonal consumer purchasing behavior, which generally results in higher revenues during the Company’s first and fourth fiscal quarter, and by the timing and performance of theatrical and game releases and cable programming broadcasts.
INTELLECTUAL PROPERTY PROTECTION
The Company’s businesses throughout the world are affected by its ability to exploit and protect against infringement of its IP, including trademarks, trade names, copyrights, patents and trade secrets. Important IP includes rights in the content of motion pictures, television programs, electronic games, sound recordings, character likenesses, theme park attractions, books and magazines and merchandise. Risks related to the protection and exploitation of IP rights and information concerning the expiration of certain of our copyrights are set forth in Item 1A – Risk Factors.
FEDERAL REGULATION — ENTERTAINMENT AND SPORTS
Television broadcasting is subject to extensive regulation by the Federal Communications Commission (FCC) under federal laws and regulations, including the Communications Act of 1934, as amended. Violation of FCC regulations can result in substantial monetary fines, limited renewals of licenses and, in egregious cases, denial of license renewal or revocation of a license. FCC regulations that affect linear channels include the following:
•Licensing of television stations. Each of the television stations we own must be licensed by the FCC. These licenses are granted for periods of up to eight years, and we must obtain renewal of licenses as they expire in order to continue operating the stations. We (and the acquiring entity in the case of a divestiture) must also obtain FCC approval whenever we seek to have a license transferred in connection with the acquisition or divestiture of a station. The FCC may decline to renew or approve the transfer of a license in certain circumstances and may delay renewals while permitting a licensee to continue operating. Although we have received such renewals and approvals in the past or have been permitted to continue operations when renewal is delayed, there can be no assurance that this will be the case in the future.
•Station ownership limits. The FCC imposes limitations on the number of television stations and radio stations an entity can own in a specific market, on the combined number of television and radio stations an entity can own in a single market and on the aggregate percentage of the national audience that can be reached by television stations. Currently:
◦FCC regulations may restrict our ability to own more than one television station in a market, depending on the size and nature of the market. We do not own more than one television station in any market.
◦Federal statutes permit our television stations in the aggregate to reach a maximum of 39% of the national audience. Pursuant to the most recent decision by the FCC as to how to calculate compliance with this limit, our eight stations reach approximately 20% of the national audience.
•Dual networks. FCC rules currently prohibit any of the four major broadcast television networks — ABC, CBS, Fox and NBC — from being under common ownership or control.
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•Regulation of programming. The FCC regulates broadcast programming by, among other things, banning “indecent” programming, regulating political advertising and imposing commercial time limits during children’s programming. Penalties for broadcasting indecent programming can be over $400,000 per indecent utterance or image per station.
Federal legislation and FCC rules also limit the amount of commercial matter that may be shown on broadcast or cable channels during programming designed for children 12 years of age and younger. In addition, broadcast stations are generally required to provide an average of three hours per week of programming that has as a “significant purpose” meeting the educational and informational needs of children 16 years of age and younger. FCC rules also give television station owners the right to reject or refuse network programming in certain circumstances or to substitute programming that the licensee reasonably believes to be of greater local or national importance.
•Cable and satellite carriage of broadcast television stations. With respect to MVPDs operating within a television station’s Designated Market Area, FCC rules require that every three years each television station elect either “must carry” status, pursuant to which MVPDs generally must carry a local television station in the station’s market, or “retransmission consent” status, pursuant to which the MVPDs must negotiate with the television station to obtain the consent of the television station prior to carrying its signal. The ABC owned television stations have historically elected retransmission consent.
•Cable and satellite carriage of programming. The Communications Act and FCC rules regulate some aspects of negotiations between programmers and distributors regarding the carriage of networks by cable and satellite distribution companies, and some cable and satellite distribution companies have sought regulation of additional aspects of the carriage of programming on their systems. New legislation, court action or regulation in this area could have an impact on the Company’s operations.
The foregoing is a brief summary of certain provisions of the Communications Act, other legislation and specific FCC rules and policies. Reference should be made to the Communications Act, other legislation, FCC rules and public notices and rulings of the FCC for further information concerning the nature and extent of the FCC’s regulatory authority.
FCC laws and regulations are subject to change, and the Company generally cannot predict whether new legislation, court action or regulations, or a change in the extent of application or enforcement of current laws and regulations, would have an adverse impact on our operations.
AVAILABLE INFORMATION
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are available without charge on our website, www.disney.com/investors, as soon as reasonably practicable after they are filed electronically with the U.S. Securities and Exchange Commission (SEC). We are providing the address to our internet site solely for the information of investors. We do not intend the address to be an active link or to otherwise incorporate the contents of the website into this report.
ITEM 1A. Risk Factors
For an enterprise as large and complex as the Company, a wide range of factors could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in our filings with the SEC, the most significant factors affecting our business include the following:
BUSINESS, ECONOMIC, MARKET and OPERATING CONDITION RISKS
The adverse impact of COVID-19 on our businesses will continue for an unknown length of time and may continue to impact certain of our key sources of revenue.
Since early 2020, the world has been and continues to be impacted by COVID-19 and its variants. COVID-19 and measures to prevent its spread has impacted our segments in a number of ways, most significantly at the DPEP segment where our theme parks and resorts were closed and cruise ship sailings and guided tours were suspended. Most of our businesses have been closed, suspended or restricted consistent with government mandates or guidance. These operations resumed, generally at reduced capacity, at various points since May 2020. We experienced significant disruptions in the production and availability of content. Although film and television production generally resumed beginning in the fourth quarter of fiscal 2020, we continue to see disruption in production activities depending on local circumstances. Production delays and fewer theatrical releases have limited the availability of film content to be sold in distribution windows subsequent to the theatrical release. Theaters have been subject to capacity limitations and shifting government mandates or guidance regarding COVID-19 restrictions. Declines in linear viewership and consumption of our content (due to production delays or otherwise) result in decreased advertising revenue.
Sports content continues to be delayed or impacted by COVID-19 restrictions. Continued or increased unavailability of sports content is likely to exacerbate the impacts to our business. Other of our offerings will be exposed to additional financial impacts in the event of future significant unavailability of content. COVID-19 impacts could also hasten the erosion of historical sources of revenue at our Linear Networks businesses. We have experienced reduced numbers of reservations at our hotels and cruises. We have experienced increased returns and refunds and customer requests for payment deferrals.
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Collectively, our impacted businesses have historically been the source of the majority of our revenue. Many of our businesses that are open are operating subject to restrictions and increased expenses. These and other impacts of COVID-19 on our businesses will continue for an unknown length of time. COVID-19 impacts that have subsided may again impact our businesses in the future and new impacts may emerge from COVID-19 developments or other pandemics. For example, some of our parks closed due to government mandates or guidance following their initial reopening.
Consumers may change their behavior and consumption patterns in response to the prolonged suspension of certain of our businesses, such as subscription to pay television packages (which experienced accelerated decline during some periods after the onset of COVID-19) or theater-going to watch movies. Certain of our customers, including individuals as well as businesses such as theatrical distributors, affiliates, licensees of rights to use our programming and IP, advertisers and others, have been negatively impacted by the economic downturn caused by COVID-19, which may continue to result in decreased purchases of our goods and services even after certain operations resume. Some industries in which our customers operate, such as theatrical distribution, retail and travel, could experience contraction, which could impact the profitability of our businesses going forward. Additionally, we have incurred and will continue to incur incremental costs to implement health and safety measures, reopen our parks and restart our halted projects and operations. As we have resumed production of content, including live sports events, we have incurred costs to implement health and safety measures and productions will generally take longer to complete.
Our mitigation efforts in response to the impacts of COVID-19 on our businesses have had, or may have, negative impacts. The Company (or our Board of Directors, as applicable) issued senior notes in March and May 2020, entered into an additional $5.0 billion credit facility in April 2020 (which has now been terminated), did not pay a dividend with respect to fiscal 2020 operations and has not declared nor paid a dividend with respect to fiscal 2021 operations; suspended certain capital projects; temporarily reduced certain discretionary expenditures (such as spending on marketing); temporarily reduced management compensation; temporarily eliminated Board of Director retainers and committee fees; furloughed over half of our employees; and reduced our employee population. Such mitigation measures have resulted in the delay or suspension of certain projects in which we have invested, particularly at our parks and resorts and studio operations. We may take additional mitigation actions in the future such as raising additional financing; not declaring future dividends (the Company has announced an intention not to declare further dividends until a return to a more normalized operating environment); reducing, or not making, certain payments, such as some contributions to our pension and postretirement medical plans; further suspending capital spending; reducing film and television content investments; or implementing additional furloughs or reductions in force or modifying our operating strategy. These and other of our mitigating actions may have an adverse impact on our businesses. Additionally, there are limitations on our ability to mitigate the adverse financial impact of COVID-19, including the fixed costs of our theme park business and the impact COVID-19 may have on capital markets and our cost of borrowing. Further, the benefit of certain mitigation efforts will not continue to be available going forward. For example, as our employees are returning from furlough, the cost reductions of the related furloughs are no longer available and we are incurring expenses to recall and hire employees.
Even our operations that were not suspended or that have resumed continue to be adversely impacted by government mandated restrictions (such as density limitations and travel restrictions and requirements); measures we voluntarily implement; measures we are contractually obligated to implement; the distancing practices and health concerns of consumers, talent and production workers; and logistical limitations. Upon reopening our parks and resorts businesses we have seen certain instances of lower demand. Geographic variation in government requirements and ongoing changes to restrictions have disrupted and could further disrupt our businesses, including our production operations. Our operations could be suspended, re-suspended or subjected to new or reinstated limitations by government action or otherwise in the future as a result of developments related to COVID-19, such as the current expansion of the delta variant or other variants. For example, both Hong Kong Disneyland Resort and Disneyland Paris have reopened and closed multiple times since the onset of COVID-19. Some of our employees who returned to work were later refurloughed. Our operations could be further negatively impacted and our reputation could be negatively impacted by a significant COVID-19 outbreak impacting our employees, customers or others interacting with our businesses, including our supply chain.
In fiscal year 2020, we operated at a net loss and in fiscal year 2021, our net income from continuing operations remained substantially below pre-pandemic levels. We have impaired goodwill and intangible assets at our International Channels businesses and written down the value of certain of our retail store assets. Certain of our other assets could also become impaired, including further impairments of goodwill and intangible assets; we have increased, and may further increase, allowances for credit losses; and there may be changes in judgments in determining the fair-value of assets; and estimates related to variable consideration may change due to increased returns, reduced usage of our products or services and decreased royalties. Our leverage ratios have increased as a result of COVID-19’s impact on our financial performance, which caused certain of the credit rating agencies to downgrade their assessment of our credit ratings, and are expected to remain elevated at least in the near term. Our debt ratings may be further downgraded, which may negatively impact our cost of borrowing. Due to reduced operating cash flow, we may utilize cash balances and/or future financings to fund a portion of our operations and investments in our businesses. Financial risks may be exacerbated by a number of factors, including the timing of customer deposit refunds and liquidity issues among our key customers, particularly advertisers, television affiliates, theatrical exhibitors
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and distributors, and licensees. These factors have impacted timely payments by such customers to the Company. Additionally, loss of or delay in the collection of receivables as a result of contractual performance short falls, meeting our contractual payment obligations, and investments we need to make in our business may result in increased financial risk. The Company has $12.5 billion in trade accounts receivable outstanding at October 2, 2021, with an allowance for credit losses of $0.2 billion. Our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty due to the impacts of COVID-19. Economic or political conditions in a country outside the U.S. could also reduce our ability to hedge exposure to currency fluctuations in the country or our ability to repatriate revenue from the country.
The impacts of COVID-19 to our business have generally amplified, or reduced our ability to mitigate, the other risks discussed in our filings with the SEC and our remediation efforts may not be successful.
COVID-19 also makes it more challenging for management to estimate future performance of our businesses. COVID-19 has already adversely impacted our businesses and net cash flow, and we expect the ultimate magnitude of these disruptions on our financial and operational results will be dictated by the length of time that such disruptions continue which will, in turn, depend on the currently unknowable duration and severity of the impacts of COVID-19, and among other things, the impact and duration of governmental actions imposed in response to COVID-19 and individuals’ and companies’ risk tolerance regarding health matters going forward. Where actual performance in our international markets significantly underperforms management’s forecasts, the Company has had, and could have further, foreign currency hedge gains/losses which are not offset by the realization of exposures, resulting in excess hedge gains or losses. While we cannot be certain as to the duration of the impacts of COVID-19, we expect impacts of COVID-19 to continue to affect our financial results in fiscal 2022.
Changes in U.S., global, and regional economic conditions are expected to have an adverse effect ongenerally adversely affect the profitability of our businesses.
A declineDeclines in economic activity,conditions, such as recession, or economic downturn, and/or inflationary conditions in the U.S. and other regions of the world in which we do business, canor a failure of conditions to improve as anticipated typically adversely affect demand and/or expenses for anyone or more of our businesses, thus reducing our revenue and earnings. Global economic activity has declined as a result of the impacts of COVID-19. Past declines in economic conditions reduced guest spending at our parks and resorts, purchases of and prices for advertising on our broadcast and cable networks and owned stations, performance of our home entertainment releases, and purchases of Company-branded consumer products, and similar impacts can be expected shouldas such conditions recur. Recent inflationary conditions increased certain of our costs. The current decline in economic conditions could also reducehave the effect of reducing attendance at our parks and resorts, prices that MVPDs pay for our cable programming, purchases of and prices for advertising on our DTC products or subscription levels for our cable programming or direct-to-consumer products. EconomicDTC products, while also continuing to increase the prices we pay for goods, services and labor. Unfavorable economic conditions can also impair the ability of those with whom we do business to satisfy their obligations to us. In addition, an increase in price levels generally, or in price levels in a particular sector, such as the energy sector (such as current inflation related to domestic and global supply chain issues, which has led to both overall price increases and pronounced price increases in certain sectors), could result in a shift in consumer demand away from the entertainment and consumer productsexperiences we offer, which could also adversely affect our revenues and, at the same time, increase our costs. A decline in economic conditions or a failure of conditions to improve as anticipated could impact
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implementation or success of our expansion plans. Changesbusiness plans, such as our plans to increase investment in our Experiences segment, the realignment of our cost structure and plans for our DTC ad-supported services, enhancements, pricing structure and price increases. In addition, actions to reduce inflation, including raising interest rates, increase our cost of borrowing, which in turn make it more difficult to obtain financing for our operations or investments on favorable terms. Further, global economic conditions impact foreign currency exchange rates for foreign currencies may reduce international demand for our productsagainst the U.S. dollar. The current or increase our labor or supply costscontinued strength in non-U.S. markets, or reducethe value of the U.S. dollar has adversely impacted the U.S. dollar value of revenue we receive and expect to receive from other markets. Economicmarkets and may reduce international demand for our products and services. Although we hedge exposure to certain foreign currency fluctuations, any such hedging activity may not substantially offset the negative financial impact of exchange rate fluctuations and is not expected to offset all such negative financial impact, particularly in periods of sustained U.S. dollar strength relative to multiple foreign currencies. Further, economic or political conditions in a countrycountries outside the U.S. also have reduced, and could alsocontinue to reduce, our ability to hedge exposure to currency fluctuations in the countrythose countries or our ability to repatriate revenue from the country.those countries. Broader or targeted supply chain delays, such as those currently impactingthat have impacted global distribution from time to time, may further exacerbate inflationary pressures and impact our ability to sell and deliver goods or otherwise disrupt our operations. The adverse impact on our businesses of declines in economic conditions or a failure of conditions to improve as anticipated will depend, in part, on the severity and duration of such economic conditions and our ability to mitigate the impacts of economic conditions on our businesses may be limited.
Changes in technology, and in consumer consumption patterns mayand in how entertainment products are created affect demand for our entertainment products, the revenue we can generate from these products orand the cost of producing or distributing these products.
The media entertainment and internet businesses in which we participate increasingly depend on our ability to successfully adapt to new technologies including shifting patterns of content consumption through the adoption and exploitation of new technologies.how entertainment products are generated. New technologies affect the demand for our products, the manner in which our products are distributed to consumers, ways we charge for and receive revenue for our entertainment products and the stability of those revenue streams, the sources and nature of competing content offerings, the time and manner in which consumers acquire and view some of our entertainment products and the options available to advertisers for reaching their desired audiences. This trend hasThese developments have impacted the business model for certain traditional forms of distribution, as evidenced by the industry-wide decline in ratings for broadcast and cable television, the reduction in demand for home entertainment sales of theatrical content, the development of alternative distribution channels for broadcast and cable programming and declines in subscriber levels for traditional cable channels, including for a numberchannels. These trends have decreased advertising and affiliate revenue at some of our linear networks. DeclinesIn addition, theater-going to watch movies currently is, and may continue to be, below pre-COVID-19 levels.
Rules governing new technological developments, such as developments in linear viewership have resulted in decreased advertising revenue.generative artificial intelligence (AI), remain unsettled, and these developments may affect aspects of our existing business model, including revenue streams for the use of our IP and how we create our entertainment products. In order to respond to these developments,the impact of new technologies on our businesses, we regularly consider, and from time to time implement changes to our business models, most recently by developing, investing in and acquiring DTC products, and reorganizing our media and entertainment businesses to accelerateadvance our DTC strategies.strategies, and developing new media offerings. There can be no assurance that our DTC offerings, new media offerings and other efforts will successfully respond to thesetechnological changes. In addition, declines in certain traditional forms of distribution may increase the cost of content allocable to our DTC offerings, negatively impacting the profitability of our DTC offerings. We expect to forgo revenue from traditional sources, particularly as we expand our DTC offerings. To date our DTC streaming services have experienced significant losses. There can be no assurance that the DTC model and other business models we may develop will ultimately be profitable or as profitable as our existing or historic business models.
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MisalignmentWe face risks relating to misalignment with public and consumer tastes and preferences for entertainment, travel and consumer products, could negativelywhich impact demand for our entertainment offerings and products and adversely affect the profitability of any of our businesses.
Our businesses create entertainment, travel and consumer products whose success depends substantially on consumer tastes and preferences that change in often unpredictable ways. The success of our businesses depends on our ability to consistently create compelling content, which may be distributed, among other ways, through broadcast, cable, theaters, internet or cellularmobile technology, and used in theme park attractions, hotels and other resort facilities and travel experiences and consumer products. Such distribution must meet the changing preferences of the broad consumer market and respond to competition from an expanding array of choices facilitated by technological developments in the delivery of content. The success of our theme parks, resorts, cruise ships and experiences, as well as our theatrical releases, depends on demand for public or out-of-home entertainment experiences. COVID-19 may impact consumer tastes and preferences. ManyDemand for certain out-of-home entertainment experiences, such as theater-going to watch movies, has not returned to pre-pandemic levels. In addition, many of our businesses increasingly depend on acceptance of our offerings and products by consumers outside the U.S., and their The success of our businesses therefore depends on our ability to successfully predict and adapt to changing consumer tastes and preferences outside as well as inside the U.S. Moreover, we must often invest substantial amounts in content production and acquisition, acquisition of sports rights, launch of new sports-related studio programming, theme park attractions, cruise ships or hotels and other facilities or customer facing platforms before we
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know the extent to which these products will earn consumer acceptance. The impactsacceptance, and these products may be introduced into a significantly different market or economic or social climate from the one we anticipated at the time of COVID-19the investment decisions. Generally, our revenues and profitability are inhibiting and delaying our ability to earn returns on some of these and other investments. Ifadversely impacted when our entertainment offerings and products, (including our content offerings, which have been impacted by COVID-19) as well as our methods to make our offerings and products available to consumers, do not achieve sufficient consumer acceptance, our revenue may decline, decline further or fail to grow to the extent we anticipate when making investment decisions and thereby further adversely affect the profitability of one or moreacceptance. Further, consumers’ perceptions of our businesses.position on matters of public interest, including our efforts to achieve certain of our environmental and social goals, often differ widely and present risks to our reputation and brands. Consumer tastes and preferences impact, among other items, revenue from advertising sales (which are based in part on ratings for the programs in which advertisements air), affiliate fees, subscription fees, theatrical film receipts, the license of rights to other distributors, theme park admissions, hotel room charges and merchandise, food and beverage sales, sales of licensed consumer products or sales of our other consumer products and services.
The success of our businesses is highly dependent on the existence and maintenance of intellectual property rights in the entertainment products and services we create.
The value to us of our IP is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from our IP may decrease, or the cost of obtaining and maintaining rights may increase. The terms of some copyrights for IP related to some of our products and services have expired and other copyrights will expire in the future. For example, in the United States and countries that look to the United States copyright term when shorter than their own, the copyright term for early works such as the short film Steamboat Willie (1928), and the specific early versions of characters depicted in those works, expires at the end of the 95th calendar year after the date the copyright was originally secured in the United States. As copyrights expire, we expect that revenues generated from such IP will be negatively impacted to some extent.
The unauthorized use of our IP may increase the cost of protecting rights in our IP or reduce our revenues. The convergence of computing, communication and entertainment devices, increased broadband internet speed and penetration, increased availability and speed of mobile data transmission and increasingly sophisticated attempts to obtain unauthorized access to data systems have made the unauthorized digital copying and distribution of our films, television productions and other creative works easier and faster and protection and enforcement of IP rights more challenging. The unauthorized distribution and access to entertainment content generally continues to be a significant challenge for IP rights holders. Inadequate laws or weak enforcement mechanisms to protect entertainment industry IP in one country can adversely affect the results of the Company’s operations worldwide, despite the Company’s efforts to protect its IP rights. COVID-19 and distribution innovationDistribution innovations, including in response to COVID-19, hashave increased opportunities to access content in unauthorized ways. Additionally, negative economic conditions coupled with a shift in government priorities could lead to less enforcement. These developments require us to devote substantial resources to protecting our IP against unlicensed use and present the risk of increased losses of revenue as a result of unlicensed distribution of our content and other commercial misuses of our IP. The legal landscape for some new technologies, including some generative AI, remains uncertain, and development of the law in this area could impact our ability to protect against infringing uses.
With respect to IP developed by the Company and rights acquired by the Company from others, the Company is subject to the risk of challenges to our copyright, trademark and patent rights by third parties. In addition, the availability of copyright protection and other legal protections for IP generated by certain new technologies, such as generative AI, is uncertain. Successful challenges to our rights in IP may result in increased costs for obtaining rights or the loss of the opportunity to earn revenue from or utilize the IP that is the subject of challenged rights. From time to time, the Company has been notified that it may be infringing certain IP rights of third parties. Technological changes in industries in which the Company operates and extensive patent coverage in those areas may increase the risk of such claims being brought and prevailing.
Protection of electronically stored data and other cybersecurity is costly, and if our data or systems are materially compromised in spite of this protection, we may incur additional costs, lost opportunities, damage to our reputation, disruption of service or theft of our assets.
We maintain information necessary to conduct our business, including confidential and proprietary information as well as personal information regarding our customers and employees, in digital form. We also use computer systems to deliver our products and services and operate our businesses. Data maintained in digital form is subject to the risk of unauthorized access, modification, exfiltration, destruction or denial of access and our computer systems are subject to cyberattacks that may result in disruptions in service. We use many third partythird-party systems and software, which are also subject to supply chain and other
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cyberattacks. We develop and maintain an information security program to identify and mitigate cyber risks but the development and maintenance of this program is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Accordingly, despite our efforts, the risk of unauthorized access, modification, exfiltration, destruction or denial of access with respect to data or systems and other cybersecurity attacks cannot be eliminated entirely, and the risks associated with a potentially material incident remain. In
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addition, we provide some confidential, proprietary and personal information to third parties in certain cases, when itwhich information is necessaryalso subject to pursue business objectives. While we obtain assurances that these third parties will protect this information and, where we believe appropriate, monitor the protections employed by these third parties, there is a risk the confidentiality of data held by third parties may be compromised.compromise.
If our information or cyber security systems or data are compromised in a material way, our ability to conduct our business may be impaired, we may lose profitable opportunities or the value of those opportunities may be diminished and, as described above, we may lose revenue as a result of unlicensed use of our intellectual property. If personal information of our customers or employees is misappropriated, our reputation with our customers and employees may be damaged resulting in loss of business or morale, and we may incur costs to remediate possiblerelated remediation of harm to our customers and employees or damages arising from litigation and/or to pay fines or take other actionactions we take with respect to judicial or regulatory actions arising out of the incident.an incident create additional costs. Insurance we obtain maydoes not cover all potential losses or damages associated with such attacks or events. Our systems and the systemsusers and those of third parties with whom we engage are continually attacked.attacked, sometimes successfully, and there can be no assurance that future incidents will not have material adverse effects on our operations or financial results.
A variety of uncontrollable events may disrupt our businesses, reduce demand for or consumption of our products and services, impair our ability to provide our products and services or increase the cost or reduce the profitability of providing our products and services.
DemandThe operation and profitability of our businesses and demand for and consumption of our products and services, particularly our theme parks and resorts, isexperiences businesses, are highly dependent on the general environment for travel and tourism.tourism, including in the specific regions in which our parks and experiences businesses operate. In addition, we have extensive international operations, including our international theme parks and resorts, which are dependent on domestic and international regulations consistent with trade and investment in those regions. The operation of our businesses and the environment for travel and tourism, as well as demand for and consumption of our other entertainment products, can be significantly adversely affected in the U.S., globally or in specific regions as a result of a variety of factors beyond our control, including: health concerns (including as it has been by COVID-19 and could be by future health outbreaks and pandemics); adverse weather conditions arising from short-term weather patterns or long-term climate change, including longer and more regular excessive heat conditions, catastrophic events or natural disasters (such as excessive heat or rain, hurricanes, typhoons, floods, droughts, tsunamis and earthquakes); international, political or military developments, (includingincluding trade and other international disputes and social unrest);unrest; macroeconomic conditions, including a decline in economic activity;activity, inflation and foreign exchange rates; and terrorist attacks. These events and others, such as fluctuations in travel and energy costs and computer virus attacks, intrusions or other widespread computing or telecommunications failures, may also damage our ability to provide our products and services or to obtain insurance coverage with respect to some of these events. An incident that affected our property directly would have a direct impact on our ability to provide goods and services and could have an extended effect of discouraging consumers from attending our facilities. Moreover, the costs of protecting against such incidents including the costs of protecting against the spread of COVID-19, reduces the profitability of our operations.
For example, COVID-19 and measures to prevent its spread impacted our businesses in a number of ways, most significantly at the spreadExperiences segment where our theme parks and resorts were closed and cruise ship sailings and guided tours were suspended. In addition, we delayed, or in some cases, shortened or canceled theatrical releases and experienced disruptions in the production and availability of COVID-19 are currently impairingcontent. Collectively, our ability to provide our products and services and reducing consumptionimpacted businesses historically have been the source of those products and services. Further, prior to COVID-19, events in Hong Kong impacted profitabilitythe majority of our Hong Kong operations and may continue to do so, and pastrevenue. In addition, hurricanes have impacted the profitability of Walt Disney World Resort and may do so in Floridathe future. The Company has paused certain operations in certain regions, including in response to sanctions, trade restrictions and future hurricanes may also do so.
The negative economic consequencesrelated developments and the profitability of COVID-19 may be particularly challengingcertain operations has been impacted as a result of events in markets where individuals and local businesses have limited access to government supported “safety nets,” which could lead to political instability and unrest, and further depress demand for our products and services over a longer timeframe.the corresponding regions.
In addition, we derive affiliate fees and royalties from the distribution of our programming, sales of our licensed goods and services by third parties, and the management of businesses operated under brands licensed from the Company, and we are therefore dependent on the successes of those third parties for that portion of our revenue. The profitability of one or more of our businesses could be adversely impacted by the significant contraction of distribution channels for our products and services, including through third-party licensees or sellers of our licensed goods and services. In addition, third-party suppliers provide products and services essential to the operation of a number of our businesses. A wide variety of factors could influence the success of those third parties and if negative factors significantly impacted a sufficient number of those third parties or materially impacted a supplier of a significant product or service, the profitability of one or more of our businesses could be adversely affected. In specific geographic markets, we have experienced delayed and/or partial payments from certain affiliate partnersthird parties due to liquidity issues.
We obtain insurance against the risk of losses relating to some of these events, generally including certain physical damage to our property and resulting business interruption, certain injuries occurring on our property and some liabilities for alleged breach of legal responsibilities. When insurance is obtained it is subject to deductibles, exclusions, terms, conditions and limits of liability. The types and levels of coverage we obtain vary from time to time depending on our view of the likelihood of specific types and levels of loss in relation to the cost of obtaining coverage for such types and levels of loss and we may experience material losses not covered by our insurance. For example, most losses related to impacts of COVID-19 will not be covered by insurance available to us.
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ChangesWe face risks related to changes in our business strategy or restructuring of our businesses, which have affected and may increasecontinue to affect our costs or otherwise affectcost structure, the profitability of our businesses or the value of our assets.
As changes in our business environment occur we have adjusted, continue to adjust and may further adjust our business strategies to meet these changes and we may otherwise decide to further restructure our operations or particular businesses or assets. For example, in October 2020fiscal 2023, we announced a reorganization ofreorganized our media and entertainment businesses to accelerateoperations, which had been previously reported in one segment, into two segments, Entertainment and Sports; in fiscal 2023 we announced that we would review content, primarily on our DTC strategies. In Marchservices, for alignment with a strategic change in our approach to content curation, resulting in removal of certain content from our platforms and related impairment charges; in fiscal 2022, we announced plans to introduce an ad-supported Disney+ service, new pricing model and price increases and cost realignment; in fiscal 2021, we announced the closure of a substantial number of our Disney-branded retail stores; and we have announced exploration of a number of new types of businesses. Changes in strategy, such as was the case with the most recent reorganization of our media and entertainment operations, can lead to workforce disruptions. Our new organization and strategies are, among other things, subject to execution risk and may not produce the anticipated benefits, such as supporting our growth strategies and enhancing shareholder value. For example, notwithstanding our announced plans to rationalize costs, the costs of our DTC strategy, and associated losses, may continue to grow or be reduced more slowly than anticipated, which may impact our distribution strategy across businesses/distribution platforms, the types of content we distribute through various businesses/distribution platforms, and the timing and sequencing of content windows. Our new organization and strategies could be less successful than our previous organizational structure and strategies. In addition, external events including changing technology, changing consumer purchasing patterns, acceptance of our theatrical and other content offerings and changes in macroeconomic conditions may impair the value of our assets. When these changes or events occur, we have incurred and may continue to incur costs to change our business strategy and have needed and may in the future need to write-down the value of assets. For example, current conditions, including COVID-19 and our business decisions, have reducedIn addition to the value of some of our assets. Wecontent impairment noted above, among other assets, we have impaired goodwill and intangible assets at our International Channels businesseslinear networks and impaired the value of certain of our retail store assets. We may write-downwrite down other assets as our strategy evolves to account for the current business environment.
We also make investments in existing or new businesses, including investments in international expansion of our business and in new business lines. For example, in fiscal 2023, we announced that we are developing plans to accelerate and expand investment in our Experiences segment. In addition, in recent years, suchother investments have included expansion and renovation of certain of our theme parks, expansion of our fleet of cruise ships, the acquisition of TFCF Corporation (TFCF) and investments related to DTC offerings. Some of these and future investments havemay ultimately result in returns that are negative or low, the ultimate business prospects of the businesses related to these investments are uncertain, and these investments may impact the resources available to, and the profitability of, our other businesses, and these risks are exacerbated by COVID-19.businesses. In any of these events,addition, our costs may increase, we may have significant charges associated with the write-down of assets, as occurred in connection with the closure of Star Wars: Galactic Starcruiser or returns on new investments may be negative or lower than prior to the change in strategy or restructuring. Even if our strategies are effective in the long term, our new offerings will generally not be profitable in the short term, growth of our new offerings is unlikely to be even quarter over quarter and we may not expand into new markets as or when anticipated. Our ability to forecast for new businesses may be impacted by our lack of experience operating in those new businesses, speed with which the competitive landscape changes, volatility beyond our control (such as the events beyond our control noted above) and our ability to obtain or develop the content and rights on which our projections are based. Accordingly, we may not achieve our forecasted outcomes.
Increased competitive pressures may reduceimpact our revenues orand increase our costs.
We face substantial competition in each of our businesses from alternative providers of the products and services we offer and from other forms of entertainment, lodging, tourism and recreational activities. This includes, among other types, competition for human resources, content and other resources we require in operating our business. For example:
•Our programming and production operations compete to obtain creative, performing, production and business talent, sports and other programming, story properties, advertiser support, production facilities and market share with traditional and new media platforms, including other studio operators, television networks, SVODVOD providers and other new sources of broadband delivered content.
•Our television networks and stations and DTC offerings compete for the sale of advertising time with traditional and new media platforms, including other television and SVODVOD services, as well as with newspapers, magazines, billboards and radio stations. In addition, we increasingly face competition for advertising sales fromstations, and various forms of internet and mobile delivered content, which offer advertising delivery technologies that are more targeted than can be achieved through traditional means.
•Our television networks compete for carriage of their programming with other programming providers.
•Our theme parks and resorts compete for guests with all other forms of entertainment, lodging, tourism and recreation activities.activities and compete for creative, performing and business talent, including with other theme park and resort operators.
•Our content sales/licensing operations compete for customers with all other forms of entertainment.
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•Our consumer products business competes with other licensors and creators of IP.
•Our DTC businessesstreaming services compete for customers with an increasing number of competitors’ DTC offerings, all other forms of media and all other forms of entertainment, as well as for technology, creative, performing and business talent and for content.
Competition in each of these areas may further increase as a result of technological developments and changes in market structure, including consolidation of suppliers of resources and distribution channels. Increased competition has increased, and may divertcontinue to increase, the cost of programming, including sports and other products and diverts consumers from, or delays their consumption of, our creative or other products, or to other products or other forms of entertainment and experiences, which could reduce our revenue or increase our marketing costs.
Competition for the acquisition of resources can further increase the cost of producing our products and services,services; change the composition of our offerings, including sports; deprive us of talent needed for our entertainment and experiences businesses, including the talent necessary to produce high quality creative materialmaterial; increase employee turnover and staffing instability; or increase the cost of compensation for our employees. Such competition may also reduce, or limit growth in, prices for our products and services, including advertising rates and subscription fees at our media networks and DTC offerings, parks and resorts admissions and room rates and prices for consumer products from which we derive license revenues, and fees for our DTC offerings.
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revenues.
Our results may be adversely affected if long-term programming or carriagedistribution contracts are not renewed on sufficiently favorable terms.
We enter into long-term contracts for both the acquisition and the distribution of media programming and products, including contracts for the acquisition of programming rights for sporting events and other programs, and contracts for the distribution of our programming to content distributors. As these contracts expire, we must renew or renegotiate the contracts, which from time to time has led to service blackouts when distribution contracts expired before renewal terms were agreed, and if we are unable to renew themthese contracts on acceptable terms, we may lose programming rights or distribution rights. As a result, our portfolio of programming rights we acquire and the distributors of our programming and the portfolio of programming rights our distributors acquire have changed and may continue to change over time. Even if these contracts are renewed, the cost of obtaining certain programming rights has increased and may continue to increase (or increase at faster rates than our historical experience) orand programming distributors, facing pressures resulting from increased subscription fees and alternative distribution challenges, have demanded and may continue to demand terms (including with respect to the pricing for, and the breadthnature and amount of, distribution)programming distributed) that reduce our revenue from distribution of programs (or increase revenue at slower rates than our historical experience). For example, a recent carriage agreement renewal includes fewer of our linear networks but provides for certain of our DTC streaming services to be made available to the distributor’s subscribers. Moreover, our ability to renew these contracts on favorable terms may be affected by a number of factors, such as consolidation in the market for program distribution and the entrance of new participants in the market for distribution of content on digital platforms and the impacts of COVID-19.platforms. With respect to the acquisition of programming rights, particularly sports programming rights, the impact of these long-term contracts on our results over the term of the contracts depends on a number of factors, including the strength of advertising markets, subscription levels and rates for programming rights costs increases, effectiveness of marketing efforts and the size of viewer audiences. There can be no assurance that revenues from programming based on these rights will exceed the cost of the rights plus the other costs of producing and distributing the programming.
Changes in regulationsRegulations applicable to our businesses may impair the profitability of our businesses.
OurEach of our businesses, including our broadcast networks and television stations, are highly regulated, and each of our other businesses is subject to a variety of U.S. and overseas regulations.international regulations, which impact the operations and profitability of our businesses. Some of these regulations include:
•U.S. FCC regulation of our television and radio networks, our national programming networks and our owned television stations. See Item 1 — Business — Disney MediaFederal Regulation - Entertainment and Entertainment Distribution, Federal Regulation.Sports.
•Federal, state and foreign privacy and data protection laws and regulations.
•Regulation of the safety and supply chain of consumer products and theme park operations, including potential regulation regarding the sourcing, importation and the sale of goods.
•Environmental protection regulations.
•Imposition by foreign countries ofU.S. and international anti-corruption laws, sanction programs, trade restrictions restrictionsand anti-money laundering laws.
•Restrictions on the manner in which content is currently licensed and distributed, ownership restrictions currency exchange controls or film or television content requirements, investment obligations or quotas.
•Domestic and international labor laws, tax laws or currency controls.
ChangesNew laws and regulations, as well as changes in any of these current laws and regulations or regulator activities in any of these areas, or others, may require us to spend additional amounts to comply with the regulations, or may restrict our ability to offer products and services in ways that are profitable.profitable, and create an increasingly unpredictable regulatory landscape. In addition, ongoing and future developments in international political, trade and security policy may lead to new regulations
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limiting international trade and investment and disrupting our operations outside the U.S., including our international theme parks and resorts operations in France, mainland China and Hong Kong. For example, in January 2019 India2022 the U.S. and other countries implemented regulationa series of sanctions against Russia in response to events in Russia and tariffs impacting certain bundling of channels;Ukraine; U.S. agencies have enhanced trade restrictions, and legislation is currently under consideration that would prohibitincluding new prohibitions on the importation of goods from certain regions;regions and other jurisdictions are considering similar measures; U.S. state governments have become more active in passing legislation targeted at specific sectors and companies and applying existing laws in novel ways to new technologies, including streaming and online commerce; and in many countries/regions around the world (including but not limited to the EU) regulators are requiring us to broadcast on our linear (or display on our DTC streaming services) programming produced in specific countries as well as invest specified amounts of our revenues in local content productions. In Florida, steps directed at the Company (including the passage of legislation) have been taken and future actions have been threatened, which collectively could negatively impact (and may have already impacted) our ability to execute on our business strategy, our costs and the profitability of our operations in Florida.
PublicFurther, in response to the COVID-19 pandemic, public health and other regional, national, state and local regulations and policies are impacting our ability to operate our businesses at all or in accordance with historic practice. In addition to the government requirements that have closed or impacted most of our businesses as a result of COVID-19, governmentbusinesses. Government requirements may continue tocould be extendedreinstated and new government requirements may be imposed.imposed to address COVID-19 or future health outbreaks or pandemics.
Our operations outside the U.S. may be adversely affected by the operation of laws in those jurisdictions.
Our operations in non-U.S. jurisdictions are in many cases subject to the laws of the jurisdictions in which they operate rather than, or in addition to, U.S. law. Laws in some jurisdictions differ in significant respects from those in the U.S. These differences can affect our ability to react to changes in our business, and our rights or ability to enforce rights may be different than would be expected under U.S. law. Moreover, enforcement of laws in some overseasinternational jurisdictions can be inconsistent and unpredictable, which can affect both our ability to enforce our rights and to undertake activities that we believe are beneficial to our business. In addition, the business and political climate in some jurisdictions may encourage corruption, which could reduce our ability to compete successfully in those jurisdictions while remaining in compliance with local laws or U.S. anti-corruption laws applicable to our businesses. As a result, our ability to generate revenue and our expenses in non-U.S. jurisdictions may differ from what would be expected if U.S. law alone governed these operations.
Environmental, social and governance matters and any related reporting obligations may impact our businesses.
U.S. and international regulators, investors and other stakeholders are increasingly focused on environmental, social and governance matters. For example, new domestic and international laws and regulations relating to environmental, social and governance matters, including environmental sustainability and climate change, human capital management and cybersecurity, are under consideration or being adopted, which may include specific, target-driven disclosure requirements or obligations. Our response will require increased costs to comply, the implementation of new reporting processes, entailing additional compliance risk, a skilled workforce and other incremental investments.
In addition, we have undertaken or announced a number of related actions and goals, which will require changes to operations and ongoing investment. There is no assurance that our initiatives will achieve their intended outcomes or that we will achieve any of these goals. Consumer, government and other stakeholder perceptions of our efforts to achieve these objectives often differ widely and present risks to our reputation and brands. In addition, our ability to implement some initiatives or achieve some goals is dependent on external factors. For example, our ability to meet certain environmental sustainability goals or initiatives will depend in part on third-party collaboration, the availability of suppliers that can satisfy new requirements, mitigation innovations and/or the availability of economically feasible solutions at scale.
Damage to our reputation or brands may negatively impact our Company across businesses and regions.
Our reputation and globally recognizable brands are integral to the success of our businesses. Because our brands engage consumers across our businesses, damage to our reputation or brands in one business may have an impact on our other
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businesses. Because some of our brands are globally recognized, brand damage may not be locally contained. Maintenance of the reputation of our Company and brands depends on many factors including the quality of our offerings, maintenance of trust with our customers and our ability to successfully innovate. In addition, we may pursue brand or product integration combining previously separate brands or products targeting different audiences under one brand or pursue other business initiatives inconsistent with one or more of our brands, and there is no assurance that these initiatives will be accepted by our customers and not adversely impact one or more of our brands. Significant negative claims or publicity regarding the Company or its operations, products, management, employees, practices, business partners, business decisions, social responsibility and culture, which may damagebe amplified by social media, adversely impact our brands or reputation, even if such claims are untrue. Damage to our reputation or brands could impact our sales, business opportunities, profitability, recruiting and valuation of our securities.
Risks that impact our business as a wholeVarious risks may also impact the success of our DTC business.streaming services.
We may not successfully execute on our DTC strategy. An increasingThe success of our DTC strategy and profitability of our DTC streaming services will be impacted by the success of the reorganization of our media and entertainment business and our ability to advance our DTC strategies, drive subscriber additions and retention based on the attractiveness of our content,
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manage churn in reaction to price increases, achieve the desired financial impact of the Disney+ ad supported service, pricing model and price increases, our ability to execute on cost realignment and the effects of our determinations with regard to distribution for our creative content across windows. The initial costs of marketing campaigns are generally recognized in the business of initial exploitation, and amortization of capitalized production costs and licensed programming rights are generally allocated across businesses based on the estimated relative value of the distribution windows. Accordingly, our distribution determinations impact the costs of each business, including the applicable DTC service. There are a number of competitors have enteredcompeting DTC businesses. Consumers may not be willing to pay for an expanding set of DTC streaming services at increasing prices, potentially exacerbated by an economic downturn. In addition, economic downturns negatively impact the purchase of and price for advertising on our DTC streaming services. We face competition for creative talent and sports and other programming rights and may not be successful in recruiting and retaining talent.talent and obtaining desired programming rights or face increased costs to do so. Acquisition of new subscribers to our DTC streaming services is not linear, and we have experienced net losses of subscribers in some periods. Our content does not always successfully attract and retain subscribers in the quantities that we expect. Our content is subject to cost pressures and may cost more than we expect. We may not successfully manage our costs to meet our profitability goals. Government regulation, including revised foreign content and ownership regulations may impactas well as government-imposed content restrictions, impacts the implementation of our DTC business plans. The highly competitive environment in which we operate puts pricing pressure on our DTC offerings and may require us to lower our prices or not take price increases to attract or retain customers.customers or lead to higher churn rates. These and other risks may impact the profitability and success of our DTC businesses.streaming services.
Potential credit ratings actions, increases in interest rates, or volatility in the U.S. and global financial markets could impede access to, or increase the cost of, financing our operations and investments.
Our borrowing costs have been and can be affected by short- and long-term debt ratings assigned by independent ratings agencies that are based, in part, on the Company’s performance as measured by credit metrics such as leverage and interest coverage ratios. As a result of the financial impact of COVID-19 on our businesses, Standard and Poor’s downgraded our long-term debt ratings by two notches to BBB+ and downgraded our short-term debt ratings by one notch to A-2. Fitch downgraded our long- and short-term credit ratings by one notch to A- and F2, respectively. On June 5, 2023, Standard and Poor’s upgraded our long-term debt ratings by one notch to A-. As of October 2, 2021September 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 BBB+A- and A-2 (Stable)(Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively. These ratings actions have increased, and any potentialAny future downgrades could further increase our cost of borrowing and/or make it more difficult for us to obtain financing.financing on acceptable terms.
In addition, increases in interest rates orhave increased our cost of borrowing and volatility in U.S. and global financial markets could impact our access to, or further increase the cost of, financing. Past disruptions in the U.S. and global credit and equity markets made it more difficult for many businesses to obtain financing on acceptable terms. These conditions tended to increase the cost of borrowing and if they recur, our cost of borrowing could increase and it may be more difficult to obtain financing for our operations or investments.
Elevated indebtedness or leverage ratios could adversely affect us, including by decreasing our business flexibility.
Elevated indebtedness could have the effect of, among other things, reducing our financial flexibility and our ability to respond to changing business and economic conditions and other uncontrollable events. Debt repayment obligations could also reduce funds available for investments, capital expenditures, share repurchases and dividends, and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels. Our leverage ratios increased as the result of COVID-19’s impact on financial performance, which caused certain of the credit ratings agencies to downgrade their assessment of our credit ratings. Downgrades to our debt rating may negatively impact our cost of borrowings and/or make it more difficult for us to obtain financing on acceptable terms.
Labor disputes may disrupt our operations and may adversely affect the profitability of anyone or more of our businesses.
A significant number of employees in various parts of our businesses, are covered by collective bargaining agreements, including employees of our theme parks, and resorts as well as writers, directors, actors and production personnel and others employed at DMED.for our productions are covered by collective bargaining agreements. In addition, some of our employees outside the U.S. are represented by works councils, trade unions or other employee associations. Further, the employees of licensees who manufacture and retailers who sell our licensed consumer products, and employees of providers of programming content (such as sports leagues) may be covered by labor agreements with their employers. From time to time, collective bargaining agreements and other labor agreements expire, requiring renegotiation of their terms. In general, a labor disputedisputes and work stoppages involving our employeesemployees; persons employed on our productions; athletes or others employed by, or otherwise connected with, sports leagues or organizers; or the employees of our licensees or retailers who sell our licensed consumer products or providers of programming content may disrupt our operations and reduce our revenues. ResolutionFor example, on May 2, 2023, members of the Writers Guild of America (WGA) commenced a work stoppage, which lasted for almost five months. On July 14, 2023, members of SAG-AFTRA, the union representing television and movie actors, also commenced a work stoppage, which lasted for almost four months. These work stoppages have impacted our
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productions and the pipeline for programming and theatrical releases, which could result in reduced revenue and have an adverse effect on our profitability. The new collective bargaining agreements with the Directors Guild of America, WGA and SAG-AFTRA will lead to increased costs to create content, including as a result of increases in rates, residuals and benefits. Generally, resolution of disputes or negotiation of new agreements, including rate increases and other changes to employee benefits, has in the past increased our costs and may increase our costs.costs in the future.
The seasonality of certain of our businesses and timing of certain of our product offerings could exacerbate negative impacts on our operations.
Each of our businesses is normally subject to seasonal variations and variations in connection with the timing of our product offerings, including as follows:
•Revenues in our DPEPat the Experiences segment fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and leisure activities and seasonal consumer purchasing behavior, which generally results in increased revenues during the Company’s first and fourth fiscal quarters. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early winter and spring holiday periods. Our parks, resortsRevenues at the Experiences segment also may fluctuate with changes in theme park attendance and experiences areresort occupancy resulting from special celebrations or events that may be operating at diminished capacityincrease demand in the applicable periods and decrease demand in prior or have been or may be closed during theselater periods as a result of COVID-19.guests time their vacations to occur during such special celebrations or events. In addition, licensing revenues fluctuate with the timing and performance of our theatrical releases and cable programming broadcasts, many of which have been delayed, canceled or modified.broadcasts.
•Revenues from television networks and stations are subject to seasonal advertising patterns and changes in viewership levels.levels, including related to certain sporting events. In general, domestic general entertainment linear networks advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months.months, and sports advertising revenues are impacted by the timing of sports seasons and events, which varies throughout the year or may take place periodically.
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•Revenues from content sales/licensing fluctuate due to the timing of content releases across various distribution markets. Release dates and methods are determined by a number of factors, including, among others, competition, and the timing of vacation and holiday periods and impacts of COVID-19 to various distribution markets.periods.
•DTC revenues fluctuate based onon: changes in the number of subscribers, mix of subscribers to different offerings and subscriber fee or revenue mix;fees; viewership levels on our digital platforms;levels; and the demand for sports and film and television content. Each of these may depend on the availability of content, which varies from time to time throughout the year based on, among other things, sports seasons, content production schedules and sports league shut downs. Because our DTC business is relatively new, we have limited data on which to base our understanding of DTC seasonality.work stoppages.
Accordingly, negative impacts on our business occurring during a time of typical high seasonal demand such as our park closures due to COVID-19 restrictions or hurricane damage during the summer travel season or other high seasons, could have a disproportionate effect on the results of that business for the year. Examples include the ongoing impact of COVID-19 on various high seasons or hurricane damage
Our operations are impacted by our ability to our parks during the summer travel season.
Sustained increases inattract and retain employees and costs of employee wages and health, welfare and pension andbenefits, including postretirement medical benefits for some employees and other employee health and welfare benefitsretirees, may reduce our profitability.
With approximately 190,000225,000 employees, the success of our businesses is substantially affected by our ability to attract and retain a workforce with the necessary skills for our varied businesses, including executing successfully on succession planning for the talent at all levels necessary to advance the Company’s key objectives and strategies. Further, our profitability is substantially affected by labor costs, including wages and our health, welfare and pension benefits, including the costs of pensionmedical benefits for current employees and current andthe costs of postretirement medical benefits.benefits for some current employees and retirees. We may experience significant increases in these costs as a result of macroeconomic, factors, which are beyondregulatory, competitive and other factors. For example, labor costs in our control, including increases in the costparks and resorts have increased, and we expect will continue to increase, as a result of collective bargaining agreements and wage laws and regulations where we operate. Future health care. Impacts of COVID-19outbreaks and pandemics may lead to an increase in the cost of medical insurance and expenses. In addition, changes in investment returns and discount rates used to calculate pension and postretirement medical expense and related assets and liabilities can be volatile and may have an unfavorable impact on our costs in some years. These macroeconomic factors as well as a decline in the fair value of pension and postretirement medical plan assets may put upward pressure on the cost of providing pension and postretirement medical benefits and may increase future funding requirements. There can be no assurance that we will succeed in attracting and retaining the human resources necessary for the success of our businesses or in limiting cost increases from wages and continued upward pressureother employee benefits, which could reduce the profitability of our businesses.
The alteration or discontinuationWe face risks related to costs and expenses in connection with the acquisition of LIBOR may adversely affect our borrowing costs.
Certain of ourNBCU’s equity interest rate derivatives and a portion of our indebtedness bear interest at variable interest rates, primarily based on LIBOR, which may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to perform differently than in the past or cause other unanticipated consequences. In July 2017, the Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. However, on November 30, 2020, ICE Benchmark Administration (“IBA”), indicated that it would consult on its intention to cease publication of most USD LIBOR tenors beyond June 30, 2023. On March 5, 2021, IBA confirmed it would cease publication of Overnight, 1, 3, 6 and 12 Month USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. IBA also intends to cease publishing 1 Week and 2 Month USD LIBOR settings immediately following the LIBOR publication on December 31, 2021. The Alternative Reference Rates Committee (ARCC), which was convened by the Federal Reserve BoardHulu and the New York Fed, has identified the Secured Overnight Financing Rate (SOFR) as the recommended risk-free alternative rate for USD LIBOR. The extended cessation date for most USD LIBOR tenors will allow for more time for existing legacy USD LIBOR contractsTFCF acquisition.
On November 1, 2023, NBCU exercised its right to mature and provide additional time to continue to prepare for the transition from LIBOR. At this time, it is not possible to predict the effect any discontinuance, modification or other reforms to LIBOR, or the establishment of alternative reference rates such as SOFR, or any other reference rate, will have onrequire the Company or its borrowing costs.
ACQUISITION RISKS
Our consolidated indebtedness increased substantially following completion ofto purchase NBCU’s equity interest in Hulu under a put/call arrangement between the TFCF acquisition and further increased as a result of the impacts of COVID-19. This increased level of indebtedness could adversely affect us, including by decreasing our business flexibility.
As a result of the TFCF acquisitionparties. The purchase price for NBCU’s equity interest in fiscal 2019, the Company’s net indebtedness increased substantially. The increased indebtedness could have the effect of, among other things, reducing our financial flexibility and reducing our flexibility to respond to changing business and economic conditions, such as those presented by COVID-19, among others. Increased levels of indebtedness could also reduce funds available for capital expenditures, share repurchases and dividends, and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels. The Company has announced an intention not to declare further dividends until a return to a more normalized operating environment. Our leverage ratios have increased as the result of COVID-19’s impact on financial performance, which caused certain of the credit ratings agencies to downgrade their assessment of our credit ratings, and are expected to remain elevated at least in the near term. Our debt ratings mayHulu will be further downgraded, which may negatively impact our cost of borrowings.
Consummation of the TFCF acquisition has increased our exposure to the risks of operating internationally.
We are a diversified entertainment company that offers entertainment, travel and consumer products worldwide. Although many of our businesses increasingly depend on acceptance of our offerings and products by consumers outside of the U.S., the combination with TFCF has increased the importance of international operations to our future operations, growth and prospects.determined
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Our risks of operating internationally have increased following the completionbased on NBCU’s equity ownership percentage of the TFCF acquisitiongreater of Hulu’s equity fair value as of September 30, 2023, and as a resultguaranteed floor value. Further, the Company will share with NBCU 50% of COVID-19.
The TFCF acquisition and integration andthe Company’s tax benefit from the purchase of NBCU’s interest in Hulu, put/callwhich payments are expected to be made primarily over a 15-year period. In addition, we may result in additional costs and expenses.
We have incurred and may continue to incur significant costs expenses and fees for professional services and other transaction and financing costsexpenses in connection with the TFCF acquisition and integration and the Hulu put/call agreement with NBCU. We may also incur accounting and other costs that were not anticipated at the time of the TFCF acquisition, including costs for which we have established reserves or which may lead to reserves in the future. SuchThe cost to purchase NBCU’s equity interest in Hulu and related obligations to NBCU and any such other costs could negatively impact the Company’s free cash flow.position and result in the Company incurring additional indebtedness.
GENERAL RISKS
The price of our common stock has been, and may continue to be, volatile.
The price of our common stock has experienced substantial volatility and may continue to be volatile. Various factors have impacted, and may continue to impact, the price of our common stock, including, among others, changes in management; variations in our operating results; variations between our actual results and expectations of securities analysts; changes in our estimates, guidance or business plans; changes in financial estimates and recommendations by securities analysts; the activities, operating results or stock price of our competitors or other industry participants in the industries in which we operate; the announcement or completion of significant transactions by us or a competitor; events affecting the stock market generally; and the economic and political conditions in the U.S. and internationally, as well as other factors described in this Item 1A. Some of these factors may adversely impact the price of our common stock, regardless of our operating performance. Further, volatility in the price of our common stock may negatively impact one or more of our businesses, including by increasing cash compensation or stock awards for our employees who participate in our stock incentive programs or limiting our financing options for acquisitions and other business expansion.
The Company’s amended and restated bylaws provide to the fullest extent permitted by law that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its stockholders, which could increase costs to bring a claim, discourage claims or limit the ability of the Company’s stockholders to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company’s directors, officers or other employees.
The Company’s amended and restated bylaws provide to the fullest extent permitted by law that unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of the Company, (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action or proceeding asserting a claim arising pursuant to, or seeking to enforce any right, obligation or remedy under, any provision of the General Corporation Law of the State of Delaware (the “DGCL”), the Certificate of Incorporation or these Bylaws (as each may be amended from time to time), (iv) any action or proceeding as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware, (v) or any action or proceeding asserting a claim governed by the internal affairs doctrine. The choice of forum provision may increase costs to bring a claim, discourage claims or limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or the Company’s directors, officers or other employees, which may discourage such lawsuits against the Company or the Company’s directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in the Company’s amended and restated bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions. The exclusive forum provision in the Company’s amended and restated bylaws will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws including the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or the respective rules and regulations promulgated thereunder.
ITEM 1B. Unresolved Staff Comments
The Company has received no written comments regarding its periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of fiscal 2021 and2023 that remain unresolved.
ITEM 2. Properties
Our parks and resorts locations and other properties of the Company and its subsidiaries are described in Item 1 under the caption Disney Parks, Experiences and Products. Film and television library properties and television stations owned by the Company are described in Item 1 under the caption Disney Media and Entertainment Distribution.
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The Company and its subsidiaries own and lease properties throughout the world. In addition to the properties noted above, the table below provides a brief description of other significant properties and the related business segment.
LocationProperty /
Approximate Size		UseBusiness Segment
Burbank, CA & surrounding cities(1)
Land (201 acres) & Buildings (4,695,000(4,694,000 ft2)
Owned Office/Production/Warehouse (includes 240,000 ft2 subletleased to third-party tenants)
Corporate/DMED/DPEPEntertainment/Experiences
Burbank, CA & surrounding cities(1)
Buildings (1,806,000(1,834,000 ft2)
Leased Office/WarehouseCorporate/DMED/DPEPEntertainment/Experiences
Los Angeles, CA
Land (22 acres) & Buildings (600,000(605,000 ft2)
Owned Office/Production/Technical WarehouseCorporate/DMEDEntertainment
Los Angeles, CA
Buildings (2,267,000(2,640,000 ft2)
Leased Office/Production/Technical/Theater (includes 118,000 ft2 sublet to third-party tenants)
Corporate/DMED/DPEPEntertainment/Experiences
New York, NY
Buildings (51,000 ft2)
Owned Office/Production/TechnicalOfficeCorporate/DMEDEntertainment/Sports
New York, NY
Land (2 acres) & Buildings (2,716,000(2,190,000 ft2)
Leased Office/Production/Theater/Warehouse (includes 676,000679,000 ft2 subletleased to third-party tenants)
Corporate/DMED/DPEPEntertainment/Sports/Experiences
Bristol, CT
Land (117 acres) & Buildings (1,174,000 ft2)
Owned Office/Production/TechnicalDMEDSports
Bristol, CT
Buildings (512,000(273,000 ft2)
Leased Office/Warehouse/TechnicalDMEDSports
Emeryville, CA
Land (20 acres) & Buildings (430,000 ft2)
Owned Office/Production/TechnicalDMEDEntertainment
Emeryville, CA
Buildings (80,000(97,000 ft2)
Leased Office/StorageDMEDEntertainment
San Francisco, CA
Buildings (642,000(517,000 ft2)
Leased Office/Production/Technical/Theater (includes 47,000 ft2 subletleased to third-party tenants)
Corporate/DMEDEntertainment
USA & CanadaLand and Buildings (Multiple sites and sizes)Owned and Leased Office/ Production/Transmitter/Theaters/WarehouseCorporate/DMED/DPEPEntertainment/Experiences
Europe, Asia, Australia & Latin AmericaBuildings (Multiple sites and sizes)Leased Office/Warehouse/Retail/ResidentialCorporate/DMED/DPEPEntertainment/Experiences
(1)Surrounding cities include Glendale, CA, North Hollywood, CA and Sun Valley, CA
ITEM 3. Legal Proceedings
As disclosed in Note 1514 to the Consolidated Financial Statements, the Company is engaged in certain legal matters, and the disclosure set forth in Note 1514 relating to certain legal matters is incorporated herein by reference.
The Company, together with, in some instances, certain of its directors and officers, is a defendant in various other legal actions involving copyright, breach of contract and various other claims incident to the conduct of its businesses. Management does not expect the Company to suffer any material liability by reason of these actions.
ITEM 4. Mine Safety Disclosures
Not applicable.
Information About Our Executive Officers
The executive officers of the Company are elected each year at the organizational meeting of the Board of Directors, which follows the annual meeting of the shareholders, and at other Board of Directors meetings, as appropriate. Each of the executive officers has been employed by the Company in the position or positions indicated in the list and pertinent notes below. Each of the executive officers has been employed by the Company for more than five years.
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At October 2, 2021, theThe executive officers of the Company were as follows:are:
NameAgeTitleExecutive
Officer Since
Robert A. Iger70
Executive Chairman(1)
2000
Robert A. Chapek62
Chief Executive Officer(2)
2020
Alan N. Braverman73Senior Executive Vice President, General Counsel and Secretary2003
Christine M. McCarthy66
Senior Executive Vice President and Chief Financial Officer(3)
2005
Paul J. Richardson56
Senior Executive Vice President and Chief Human Resources Officer(4)
2021
Zenia B. Mucha65
Senior Executive Vice President Corporate Communications(5)
2018
NameAgeTitleExecutive
Officer Since
Robert A. Iger72
Chief Executive Officer(1)
2022
Kevin A. Lansberry60
Interim Chief Financial Officer(2)
2023
Horacio E. Gutierrez58
Senior Executive Vice President, General Counsel and Chief Compliance Officer(3)
2022
Sonia L. Coleman51
Senior Executive Vice President and Chief Human Resources Officer(4)
2023
Kristina K. Schake53
Senior Executive Vice President and Chief Communications Officer(5)
2022
(1)Mr. Iger was appointed Chief Executive ChairmanOfficer effective February 24, 2020.November 20, 2022. He is alsopreviously served as Executive Chairman of the BoardCompany from March 2012. He wasFebruary 2020 through December 2021 and as Chief Executive Officer of the Company from OctoberSeptember 2005 to February 2020.
(2)Mr. ChapekLansberry was appointed Interim Chief ExecutiveFinancial Officer effective February 24, 2020.July 1, 2023. He served as Chairmanwas previously Executive Vice President and Chief Financial Officer of Disneythe Company’s Parks, Experiences and Products since the segment’s creation insegment from March 2018 and prior to that was Chairman ofExecutive Vice President and Chief Financial Officer, Walt Disney Parks and Resorts since 2015.from May 2017. Over his more than 35 years with the Company, Mr. Lansberry has held a wide range of roles in the Company’s parks and experiences businesses, including in finance, business development, alliances and operations.
(3)Ms. McCarthyMr. Gutierrez was appointed Senior Executive Vice President and General Counsel effective February 1, 2022 and appointed Chief FinancialCompliance Officer effective June 30, 2015. SheMarch 27, 2023. Prior to joining the Company, he served as Head of Global Affairs and Chief Legal Officer for Spotify Technology S.A. (Spotify) from November 2019 to January 2022, where he led a global, multi-disciplinary team of business, corporate communications and public affairs, government relations, licensing, operations and legal professionals responsible for the company’s work in areas including industry relations, content partnerships, public policy, and trust & safety. He was previously ExecutiveSpotify’s General Counsel - Vice President, Corporate Real Estate, Alliances and Treasurer of the CompanyBusiness & Legal Affairs from 2000April 2016 to 2015.November 2019.
(4)Mr. RichardsonMs. Coleman was appointed Senior Executive Vice President and Chief Human Resources Officer effective July 1, 2021. HeApril 8, 2023. She was previously Senior Vice President, of Human Resources at Disney General Entertainment and ESPN from 2007.August 2021. Ms. Coleman served as Senior Vice President, Human Resources for Disney General Entertainment from April 2017, Vice President, Human Resources for the Company from May 2016 and Vice President, Human Resources, Disney Consumer Products from May 2010.
(5)Ms. MuchaSchake was appointed Senior Executive Vice President Corporateand Chief Communications Officer effective August 2016. She was previouslyJune 29, 2022. Previously, she served as Executive Vice President, CorporateGlobal Communications from April 2022. Prior to joining the Company, she was appointed by the President of the United States as Counselor for Strategic Communications to the Secretary of the U.S. Department of Health and Human Services, leading a nationwide public education campaign from March 2005.2021 to December 2021. Prior to that, she served as Global Communications Director for Instagram, a product of Meta Platforms, Inc., from March 2017 to March 2019, where she oversaw the communications teams in North America, Latin America, Europe and Asia.
On November 2, 2023, the Company appointed Hugh F. Johnston, 62, as Senior Executive Vice President and Chief Financial Officer commencing on December 4, 2023. Mr. Johnston currently serves as Executive Vice President and Chief Financial Officer, from 2010, and Vice Chairman, from 2015, of PepsiCo, Inc. (“PepsiCo”). In addition to providing strategic financial leadership for PepsiCo in these roles, Mr. Johnston’s portfolio has included a variety of responsibilities, including leadership of PepsiCo’s information technology function from 2015, PepsiCo’s global e-commerce business from 2015 to 2019, and the Quaker Foods North America division from 2014 to 2016. He also held a number of other leadership roles during his PepsiCo career, having served as Executive Vice President, Global Operations from 2009 to 2010, President of Pepsi-Cola North America from 2007 to 2009, Executive Vice President, Operations from 2006 to 2007 and Senior Vice President, Transformation from 2005 to 2006. Prior to that, he served as Senior Vice President and Chief Financial Officer of PepsiCo Beverages and Foods from 2002 through 2005, and as PepsiCo’s Senior Vice President of Mergers and Acquisitions in 2002. Mr. Johnston joined PepsiCo in 1987 as a Business Planner and held various finance positions until 1999 when he left to join Merck & Co., Inc. as Vice President, Retail, a position which he held until he rejoined PepsiCo in 2002.
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PART II
ITEM 5. Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s common stock is listed on the New York Stock Exchange under the ticker symbol “DIS”.
The Company did not pay a dividend with respect to fiscal year 2020 operations and has not declared or paid a dividend with respect to fiscal 2021 operations. Longer term, we anticipate dividends will remain a part of our capital allocation strategy. However, for the time being, we don’t anticipate declaring a dividend until we return to a more normalized operating environment. The Company does not intend to provide statements about its intentions to pay future dividends until such time as a dividend is declared.
As of October 2, 2021,September 30, 2023, the approximate number of common shareholders of record was 813,000.
The following table provides information about Company purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the quarter ended October 2, 2021:
Period
Total Number
of Shares
Purchased(1)
Weighted
Average Price
Paid per Share		Total Number 
of Shares 
Purchased
as Part of 
Publicly
Announced 
Plans or 
Programs
Maximum 
Number of 
Shares that 
May Yet Be 
Purchased
Under the
Plans or
Programs(2)
July 4, 2021 – July 31, 202115,923$180.39—n/a
August 1, 2021 – August 31, 202115,510176.90—n/a
September 1, 2021 – October 2, 202115,493179.52—n/a
Total46,926178.95—n/a
(1)46,926 shares were purchased on the open market to provide shares to participants in the Walt Disney Investment Plan (WDIP). These purchases were not made pursuant to a publicly announced repurchase plan or program.
(2)Not applicable as the Company no longer has a stock repurchase plan or program.768,000.
ITEM 6. [Reserved]
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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CONSOLIDATED RESULTSDirect-to-Consumer
(Disney+, Disney+ Hotstar and Hulu are subscription services that provide video streaming of general entertainment and family programming. Disney+ and Disney+ Hotstar also provide video streaming of international sports programming. The services are offered individually or in millions, except per share data)
 20212020% Change
Better
(Worse)
Revenues:
Services$61,768  $59,265  4  %
Products5,650  6,123  (8) %
Total revenues67,418  65,388  3  %
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)(41,129) (39,406) (4) %
Cost of products (exclusive of depreciation and amortization)(4,002) (4,474) 11  %
Selling, general, administrative and other(13,517) (12,369) (9) %
Depreciation and amortization(5,111) (5,345) 4  %
Total costs and expenses(63,759) (61,594) (4) %
Restructuring and impairment charges(654) (5,735) 89  %
Other income, net201  1,038  (81) %
Interest expense, net(1,406) (1,491) 6  %
Equity in the income of investees, net761  651  17  %
Income (loss) from continuing operations before income taxes2,561  (1,743) nm
Income taxes from continuing operations(25) (699) 96  %
Net income (loss) from continuing operations2,536  (2,442) nm
Loss from discontinued operations, net of income tax benefit of $9 and $10, respectively(29) (32) 9  %
Net income (loss)2,507  (2,474) nm
Net income from continuing operations attributable to noncontrolling and redeemable noncontrolling interests(512) (390) (31) %
Net income (loss) attributable to Disney$1,995  $(2,864) nm
Earnings (loss) per share attributable to Disney:
Diluted(1)
Continuing operations$1.11  $(1.57)nm
Discontinued operations(0.02)(0.02)—  %
$1.09   $(1.58)nm
Basic(1)
Continuing operations$1.11 $(1.57)nm
Discontinued operations(0.02)(0.02)—  %
$1.10 $(1.58)nm
Weighted average number of common and common equivalent shares outstanding:
Diluted1,8281,808
Basic1,8161,808
various bundles, which may include ESPN+ (see Sports segment discussion), to customers directly or through third-party distributors on mobile and internet connected devices. The majority of Direct-to-Consumer revenue is derived from subscription fees and advertising.
(1)Total may not equalDisney+ (including Star+ in Latin America)
Disney+ is a subscription-based DTC service with Disney, Pixar, Marvel, Star Wars and National Geographic branded programming, which are all top-level selections or “tiles” within the sumDisney+ interface. Outside the U.S. and Latin America, Disney+ also includes a Star branded tile, which features general entertainment programming.
Star+ is a standalone DTC service in Latin America with a variety of general entertainment and family content and live sports programming.
Disney+ (including Star+) is also referred to as Disney+ Core.
As of September 30, 2023, the estimated number of paid Disney+ Core subscribers, based on internal management reports, was approximately 113 million.
Disney+ Hotstar
Disney+ Hotstar is a subscription-based DTC service available in India, Indonesia, Malaysia, Philippines and Thailand. Programming includes television shows, movies, sports and original series in approximately ten languages, in addition to gaming and social features. Disney+ Hotstar has exclusive streaming rights to certain cricket programming.
As of September 30, 2023, the estimated number of paid Disney+ Hotstar subscribers, based on internal management reports, was approximately 38 million.
Disney+ Core and Disney+ Hotstar offer content from the Company’s various studios, including library titles, as well as content acquired from third parties.
The majority of Disney+ Core and Disney+ Hotstar revenue is derived from subscription fees and, to a lesser extent, Advertising. The Company launched an ad-supported Disney+ service in the U.S. in December 2022 and in select European markets and in Canada in November 2023. The Company plans to launch an ad-supported Disney+ service in additional international markets in calendar 2024.
Hulu
Hulu is a domestic subscription-based DTC service with general entertainment content from the Company’s various studios as well as content licensed from third parties. Hulu’s revenue is primarily derived from subscription fees and Advertising. Hulu offers subscription VOD (SVOD) services with or without advertising in addition to a digital OTT MVPD (Live TV) service. The Live TV service is available with either of Hulu’s SVOD services and includes live linear streams of cable networks and the major broadcast networks. In addition, Hulu offers subscriptions to premium services such as Max, Cinemax, Starz and Showtime, which can be added to the Hulu service. Certain programming from ABC Network, Freeform and FX Channels is also available on the Hulu SVOD service one day after the linear airing on these channels. As of September 30, 2023, the estimated number of paid Hulu subscribers, based on internal management reports, was approximately 49 million.
The Company has 67% ownership and full operational control of Hulu. NBC Universal (NBCU) owns the remaining 33% of Hulu. In November 2023, NBCU exercised its put right to require the Company to purchase NBCU’s interest in Hulu (see Note 2 of the column due to rounding.

Consolidated Financial Statements for additional information).
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OrganizationContent Sales/Licensing and Other
The majority of InformationContent Sales/Licensing revenue is derived from TV/VOD, theatrical and home entertainment distribution. In addition, revenue is generated from music distribution, stage plays and post-production services through Industrial Light & Magic and Skywalker Sound.
Management’s DiscussionThe Company also publishes National Geographic magazine, which is reported with Content Sales/Licensing.
TV/VOD Distribution
We license our content to third-party television networks, television stations and Analysisother video service providers for distribution to viewers on television or a variety of internet-connected devices, including through other DTC services.
Theatrical Distribution
The Company licenses full-length live-action and animated films to theaters globally. Cumulatively through September 30, 2023, the Company has released approximately 1,100 full-length live-action films and 100 full-length animated films. In the domestic and most major international markets, we generally distribute and market our films directly. In certain international markets our films are distributed by independent companies. In some territories, certain films may be exclusively distributed on our DTC streaming services. During fiscal 2024, we expect to release approximately 15 films, although the ultimate number of releases will depend on when productions resume following the writers/actors’ work stoppages.
The Company incurs significant marketing and advertising costs before and throughout the theatrical release of a film in an effort to generate public awareness of the film, to increase the public’s intent to view the film and to help generate consumer interest in the subsequent home entertainment and other ancillary markets. These costs are expensed as incurred, which may result in a loss on a film in the theatrical markets, including in periods prior to the theatrical release of the film.
Home Entertainment Distribution
We distribute the Company’s film and episodic content in home entertainment markets on DVD and Blu-ray disc, through electronic home video licenses and VOD rentals globally.
Domestically and internationally, we distribute directly to retailers and through independent distribution companies. Electronic formats of our film and episodic content may be purchased through e-tailers such as Apple and Amazon, and MVPDs, such as Comcast and DirecTV, and physical formats are generally sold to retailers, such as Walmart and Target. The Company also operates Disney Movie Club, which sells DVD/Blu-ray discs directly to consumers in the U.S. and Canada.
Distribution of film content in the home entertainment window generally starts within three months after the theatrical release. Electronic formats are typically available approximately four to eight weeks ahead of the physical release. We also license titles to VOD e-tailers concurrent with physical home entertainment distribution.
Distribution of episodic content in the home entertainment window includes electronic sales of season passes that can be purchased prior to, during and after the broadcast season with individual episodes typically available to season pass customers shortly after the initial airing of the show in each territory. Access to individual episodes is also available for electronic purchase shortly after the initial airing in each territory.
Disney Theatrical Group
Disney Theatrical Group develops, produces and licenses live entertainment events on Broadway and around the world. Productions include The Lion King, Frozen, Aladdin and Beauty and the Beast.
Disney Theatrical Group also licenses the Company’s IP to Feld Entertainment, the producer of Disney On Ice and Marvel Universe Live!.
Disney Music Group
The Disney Music Group encompasses all aspects of the Company’s music commercialization and marketing including: recorded music (Walt Disney Records and Hollywood Records); music publishing; and concerts. Disney Music Group distributes music both physically and digitally and also licenses music throughout the world in various forms of media, including: television; print; gaming; and consumer products.
Equity Investment
The Company has a 30% effective interest in Tata Play Limited, which operates a direct-to-home satellite distribution platform in India.
Content Production and Acquisition
Produced content primarily consists of original films and episodic programs, network news and daytime/nighttime content and licensed content includes acquired episodic programming rights. Original content is generally produced under the following banners: ABC Signature; Disney Branded Television; FX Productions; Lucasfilm; Marvel; National Geographic Studios; Pixar;
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Searchlight Pictures; Twentieth Century Studios; 20th Television; and Walt Disney Pictures. Original content is also commissioned and produced by various third-party studios. Program development is carried out in collaboration with writers, producers and creative teams.
Costs to produce content are generally capitalized and allocated across Entertainment’s businesses based on the estimated relative value of the distribution windows.
Generally, the Company has full production and distribution rights to its IP. However, prior to the Company’s acquisition of Marvel, Sony Pictures Entertainment licensed from Marvel the rights to produce and distribute Spider-Man films in all windows except for the merchandise rights, which the Company retains.
The Company has a significant library of content spanning approximately 100 years of production history as well as acquired libraries. The library of content includes approximately 5,100 live-action film titles and 400 animated film titles, as well as episodic series with four or more seasons (approximately 75 dramas, 55 comedies, 35 non-scripted series, 15 animated series and 10 live-action series). In addition, the library includes approximately 100 series and 65 films that were produced for initial distribution on our DTC platforms.
In fiscal 2024, the Company plans to produce or commission approximately 225 episodic and film titles, although the ultimate number will depend on when productions resume following the writers/actors’ work stoppages. The vast majority of our productions will be distributed on our Linear Networks and/or DTC platforms or theatrically. Programming is also produced for third parties, which typically have domestic linear distribution rights while the Company retains domestic VOD and international distribution rights. We also license, acquire or produce local content for use in various countries/territories.
Competition and Seasonality
Linear Networks and Direct-to-Consumer compete for viewers’ attention and audience share primarily with other television networks, independent television stations and other media, such as other DTC streaming services, social media and video games. With respect to the sale of advertising time, we compete with other television networks, independent television stations, MVPDs, other DTC streaming services and other advertising media such as digital content, newspapers, magazines, radio and billboards. Our television and radio stations primarily compete for audiences and advertisers in local market areas.
Linear Networks compete with other networks for carriage by MVPDs. The Company’s contractual agreements with MVPDs are renewed or renegotiated from time to time in the ordinary course of business. Consolidation and other market conditions in the cable, satellite and telecommunication distribution industry, including subscriber trends, and other factors may adversely affect the Company’s ability to obtain and maintain contractual terms for the distribution of its various programming services that are as favorable as those currently in place.
Content Sales/Licensing businesses compete with all forms of entertainment and a significant number of companies produce and/or distribute theatrical and episodic content, distribute products in the home entertainment market, provide pay TV/VOD services, and produce music and live theater.
The operating results of Content Sales/Licensing fluctuate due to the timing and performance of releases in the theatrical, home entertainment and television markets. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods.
We also compete with other media and entertainment companies, independent production companies and VOD services for creative and performing talent, story properties, show concepts, scripted and other programming, advertiser support, production facilities and exhibition outlets that are essential to the success of our Entertainment businesses.
Advertising revenues at Linear Networks and Direct-to-Consumer are subject to seasonal advertising patterns and changes in viewership levels. In general, domestic advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months. Affiliate revenues vary with the subscriber trends of MVPDs.
Sports
The Sports segment generally encompasses the Company’s sports-focused global television and DTC video streaming content production and distribution activities.
The significant lines of business within Sports are as follows:
•ESPN (generally owned 80% by the Company)
◦Domestic:
▪Eight ESPN-branded television channels
▪ESPN on ABC (sports programmed on the ABC Network by ESPN)
▪ESPN+ DTC video streaming service
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◦International: ESPN-branded channels outside of the U.S.
•Star: Star-branded sports channels in India
The significant revenues of Sports are as follows:
•Affiliate fees
•Advertising
•Subscription fees
•Other revenue - Fees from the following activities: pay-per-view events on ESPN+, sub-licensing of sports rights, programming ESPN on ABC and licensing the ESPN brand
The significant expenses of Sports are as follows:
•Operating expenses, consisting 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.
•Selling, general and administrative costs, including marketing costs
•Depreciation and amortization
Domestic ESPN
Branded television channels include eight 24-hour domestic television sports channels: ESPN and ESPN2 (both of which are dedicated to professional and college sports as well as sports news and original programming); ESPNU (which is dedicated to college sports); ESPNEWS (which re-airs select ESPN studio shows and airs a variety of other programming); SEC Network (which is dedicated to Southeastern Conference college athletics); ACC Network (which is dedicated to Atlantic Coast Conference college athletics); ESPN Deportes (which airs professional and college sports as well as studio shows in Spanish); and Longhorn Network (which is dedicated to The University of Texas athletics). In addition, ESPN programs ESPN on ABC and recognizes the direct revenues and costs for this programming and receives a fee from the ABC Network, which is eliminated in consolidation.
The Company has various sports programming rights, which are used to produce content aired on ESPN television networks and ESPN+, including live events and sports news. Rights include the National Football League (NFL), college football (including bowl games and the College Football Playoff) and basketball, the National Basketball Association (NBA), mixed martial arts, Major League Baseball (MLB), the National Hockey League (NHL), soccer, Top Rank Boxing, US Open Tennis, the Masters golf tournament, the Wimbledon Championships, the Professional Golfers’ Association (PGA) Championship and the Women’s National Basketball Association (WNBA).
The number of subscribers (in millions) for the significant domestic branded channels are as follows:
Subscribers
ESPN(1)
71
ESPN2(1)
71
ESPNU(1)
50
ESPNEWS(2)
53
SEC Network(2)
48
ACC Network(2)
46
(1)Based on Nielsen Media Research estimates as of September 2023. Estimates include traditional MVPD and the majority of digital OTT subscriber counts.
(2)Because Nielsen Media Research does not measure this channel, estimated subscribers are according to SNL Kagan as of December 2022.
ESPN+ is a domestic subscription-based DTC service offering thousands of live sporting events, on-demand sports content and other original programming. The service is offered individually or in various bundles with Disney+ and Hulu to customers directly or through third-party distributors on mobile and internet connected devices. ESPN+ revenue is derived from subscription fees, pay-per-view fees and, to a lesser extent, advertising. Live events available through the service include mixed martial arts, soccer, hockey, boxing, baseball, college sports, golf, tennis and cricket. ESPN+ is currently the exclusive distributor for Ultimate Fighting Championship (UFC) pay-per-view events in the U.S. As of September 30, 2023, the estimated number of paid ESPN+ subscribers, based on internal management reports, was approximately 26 million.
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International ESPN
The Company operates approximately 40 ESPN branded sports channels outside the U.S. in 4 languages and approximately 105 countries/territories. Channels previously branded Fox are now branded ESPN. In the Netherlands, the ESPN branded channels are operated by Eredivisie Media & Marketing CV (EMM) (owned 51% by the Company), which has the media and sponsorship rights of the Dutch Premier League for soccer. Rights include various soccer leagues (including English Premier League, LaLiga, Bundesliga and multiple UEFA leagues). As of September 2023, the estimated number of subscribers to ESPN branded channels outside the U.S., based on internal management reports, was approximately 59 million.
Star
The Company operates 10 Star branded sports channels in India, in 4 languages. Star has rights to various sports programming, primarily cricket and soccer. As of September 2023, the estimated number of subscribers to Star branded channels, based on internal management reports, was 82 million.
Equity Investments
The most significant equity investment at Sports is a 30% interest in CTV Specialty Television, Inc. (CTV). The Company’s share of CTV’s financial results is reported as “Equity in the income (loss) of investees, net” in the Company’s Consolidated Statements of Operations. CTV operates television networks in Canada, including The Sports Networks (TSN) 1-5, Le Réseau des Sports (RDS), RDS2, RDS Info, Discovery Canada, Discovery Science and Animal Planet Canada.
Investments
In fiscal 2023, the Company entered into an agreement with PENN Entertainment, Inc. (PENN), under which the Company will earn advertising and licensing revenues from providing promotional services and the ESPN BET trademark to PENN in connection with its operation of a sportsbook. In addition, the Company received warrants to purchase equity in PENN, which vest over the term of the agreement. The warrants are recorded at fair market value and adjustments to fair market value are reported as “Interest expense, net” in the Company’s Consolidated Statements of Operations.
Competition and Seasonality
Sports competes for viewers’ attention and audience share primarily with other television networks, independent television stations and other media, such as other DTC streaming services, social media and video games. With respect to the sale of advertising time, we compete with other television networks, independent television stations, MVPDs and other advertising media such as digital content, newspapers, magazines, radio and billboards.
The Sports television networks compete with other networks for carriage by MVPDs. The Company’s contractual agreements with MVPDs are renewed or renegotiated from time to time in the ordinary course of business. Consolidation and other market conditions in the cable, satellite and telecommunication distribution industry and other factors may adversely affect the Company’s ability to obtain and maintain contractual terms for the distribution of its various programming services that are as favorable as those currently in place.
We also compete with other media and entertainment companies and VOD services for sports rights, creative and performing talent and other programming, advertiser support and production facilities that are essential to the success of our Sports businesses.
Advertising revenues are subject to changes in viewership levels and the demand for sports programming. Advertising revenues generated from sports programming are also impacted by the timing of sports seasons and events, which timing may vary throughout the year or may take place periodically (e.g. biannually, quadrennially). Affiliate revenues vary with the subscriber trends of MVPDs.
EXPERIENCES
The significant lines of business within Experiences are as follows:
•Parks & Experiences:
◦Domestic:
▪Theme parks and resorts:
•Walt Disney World Resort in Florida
•Disneyland Resort in California
▪Experiences:
•Disney Cruise Line
•Disney Vacation Club
•National Geographic Expeditions (owned 73% by the Company) and Adventures by Disney
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•Aulani, a Disney Resort & Spa in Hawaii
◦International:
▪Theme parks and resorts:
•Disneyland Paris
•Hong Kong Disneyland Resort (48% ownership interest and consolidated in our financial results)
•Shanghai Disney Resort (43% ownership interest and consolidated in our financial results)
•In addition, the Company licenses its IP to a third party to operate Tokyo Disney Resort
•Consumer Products:
◦Licensing of our trade names, characters, visual, literary and other IP to various manufacturers, game developers, publishers and retailers throughout the world, for use on merchandise, published materials and games
◦Sale of branded merchandise through online, retail and wholesale businesses, and development and publishing of books, comic books and magazines (except National Geographic magazine, which is reported in Entertainment)
The significant revenues of Experiences are as follows:
•Theme park admissions - Sales of tickets for admission to our theme parks and for premium access to certain attractions (e.g. Genie+ and Lightning Lane)
•Resorts and vacations - Sales of room nights at hotels, sales of cruise and other vacations and sales and rentals of vacation club properties
•Parks & Experiences merchandise, food and beverage - Sales of merchandise, food and beverages at our theme parks and resorts and cruise ships
•Merchandise licensing and retail:
◦Merchandise licensing - Royalties from licensing our IP for use on consumer goods
◦Retail - Sales of merchandise through internet shopping sites (generally branded shopDisney) and at The Disney Store, as well as to wholesalers (including books, comic books and magazines)
•Parks licensing and other - Revenues from sponsorships and co-branding opportunities, real estate rent and sales and royalties earned on Tokyo Disney Resort revenues
The significant expenses of Experiences are as follows:
•Operating expenses, consisting primarily of operating labor, costs of goods sold, infrastructure costs, supplies, commissions and entertainment offerings. Infrastructure costs include technology support costs, repairs and maintenance, property taxes, utilities and fuel, retail occupancy costs, insurance and transportation
•Selling, general and administrative costs, including marketing costs
•Depreciation and amortization
Significant capital investments:
•In recent years, the majority of the Company’s capital spend has been at our parks and experiences business, which is principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and systems infrastructure.
Parks & Experiences
Walt Disney World Resort
The Walt Disney World Resort is located approximately 20 miles southwest of Orlando, Florida, on approximately 25,000 acres of land. The resort includes theme parks (the Magic Kingdom, EPCOT, Disney’s Hollywood Studios and Disney’s Animal Kingdom); hotels; vacation club properties; a retail, dining and entertainment complex (Disney Springs); a sports complex; conference centers; campgrounds; golf courses; water parks; and other recreational facilities designed to attract visitors for an extended stay.
The Walt Disney World Resort is marketed through a variety of international, national and local advertising and promotional activities. A number of attractions and restaurants in each of the theme parks are sponsored or operated by other companies under multi-year agreements.
Magic Kingdom — The Magic Kingdom consists of six themed areas: Adventureland, Fantasyland, Frontierland, Liberty Square, Main Street USA and Tomorrowland. Each land provides a narrativeunique guest experience featuring themed attractions, restaurants, merchandise shops and entertainment experiences.
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EPCOT — EPCOT consists of four major themed areas: World Showcase, World Celebration, World Nature and World Discovery. All areas feature themed attractions, restaurants, merchandise shops and entertainment experiences. Countries represented with pavilions include Canada, China, France, Germany, Italy, Japan, Mexico, Morocco, Norway, the United Kingdom and the U.S. The Journey of Water, inspired by Moana, opened in October 2023 as part of a multi-year transformation at EPCOT.
Disney’s Hollywood Studios — Disney’s Hollywood Studios consists of eight themed areas: Animation Courtyard, Commissary Lane, Echo Lake, Grand Avenue, Hollywood Boulevard, Star Wars: Galaxy’s Edge, Sunset Boulevard and Toy Story Land. The areas provide behind-the-scenes glimpses of Hollywood-style action through various shows and attractions and offer themed food service, merchandise shops and entertainment experiences.
Disney’s Animal Kingdom — Disney’s Animal Kingdom consists of a 145-foot tall Tree of Life centerpiece surrounded by five themed areas: Africa, Asia, DinoLand USA, Discovery Island and Pandora - The World of Avatar. Each themed area contains attractions, restaurants, merchandise shops and entertainment experiences. The park features more than 300 species of live mammals, birds, reptiles and amphibians and 3,000 varieties of vegetation.
Hotels, Vacation Club Properties and Other Resort Facilities — As of September 30, 2023, the Company owned and operated 18 resort hotels and vacation club facilities at the Walt Disney World Resort, with approximately 23,000 rooms and 3,600 vacation club units. Resort facilities include 500,000 square feet of conference meeting space and Disney’s Fort Wilderness camping and recreational area, which offers approximately 800 campsites.
Disney Springs is an approximately 120-acre retail, dining and entertainment complex and consists of four areas: Marketplace, The Landing, Town Center and West Side. The areas are home to more than 150 venues including the 64,000-square-foot World of Disney retail store. Most of the Disney Springs facilities are operated by third parties that pay rent to the Company.
Ten independently-operated hotels with approximately 7,000 rooms are situated on property leased from the Company.
ESPN Wide World of Sports Complex is a 230-acre center that hosts professional caliber training and competitions, festival and tournament events and interactive sports activities. The complex, which welcomes both amateur and professional athletes, accommodates multiple sporting events, including baseball, basketball, football, soccer, softball, tennis and track and field. It also includes a stadium, as well as two venues designed for cheerleading, dance competitions and other indoor sports.
Other recreational amenities and activities available at the Walt Disney World Resort include three championship golf courses, miniature golf courses, full-service spas, tennis, sailing, swimming, horseback riding and a number of other sports and leisure time activities. The resort also includes two water parks: Disney’s Blizzard Beach and Disney’s Typhoon Lagoon.
Disneyland Resort
The Company owns 489 acres and has rights under a long-term lease for use of an additional 52 acres of land in Anaheim, California. The Disneyland Resort includes two theme parks (Disneyland and Disney California Adventure), three resort hotels and a retail, dining and entertainment complex (Downtown Disney).
The Disneyland Resort is marketed through a variety of international, national and local advertising and promotional activities. A number of the attractions and restaurants in the theme parks are sponsored or operated by other companies under multi-year agreements.
Disneyland — Disneyland consists of nine themed areas: Adventureland, Critter Country, Fantasyland, Frontierland, Main Street USA, Mickey’s Toontown, New Orleans Square, Star Wars: Galaxy’s Edge and Tomorrowland. These areas feature themed attractions, restaurants, merchandise shops and entertainment experiences.
Disney California Adventure — Disney California Adventure is adjacent to Disneyland and includes eight themed areas: Avengers Campus, Buena Vista Street, Cars Land, Grizzly Peak, Hollywood Land, Paradise Gardens Park, Pixar Pier and San Fransokyo Square. These areas include themed attractions, restaurants, merchandise shops and entertainment experiences.
Hotels, Vacation Club Units and Other Resort Facilities — Disneyland Resort includes three Company owned and operated hotels and vacation club facilities with approximately 2,400 rooms, 180 vacation club units and 180,000 square feet of conference meeting space.
Downtown Disney is a themed 15-acre retail, entertainment and dining complex with approximately 30 venues located adjacent to both Disneyland and Disney California Adventure. Most of the Downtown Disney facilities are operated by third parties that pay rent to the Company.
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Aulani, a Disney Resort & Spa
Aulani, a Disney Resort & Spa is a family resort on a 21-acre oceanfront property on Oahu, Hawaii featuring approximately 350 hotel rooms, an 18,000-square-foot spa and 12,000 square feet of conference meeting space. The resort also has approximately 480 vacation club units.
Disneyland Paris
Disneyland Paris is located on approximately 5,200-acres in Marne-la-Vallée, approximately 20 miles east of Paris, France. The land is being developed pursuant to a master agreement with French governmental authorities. Disneyland Paris includes two theme parks (Disneyland Park and Walt Disney Studios Park); seven themed resort hotels; two convention centers; a shopping, dining and entertainment complex (Disney Village); and a 27-hole golf facility. Of the 5,200 acres comprising the site, approximately half have been developed to date, including a planned community (Val d’Europe).
Disneyland Park — Disneyland Park consists of five themed areas: Adventureland, Discoveryland, Fantasyland, Frontierland and Main Street USA. These areas include themed attractions, restaurants, merchandise shops and entertainment experiences.
Walt Disney Studios Park — Walt Disney Studios Park includes five themed areas: Front Lot, Production Courtyard, Toon Studio, Worlds of Pixar and Avengers Campus. These areas each include themed attractions, restaurants, merchandise shops and entertainment experiences. Walt Disney Studios Park is undergoing a multi-year expansion that will include a new themed area based on Frozen.
Hotels and Other Facilities — Disneyland Paris operates seven resort hotels, with approximately 5,750 rooms and 250,000 square feet of conference meeting space. In addition, five on-site hotels that are owned and operated by third parties provide approximately 1,500 rooms.
Disney Village is an approximately 500,000-square-foot retail, dining and entertainment complex located between the theme parks and the hotels. A number of the Disney Village facilities are operated by third parties that pay rent to the Company.
Val d’Europe is a planned community near Disneyland Paris that is being developed in phases. Val d’Europe currently includes a regional train station, hotels and a town center consisting of a shopping center as well as office, commercial and residential space. Third parties operate these developments on land leased or purchased from the Company.
Hong Kong Disneyland Resort
The Company owns a 48% interest in Hong Kong Disneyland Resort and the Government of the Hong Kong Special Administrative Region (HKSAR) owns a 52% interest. The resort is located on 310 acres on Lantau Island and is in close proximity to the Hong Kong International Airport and the Hong Kong-Zhuhai-Macau Bridge. Hong Kong Disneyland Resort includes one theme park and three themed resort hotels. A separate Hong Kong subsidiary of the Company is responsible for managing Hong Kong Disneyland Resort. The Company is entitled to receive royalties and management fees based on the operating performance of Hong Kong Disneyland Resort.
Hong Kong Disneyland — Hong Kong Disneyland consists of eight themed areas: Adventureland, Fantasyland, Grizzly Gulch, Main Street USA, Mystic Point, Tomorrowland, Toy Story Land and World of Frozen, which opened in November 2023. These areas feature themed attractions, restaurants, merchandise shops and entertainment experiences.
Hotels — Hong Kong Disneyland Resort includes three themed hotels with approximately 1,750 rooms and 16,000 square feet of conference meeting space.
Shanghai Disney Resort
The Company owns a 43% interest in Shanghai Disney Resort and Shanghai Shendi (Group) Co., Ltd (Shendi) owns a 57% interest. The resort is located in the Pudong district of Shanghai on approximately 1,000 acres of land, which includes the Shanghai Disneyland theme park; two themed resort hotels; a retail, dining and entertainment complex (Disneytown); and an outdoor recreation area. A management company, in which the Company has a 70% interest and Shendi has a 30% interest, is responsible for operating the resort and receives a management fee based on the operating performance of Shanghai Disney Resort. The Company is also entitled to royalties based on the resort’s revenues.
Shanghai Disneyland — Shanghai Disneyland consists of seven themed areas: Adventure Isle, Fantasyland, Gardens of Imagination, Mickey Avenue, Tomorrowland, Toy Story Land and Treasure Cove. These areas feature themed attractions, shows, restaurants, merchandise shops and entertainment experiences. The Company is constructing an eighth themed area based on the animated film Zootopia, which is scheduled to open in late calendar 2023.
Hotels and Other Facilities — Shanghai Disneyland Resort includes two themed hotels with approximately 1,200 rooms. Disneytown is an 11-acre outdoor complex of dining, shopping and entertainment venues located adjacent to Shanghai Disneyland. Most Disneytown facilities are operated by third parties that pay rent to Shanghai Disney Resort. The Company is currently constructing a third themed hotel, which will have approximately 400 rooms.
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Tokyo Disney Resort
Tokyo Disney Resort is located on 494 acres of land, six miles east of downtown Tokyo, Japan. The Company earns royalties on revenues generated by the Tokyo Disney Resort, which is owned and operated by Oriental Land Co., Ltd. (OLC), a third-party Japanese corporation. The resort includes two theme parks (Tokyo Disneyland and Tokyo DisneySea); five Disney-branded hotels; six other hotels (operated by third parties other than OLC); a retail, dining and entertainment complex (Ikspiari); and Bon Voyage, a Disney-themed merchandise location.
Tokyo Disneyland — Tokyo Disneyland consists of seven themed areas: Adventureland, Critter Country, Fantasyland, Tomorrowland, Toontown, Westernland and World Bazaar.
Tokyo DisneySea — Tokyo DisneySea is divided into seven “ports of call,” including American Waterfront, Arabian Coast, Lost River Delta, Mediterranean Harbor, Mermaid Lagoon, Mysterious Island and Port Discovery. OLC is expanding Tokyo DisneySea to include an eighth themed port, Fantasy Springs expected to open in spring 2024.
Hotels and Other Resort Facilities — Tokyo Disney Resort includes five Disney-branded hotels with a total of more than 3,000 rooms and a monorail, which links the theme parks and resort hotels with Ikspiari. OLC is currently constructing a 475-room Disney-branded hotel at Tokyo DisneySea that is expected to open in spring 2024.
Disney Vacation Club (DVC)
DVC offers ownership interests in 16 resort facilities located at the Walt Disney World Resort; Disneyland Resort; Aulani; Vero Beach, Florida; and Hilton Head Island, South Carolina. Available units are offered for sale under a vacation ownership plan and are operated as hotel rooms when not occupied by vacation club members. The Company’s vacation club units range from deluxe studios to three-bedroom grand villas. Unit counts in this document are presented in terms of two-bedroom equivalents. DVC had approximately 4,500 vacation club units as of September 30, 2023, including The Villas at Disneyland Hotel, which opened in September 2023. The Company plans to open The Cabins at Disney’s Fort Wilderness Resort - A Disney Vacation Club Resort and additional units at Disney’s Polynesian Village Resort in 2024.
Storyliving by Disney
The Company is developing its first Storyliving by Disney residential community, Cotino, in Rancho Mirage, California.
Disney Cruise Line
Disney Cruise Line is a five-ship vacation cruise line, which operates out of ports in North America, Europe and the South Pacific. The Disney Magic and the Disney Wonder are 85,000-ton 875-stateroom ships; the Disney Dream and the Disney Fantasy are 130,000-ton 1,250-stateroom ships; and the Disney Wish is a 140,000-ton 1,250-stateroom ship. The ships cater to families, children, teenagers and adults, with themed areas and activities for each group. Many cruise vacations include a visit to Disney’s Castaway Cay, a 1,000-acre private Bahamian island.
Disney Cruise Line is adding the Disney Treasure, the Disney Adventure and an eighth ship. The Disney Treasure and the Disney Adventure are scheduled to be delivered from the shipyard in fiscal 2025 and the eighth ship is scheduled to be delivered in fiscal 2026. The Disney Treasure and eighth ship will be approximately 140,000 tons with 1,250 staterooms. The Disney Adventure will be approximately 200,000 tons with approximately 2,100 staterooms and will operate in Southeast Asia.
Disney Lookout Cay at Lighthouse Point on the island of Eleuthera is scheduled to open as a Disney Cruise Line destination in the summer of 2024.
Adventures by Disney and National Geographic Expeditions
Adventures by Disney and National Geographic Expeditions offer guided tour packages predominantly at non-Disney sites around the world.
Walt Disney Imagineering
Walt Disney Imagineering provides master planning, real estate development, attraction, entertainment and show design, engineering support, production support, project management and research and development.
Consumer Products
Licensing
The Company’s merchandise licensing operations cover a diverse range of product categories, the most significant of which are: toys, apparel, games, home décor and furnishings, accessories, health and beauty, food, books, stationery, footwear, magazines and consumer electronics. The Company licenses characters from its film, television and other properties for use on third-party products in these categories and earns royalties, which are usually based on a fixed percentage of the wholesale or retail selling price of the products. Some of the major properties licensed by the Company include: Mickey and Friends, Star Wars, Spider-Man, Disney Princess, Avengers, Frozen, Toy Story, Winnie the Pooh and Lilo & Stitch.
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Retail
The Company sells Disney-, Marvel-, Pixar- and Lucasfilm-branded products through shopDisney branded internet sites and Disney Store branded retail locations. At September 30, 2023, the Company owns and operates approximately 40 stores in Japan, 20 stores in North America, two stores in Europe and one store in China.
The Company creates, distributes and publishes a variety of products in multiple countries and languages based on the Company’s financialbranded franchises. The products include children’s books and comic books.
Competition and Seasonality
The Company’s theme parks and resorts as well as Disney Cruise Line and Disney Vacation Club compete with other forms of entertainment, lodging, tourism and recreational activities. The profitability of the leisure-time industry may be influenced by various factors that are not directly controllable, such as economic conditions including business cycle and exchange rate fluctuations, health concerns, the political environment, travel industry trends, amount of available leisure time, oil and transportation prices, weather patterns and natural disasters. The licensing and retail business competes with other licensors, retailers and publishers of character, brand and celebrity names, as well as other licensors, publishers and developers of game software, online video content, websites, other types of home entertainment and retailers of toys and kids merchandise.
All of the theme parks and the associated resort facilities are operated on a year-round basis. Typically, theme park attendance and resort occupancy fluctuate based on the seasonal nature of vacation travel and leisure activities, the opening of new guest offerings and pricing and promotional offers. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early winter and spring holiday periods. In addition, theme park and resort revenues may be higher during significant celebrations such as theme park or character anniversaries and lower in the periods following such celebrations. The licensing, retail and wholesale businesses are influenced by seasonal consumer purchasing behavior, which generally results in higher revenues during the Company’s first and fourth fiscal quarter, and by the timing and performance of theatrical and conditiongame releases and cable programming broadcasts.
INTELLECTUAL PROPERTY PROTECTION
The Company’s businesses throughout the world are affected by its ability to exploit and protect against infringement of its IP, including trademarks, trade names, copyrights, patents and trade secrets. Important IP includes rights in the content of motion pictures, television programs, electronic games, sound recordings, character likenesses, theme park attractions, books and magazines and merchandise. Risks related to the protection and exploitation of IP rights and information concerning the expiration of certain of our copyrights are set forth in Item 1A – Risk Factors.
FEDERAL REGULATION — ENTERTAINMENT AND SPORTS
Television broadcasting is subject to extensive regulation by the Federal Communications Commission (FCC) under federal laws and regulations, including the Communications Act of 1934, as amended. Violation of FCC regulations can result in substantial monetary fines, limited renewals of licenses and, in egregious cases, denial of license renewal or revocation of a license. FCC regulations that should be read in conjunction withaffect linear channels include the accompanying financial statements. It includes the following sections:following:
•Significant DevelopmentsLicensing of television stations. Each of the television stations we own must be licensed by the FCC. These licenses are granted for periods of up to eight years, and we must obtain renewal of licenses as they expire in order to continue operating the stations. We (and the acquiring entity in the case of a divestiture) must also obtain FCC approval whenever we seek to have a license transferred in connection with the acquisition or divestiture of a station. The FCC may decline to renew or approve the transfer of a license in certain circumstances and may delay renewals while permitting a licensee to continue operating. Although we have received such renewals and approvals in the past or have been permitted to continue operations when renewal is delayed, there can be no assurance that this will be the case in the future.
•Consolidated ResultsStation ownership limits. The FCC imposes limitations on the number of television stations and Non-Segment Itemsradio stations an entity can own in a specific market, on the combined number of television and radio stations an entity can own in a single market and on the aggregate percentage of the national audience that can be reached by television stations. Currently:
◦FCC regulations may restrict our ability to own more than one television station in a market, depending on the size and nature of the market. We do not own more than one television station in any market.
◦Federal statutes permit our television stations in the aggregate to reach a maximum of 39% of the national audience. Pursuant to the most recent decision by the FCC as to how to calculate compliance with this limit, our eight stations reach approximately 20% of the national audience.
•Business Segment ResultsDual networks. FCC rules currently prohibit any of the four major broadcast television networks — ABC, CBS, Fox and NBC — from being under common ownership or control.
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•Regulation of programming. The FCC regulates broadcast programming by, among other things, banning “indecent” programming, regulating political advertising and imposing commercial time limits during children’s programming. Penalties for broadcasting indecent programming can be over $400,000 per indecent utterance or image per station.
Federal legislation and FCC rules also limit the amount of commercial matter that may be shown on broadcast or cable channels during programming designed for children 12 years of age and younger. In addition, broadcast stations are generally required to provide an average of three hours per week of programming that has as a “significant purpose” meeting the educational and informational needs of children 16 years of age and younger. FCC rules also give television station owners the right to reject or refuse network programming in certain circumstances or to substitute programming that the licensee reasonably believes to be of greater local or national importance.
•Cable and satellite carriage of broadcast television stations. With respect to MVPDs operating within a television station’s Designated Market Area, FCC rules require that every three years each television station elect either “must carry” status, pursuant to which MVPDs generally must carry a local television station in the station’s market, or “retransmission consent” status, pursuant to which the MVPDs must negotiate with the television station to obtain the consent of the television station prior to carrying its signal. The ABC owned television stations have historically elected retransmission consent.
•CorporateCable and Unallocated Shared Expensessatellite carriage of programming. The Communications Act and FCC rules regulate some aspects of negotiations between programmers and distributors regarding the carriage of networks by cable and satellite distribution companies, and some cable and satellite distribution companies have sought regulation of additional aspects of the carriage of programming on their systems. New legislation, court action or regulation in this area could have an impact on the Company’s operations.
•Restructuring ActivitiesThe foregoing is a brief summary of certain provisions of the Communications Act, other legislation and specific FCC rules and policies. Reference should be made to the Communications Act, other legislation, FCC rules and public notices and rulings of the FCC for further information concerning the nature and extent of the FCC’s regulatory authority.
•LiquidityFCC laws and Capital Resourcesregulations are subject to change, and the Company generally cannot predict whether new legislation, court action or regulations, or a change in the extent of application or enforcement of current laws and regulations, would have an adverse impact on our operations.
•Supplemental Guarantor Financial Information
•Critical Accounting PoliciesAVAILABLE INFORMATION
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and Estimatesamendments to those reports are available without charge on our website, www.disney.com/investors, as soon as reasonably practicable after they are filed electronically with the U.S. Securities and Exchange Commission (SEC). We are providing the address to our internet site solely for the information of investors. We do not intend the address to be an active link or to otherwise incorporate the contents of the website into this report.
•Forward-Looking Statements
ITEM 1A. Risk Factors
For an enterprise as large and complex as the Company, a wide range of factors could materially affect future developments and performance. In Item 7,addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in our filings with the SEC, the most significant factors affecting our business include the following:
BUSINESS, ECONOMIC, MARKET and OPERATING CONDITION RISKS
Declines in U.S., global, and regional economic conditions generally adversely affect the profitability of our businesses.
Declines in economic conditions, such as recession, economic downturn, and/or inflationary conditions in the U.S. and other regions of the world in which we discuss fiscal 2021do business, or a failure of conditions to improve as anticipated typically adversely affect demand and/or expenses for one or more of our businesses, reducing our revenue and 2020 resultsearnings. Past declines in economic conditions reduced guest spending at our parks and comparisonsresorts, purchases of fiscal 2021 results to fiscal 2020 results. Discussionsand prices for advertising on our broadcast and cable networks and owned stations, performance of fiscal 2019 resultsour home entertainment releases, and comparisonspurchases of fiscal 2020 results to fiscal 2019 resultsCompany-branded consumer products, and similar impacts can be foundexpected as such conditions recur. Recent inflationary conditions increased certain of our costs. The current economic conditions could also have the effect of reducing attendance at our parks and resorts, prices that MVPDs pay for our cable programming, purchases of and prices for advertising on our DTC products or subscription levels for our cable programming or DTC products, while also continuing to increase the prices we pay for goods, services and labor. Unfavorable economic conditions also impair the ability of those with whom we do business to satisfy their obligations to us. In addition, an increase in “Management’s Discussionprice levels generally, or in price levels in a particular sector, could result in a shift in consumer demand away from the entertainment and Analysisexperiences we offer, which could also adversely affect our revenues and, at the same time, increase our costs. A decline in economic conditions or a failure of Financial Conditionconditions to improve as anticipated could impact
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implementation or success of our business plans, such as our plans to increase investment in our Experiences segment, the realignment of our cost structure and Resultsplans for our DTC ad-supported services, enhancements, pricing structure and price increases. In addition, actions to reduce inflation, including raising interest rates, increase our cost of Operations”borrowing, which in turn make it more difficult to obtain financing for our operations or investments on favorable terms. Further, global economic conditions impact foreign currency exchange rates against the U.S. dollar. The current or continued strength in the updatevalue of the U.S. dollar has adversely impacted the U.S. dollar value of revenue we receive and expect to Part II, Item 7receive from other markets and may reduce international demand for our products and services. Although we hedge exposure to certain foreign currency fluctuations, any such hedging activity may not substantially offset the negative financial impact of exchange rate fluctuations and is not expected to offset all such negative financial impact, particularly in periods of sustained U.S. dollar strength relative to multiple foreign currencies. Further, economic or political conditions in countries outside the U.S. also have reduced, and could continue to reduce, our ability to hedge exposure to currency fluctuations in those countries or our ability to repatriate revenue from those countries. Broader or targeted supply chain delays, such as those that have impacted global distribution from time to time, may further exacerbate inflationary pressures and impact our ability to sell and deliver goods or otherwise disrupt our operations. The adverse impact on our businesses of declines in economic conditions or a failure of conditions to improve as anticipated will depend, in part, on the severity and duration of such economic conditions and our ability to mitigate the impacts of economic conditions on our businesses may be limited.
Changes in technology, in consumer consumption patterns and in how entertainment products are created affect demand for our entertainment products, the revenue we can generate from these products and the cost of producing or distributing these products.
The media entertainment and internet businesses in which we participate increasingly depend on our ability to successfully adapt to new technologies including shifting patterns of content consumption and how entertainment products are generated. New technologies affect the demand for our products, the manner in which our products are distributed to consumers, ways we charge for and receive revenue for our entertainment products and the stability of those revenue streams, the sources and nature of competing content offerings, the time and manner in which consumers acquire and view some of our entertainment products and the options available to advertisers for reaching their desired audiences. These developments have impacted the business model for certain traditional forms of distribution, as evidenced by the industry-wide decline in ratings for broadcast and cable television, the reduction in demand for home entertainment sales of theatrical content, the development of alternative distribution channels for broadcast and cable programming and declines in subscriber levels for traditional cable channels. These trends have decreased advertising and affiliate revenue at some of our linear networks. In addition, theater-going to watch movies currently is, and may continue to be, below pre-COVID-19 levels.
Rules governing new technological developments, such as developments in generative artificial intelligence (AI), remain unsettled, and these developments may affect aspects of our existing business model, including revenue streams for the use of our IP and how we create our entertainment products. In order to respond to the impact of new technologies on our businesses, we regularly consider, and from time to time implement changes to our business models, most recently by developing, investing in and acquiring DTC products, reorganizing our media and entertainment businesses to advance our DTC strategies, and developing new media offerings. There can be no assurance that our DTC offerings, new media offerings and other efforts will successfully respond to technological changes. In addition, declines in certain traditional forms of distribution may increase the cost of content allocable to our DTC offerings, negatively impacting the profitability of our DTC offerings. We expect to forgo revenue from traditional sources, particularly as we expand our DTC offerings. To date our DTC streaming services have experienced significant losses. There can be no assurance that the DTC model and other business models we may develop will ultimately be profitable or as profitable as our existing or historic business models.
We face risks relating to misalignment with public and consumer tastes and preferences for entertainment, travel and consumer products, which impact demand for our entertainment offerings and products and the profitability of any of our businesses.
Our businesses create entertainment, travel and consumer products whose success depends substantially on consumer tastes and preferences that change in often unpredictable ways. The success of our businesses depends on our ability to consistently create compelling content, which may be distributed, among other ways, through broadcast, cable, theaters, internet or mobile technology, and used in theme park attractions, hotels and other resort facilities and travel experiences and consumer products. Such distribution must meet the changing preferences of the broad consumer market and respond to competition from an expanding array of choices facilitated by technological developments in the delivery of content. The success of our theme parks, resorts, cruise ships and experiences, as well as our theatrical releases, depends on demand for public or out-of-home entertainment experiences. Demand for certain out-of-home entertainment experiences, such as theater-going to watch movies, has not returned to pre-pandemic levels. In addition, many of our businesses increasingly depend on acceptance of our offerings and products by consumers outside the U.S. The success of our businesses therefore depends on our ability to successfully predict and adapt to changing consumer tastes and preferences outside as well as inside the U.S. Moreover, we must often invest substantial amounts in content production and acquisition, acquisition of sports rights, launch of new sports-related studio programming, theme park attractions, cruise ships or hotels and other facilities or customer facing platforms before we
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know the extent to which these products will earn consumer acceptance, and these products may be introduced into a significantly different market or economic or social climate from the one we anticipated at the time of the investment decisions. Generally, our revenues and profitability are adversely impacted when our entertainment offerings and products, as well as our methods to make our offerings and products available to consumers, do not achieve sufficient consumer acceptance. Further, consumers’ perceptions of our position on matters of public interest, including our efforts to achieve certain of our environmental and social goals, often differ widely and present risks to our reputation and brands. Consumer tastes and preferences impact, among other items, revenue from advertising sales (which are based in part on ratings for the programs in which advertisements air), affiliate fees, subscription fees, theatrical film receipts, the license of rights to other distributors, theme park admissions, hotel room charges and merchandise, food and beverage sales, sales of licensed consumer products or sales of our other consumer products and services.
The success of our businesses is highly dependent on the existence and maintenance of intellectual property rights in the entertainment products and services we create.
The value to us of our IP is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from our IP may decrease, or the cost of obtaining and maintaining rights may increase. The terms of some copyrights for IP related to some of our products and services have expired and other copyrights will expire in the future. For example, in the United States and countries that look to the United States copyright term when shorter than their own, the copyright term for early works such as the short film Steamboat Willie (1928), and the specific early versions of characters depicted in those works, expires at the end of the 95th calendar year after the date the copyright was originally secured in the United States. As copyrights expire, we expect that revenues generated from such IP will be negatively impacted to some extent.
The unauthorized use of our IP may increase the cost of protecting rights in our IP or reduce our revenues. The convergence of computing, communication and entertainment devices, increased broadband internet speed and penetration, increased availability and speed of mobile data transmission and increasingly sophisticated attempts to obtain unauthorized access to data systems have made the unauthorized digital copying and distribution of our films, television productions and other creative works easier and faster and protection and enforcement of IP rights more challenging. The unauthorized distribution and access to entertainment content generally continues to be a significant challenge for IP rights holders. Inadequate laws or weak enforcement mechanisms to protect entertainment industry IP in one country can adversely affect the results of the Company’s Annual Report on Form 10-Koperations worldwide, despite the Company’s efforts to protect its IP rights. Distribution innovations, including in response to COVID-19, have increased opportunities to access content in unauthorized ways. Additionally, negative economic conditions coupled with a shift in government priorities could lead to less enforcement. These developments require us to devote substantial resources to protecting our IP against unlicensed use and present the risk of increased losses of revenue as a result of unlicensed distribution of our content and other commercial misuses of our IP. The legal landscape for some new technologies, including some generative AI, remains uncertain, and development of the fiscal year ended October 3, 2020 as reportedlaw in Exhibit 99.1this area could impact our ability to protect against infringing uses.
With respect to IP developed by the Company and rights acquired by the Company from others, the Company is subject to the Current Report on form 8-Krisk of challenges to our copyright, trademark and patent rights by third parties. In addition, the availability of copyright protection and other legal protections for IP generated by certain new technologies, such as generative AI, is uncertain. Successful challenges to our rights in IP may result in increased costs for obtaining rights or the loss of the Company filedApril 1, 2021.
SIGNIFICANT DEVELOPMENTS
COVID-19 Pandemic
Since early 2020,opportunity to earn revenue from or utilize the worldIP that is the subject of challenged rights. From time to time, the Company has been notified that it may be infringing certain IP rights of third parties. Technological changes in industries in which the Company operates and continuesextensive patent coverage in those areas may increase the risk of such claims being brought and prevailing.
Protection of electronically stored data and other cybersecurity is costly, and if our data or systems are materially compromised in spite of this protection, we may incur additional costs, lost opportunities, damage to our reputation, disruption of service or theft of our assets.
We maintain information necessary to conduct our business, including confidential and proprietary information as well as personal information regarding our customers and employees, in digital form. We also use computer systems to deliver our products and services and operate our businesses. Data maintained in digital form is subject to the risk of unauthorized access, modification, exfiltration, destruction or denial of access and our computer systems are subject to cyberattacks that may result in disruptions in service. We use many third-party systems and software, which are also subject to supply chain and other cyberattacks. We develop and maintain an information security program to identify and mitigate cyber risks but the development and maintenance of this program is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Accordingly, despite our efforts, the risk of unauthorized access, modification, exfiltration, destruction or denial of access with respect to data or systems and other cybersecurity attacks cannot be impactedeliminated entirely, and the risks associated with a potentially material incident remain. In
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addition, we provide confidential, proprietary and personal information to third parties in certain cases, which information is also subject to risk of compromise.
If our information or cyber security systems or data are compromised in a material way, our ability to conduct our business may be impaired, we may lose profitable opportunities or the value of those opportunities may be diminished and, as described above, we may lose revenue as a result of unlicensed use of our intellectual property. If personal information of our customers or employees is misappropriated, our reputation with our customers and employees may be damaged resulting in loss of business or morale, and related remediation of harm to our customers and employees or damages arising from litigation and/or fines or other actions we take with respect to judicial or regulatory actions arising out of an incident create additional costs. Insurance we obtain does not cover all potential losses or damages associated with such attacks or events. Our systems and users and those of third parties with whom we engage are continually attacked, sometimes successfully, and there can be no assurance that future incidents will not have material adverse effects on our operations or financial results.
A variety of uncontrollable events may disrupt our businesses, reduce demand for or consumption of our products and services, impair our ability to provide our products and services or increase the cost or reduce the profitability of providing our products and services.
The operation and profitability of our businesses and demand for and consumption of our products and services, particularly our parks and experiences businesses, are highly dependent on the general environment for travel and tourism, including in the specific regions in which our parks and experiences businesses operate. In addition, we have extensive international operations, including our international theme parks and resorts, which are dependent on domestic and international regulations consistent with trade and investment in those regions. The operation of our businesses and the environment for travel and tourism, as well as demand for and consumption of our other entertainment products, can be significantly adversely affected in the U.S., globally or in specific regions as a result of a variety of factors beyond our control, including: health concerns (including as it has been by COVID-19 and its variants.could be by future health outbreaks and pandemics); adverse weather conditions arising from short-term weather patterns or long-term climate change, including longer and more regular excessive heat conditions, catastrophic events or natural disasters (such as excessive heat or rain, hurricanes, typhoons, floods, droughts, tsunamis and earthquakes); international, political or military developments, including trade and other international disputes and social unrest; macroeconomic conditions, including a decline in economic activity, inflation and foreign exchange rates; and terrorist attacks. These events and others, such as fluctuations in travel and energy costs and computer virus attacks, intrusions or other widespread computing or telecommunications failures, may also damage our ability to provide our products and services or to obtain insurance coverage with respect to some of these events. An incident that affected our property directly would have a direct impact on our ability to provide goods and services and could have an extended effect of discouraging consumers from attending our facilities. Moreover, the costs of protecting against such incidents reduces the profitability of our operations.
For example, COVID-19 and measures to prevent its spread has impacted our segmentsbusinesses in a number of ways, most significantly at the DPEPExperiences segment where our theme parks and resorts were closed and cruise ship sailings and guided tours were suspended. These operations resumed, generally at reduced capacity, at various points since May 2020. We haveIn addition, we delayed, or in some cases, shortened or cancelledcanceled theatrical releases and stage play performances were suspended as of March 2020. Stage play operations resumed, generally at reduced capacity, in the first quarter of fiscal 2021. Theaters have been subject to capacity limitations and shifting government mandates or guidance regarding COVID-19 restrictions. We experienced significant disruptions in the production and availability of content. Collectively, our impacted businesses historically have been the source of the majority of our revenue. In addition, hurricanes have impacted the profitability of Walt Disney World Resort and may do so in the future. The Company has paused certain operations in certain regions, including in response to sanctions, trade restrictions and related developments and the profitability of certain operations has been impacted as a result of events in the corresponding regions.
In addition, we derive affiliate fees and royalties from the distribution of our programming, sales of our licensed goods and services by third parties, and the management of businesses operated under brands licensed from the Company, and we are therefore dependent on the successes of those third parties for that portion of our revenue. The profitability of one or more of our businesses could be adversely impacted by the significant contraction of distribution channels for our products and services, including through third-party licensees or sellers of our licensed goods and services. In addition, third-party suppliers provide products and services essential to the operation of a number of our businesses. A wide variety of factors could influence the success of those third parties and if negative factors significantly impacted a sufficient number of those third parties or materially impacted a supplier of a significant product or service, the profitability of one or more of our businesses could be adversely affected. In specific geographic markets, we have experienced delayed and/or partial payments from certain third parties due to liquidity issues.
We obtain insurance against the risk of losses relating to some of these events, generally including certain physical damage to our property and resulting business interruption, certain injuries occurring on our property and some liabilities for alleged breach of legal responsibilities. When insurance is obtained it is subject to deductibles, exclusions, terms, conditions and limits of liability. The types and levels of coverage we obtain vary from time to time depending on our view of the likelihood of specific types and levels of loss in relation to the cost of obtaining coverage for such types and levels of loss and we may experience material losses not covered by our insurance.
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We face risks related to changes in our business strategy or restructuring of our businesses, which have affected and may continue to affect our cost structure, the profitability of our businesses or the value of our assets.
As changes in our business environment occur we have adjusted, continue to adjust and may further adjust our business strategies to meet these changes and we may otherwise decide to further restructure our operations or particular businesses or assets. For example, in fiscal 2023, we reorganized our media and entertainment operations, which had been previously reported in one segment, into two segments, Entertainment and Sports; in fiscal 2023 we announced that we would review content, including the delayprimarily on our DTC services, for alignment with a strategic change in our approach to content curation, resulting in removal of key live sports programming duringcertain content from our platforms and related impairment charges; in fiscal 20202022, we announced plans to introduce an ad-supported Disney+ service, new pricing model and price increases and cost realignment; in fiscal 2021, we announced the closure of a substantial number of our Disney-branded retail stores; and we have announced exploration of a number of new types of businesses. Changes in strategy, such as was the case with the most recent reorganization of our media and entertainment operations, can lead to workforce disruptions. Our new organization and strategies are, among other things, subject to execution risk and may not produce the anticipated benefits, such as supporting our growth strategies and enhancing shareholder value. For example, notwithstanding our announced plans to rationalize costs, the costs of our DTC strategy, and associated losses, may continue to grow or be reduced more slowly than anticipated, which may impact our distribution strategy across businesses/distribution platforms, the types of content we distribute through various businesses/distribution platforms, and the timing and sequencing of content windows. Our new organization and strategies could be less successful than our previous organizational structure and strategies. In addition, external events including changing technology, changing consumer purchasing patterns, acceptance of content offerings and changes in macroeconomic conditions may impair the value of our assets. When these changes or events occur, we have incurred and may continue to incur costs to change our business strategy and have needed and may in the future need to write-down the value of assets. In addition to the content impairment noted above, among other assets, we have impaired goodwill and intangible assets at our linear networks and impaired the value of certain of our retail store assets. We may write down other assets as our strategy evolves to account for the current business environment.
We also make investments in existing or new businesses, including investments in international expansion of our business and in new business lines. For example, in fiscal 2023, we announced that we are developing plans to accelerate and expand investment in our Experiences segment. In addition, in recent years, other investments have included expansion and renovation of certain of our theme parks, expansion of our fleet of cruise ships, the acquisition of TFCF Corporation (TFCF) and investments related to DTC offerings. Some of these and future investments may ultimately result in returns that are negative or low, the ultimate business prospects of the businesses related to these investments are uncertain, and these investments may impact the resources available to, and the profitability of, our other businesses. In addition, our costs may increase, we may have significant charges associated with the write-down of assets, as occurred in connection with the closure of Star Wars: Galactic Starcruiser or returns on new investments may be negative or lower than prior to the change in strategy or restructuring. Even if our strategies are effective in the long term, our new offerings will generally not be profitable in the short term, growth of our new offerings is unlikely to be even quarter over quarter and we may not expand into new markets as or when anticipated. Our ability to forecast for new businesses may be impacted by our lack of experience operating in those new businesses, speed with which the competitive landscape changes, volatility beyond our control (such as the events beyond our control noted above) and our ability to obtain or develop the content and rights on which our projections are based. Accordingly, we may not achieve our forecasted outcomes.
Increased competitive pressures impact our revenues and increase our costs.
We face substantial competition in each of our businesses from alternative providers of the products and services we offer and from other forms of entertainment, lodging, tourism and recreational activities. This includes, among other types, competition for human resources, content and other resources we require in operating our business. For example:
•Our programming and production operations compete to obtain creative, performing, production and business talent, sports and other programming, story properties, advertiser support, production facilities and market share with traditional and new media platforms, including other studio operators, television networks, VOD providers and other sources of broadband delivered content.
•Our television networks and stations and DTC offerings compete for the sale of advertising time with traditional and new media platforms, including other television and VOD services, as well as the suspensionwith newspapers, magazines, billboards and radio stations, and various forms of most filminternet and mobile delivered content, which offer advertising delivery technologies that are more targeted than can be achieved through traditional means.
•Our television productionnetworks compete for carriage of their programming with other programming providers.
•Our theme parks and resorts compete for guests with all other forms of entertainment, lodging, tourism and recreation activities and compete for creative, performing and business talent, including with other theme park and resort operators.
•Our content sales/licensing operations compete for customers with all other forms of entertainment.
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•Our consumer products business competes with other licensors and creators of IP.
•Our DTC streaming services compete for customers with an increasing number of competitors’ DTC offerings, all other forms of media and all other forms of entertainment, as well as for technology, creative, performing and business talent and for content.
Competition in March 2020. Although filmeach of these areas may further increase as a result of technological developments and television production generally resumed beginningchanges in the fourth quartermarket structure, including consolidation of fiscal 2020, wesuppliers of resources and distribution channels. Increased competition has increased, and may continue to see disruptionincrease, the cost of production activities dependingprogramming, including sports and other products and diverts consumers from, or delays their consumption of, our creative or other products, or to other products or other forms of entertainment and experiences, which could reduce our revenue or increase our marketing costs.
Competition for the acquisition of resources can further increase the cost of producing our products and services; change the composition of our offerings, including sports; deprive us of talent needed for our entertainment and experiences businesses, including the talent necessary to produce high quality creative material; increase employee turnover and staffing instability; or increase the cost of compensation for our employees. Such competition may also reduce, or limit growth in, prices for our products and services, including advertising rates and subscription fees at our media networks and DTC offerings, parks and resorts admissions and room rates and prices for consumer products from which we derive license revenues.
Our results may be adversely affected if long-term programming or distribution contracts are not renewed on local circumstances. Fewer theatrical releasessufficiently favorable terms.
We enter into long-term contracts for both the acquisition and production delaysthe distribution of media programming and products, including contracts for the acquisition of programming rights for sporting events and other programs, and contracts for the distribution of our programming to content distributors. As these contracts expire, we must renew or renegotiate the contracts, which from time to time has led to service blackouts when distribution contracts expired before renewal terms were agreed, and if we are unable to renew these contracts on acceptable terms, we may lose programming rights or distribution rights. As a result, our portfolio of programming rights we acquire and the distributors of our programming and the portfolio of programming rights our distributors acquire have limitedchanged and may continue to change over time. Even if these contracts are renewed, the availabilitycost of film contentobtaining certain programming rights has increased and may continue to increase (or increase at faster rates than our historical experience) and programming distributors, facing pressures resulting from increased subscription fees and alternative distribution challenges, have demanded and may continue to demand terms (including with respect to the pricing for, and the nature and amount of, programming distributed) that reduce our revenue from distribution of programs (or increase revenue at slower rates than our historical experience). For example, a recent carriage agreement renewal includes fewer of our linear networks but provides for certain of our DTC streaming services to be sold in distribution windows subsequentmade available to the theatrical release.
We have takendistributor’s subscribers. Moreover, our ability to renew these contracts on favorable terms may be affected by a number of mitigationfactors, such as consolidation in the market for program distribution and the entrance of new participants in the market for distribution of content on digital platforms. With respect to the acquisition of programming rights, particularly sports programming rights, the impact of these long-term contracts on our results over the term of the contracts depends on a number of factors, including the strength of advertising markets, subscription levels and programming rights costs increases, effectiveness of marketing efforts and the size of viewer audiences. There can be no assurance that revenues from programming based on these rights will exceed the cost of the rights plus the other costs of producing and distributing the programming.
Regulations applicable to our businesses may impair the profitability of our businesses.
Each of our businesses, including our broadcast networks and television stations, is subject to a variety of U.S. and international regulations, which impact the operations and profitability of our businesses. Some of these regulations include:
•U.S. FCC regulation of our television and radio networks, our national programming networks and our owned television stations. See Item 1 — Federal Regulation - Entertainment and Sports.
•Federal, state and foreign privacy and data protection laws and regulations.
•Regulation of the safety and supply chain of consumer products and theme park operations, including regulation regarding the sourcing, importation and the sale of goods.
•Environmental protection regulations.
•U.S. and international anti-corruption laws, sanction programs, trade restrictions and anti-money laundering laws.
•Restrictions on the manner in which content is currently licensed and distributed, ownership restrictions or film or television content requirements, investment obligations or quotas.
•Domestic and international labor laws, tax laws or currency controls.
New laws and regulations, as well as changes in any of these current laws and regulations or regulator activities in any of these areas, or others, may require us to spend additional amounts to comply with the regulations, or may restrict our ability to offer products and services in ways that are profitable, and create an increasingly unpredictable regulatory landscape. In addition, ongoing and future developments in international political, trade and security policy may lead to new regulations
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limiting international trade and investment and disrupting our operations outside the U.S., including our international theme parks and resorts operations in France, mainland China and Hong Kong. For example, in 2022 the U.S. and other countries implemented a series of sanctions against Russia in response to events in Russia and Ukraine; U.S. agencies have enhanced trade restrictions, including new prohibitions on the importation of goods from certain regions and other jurisdictions are considering similar measures; U.S. state governments have become more active in passing legislation targeted at specific sectors and companies and applying existing laws in novel ways to new technologies, including streaming and online commerce; and in many countries/regions around the world (including but not limited to the EU) regulators are requiring us to broadcast on our linear (or display on our DTC streaming services) programming produced in specific countries as well as invest specified amounts of our revenues in local content productions. In Florida, steps directed at the Company (including the passage of legislation) have been taken and future actions have been threatened, which collectively could negatively impact (and may have already impacted) our ability to execute on our business strategy, our costs and the profitability of our operations in Florida.
Further, in response to the impactsCOVID-19 pandemic, public health and other regional, national, state and local regulations and policies impacted most of COVID-19 on our businesses. We significantlyGovernment requirements could be reinstated and new government requirements may be imposed to address COVID-19 or future health outbreaks or pandemics.
Our operations outside the U.S. may be adversely affected by the operation of laws in those jurisdictions.
Our operations in non-U.S. jurisdictions are in many cases subject to the laws of the jurisdictions in which they operate rather than, or in addition to, U.S. law. Laws in some jurisdictions differ in significant respects from those in the U.S. These differences can affect our ability to react to changes in our business, and our rights or ability to enforce rights may be different than would be expected under U.S. law. Moreover, enforcement of laws in some international jurisdictions can be inconsistent and unpredictable, which can affect both our ability to enforce our rights and to undertake activities that we believe are beneficial to our business. In addition, the business and political climate in some jurisdictions may encourage corruption, which could reduce our ability to compete successfully in those jurisdictions while remaining in compliance with local laws or U.S. anti-corruption laws applicable to our businesses. As a result, our ability to generate revenue and our expenses in non-U.S. jurisdictions may differ from what would be expected if U.S. law alone governed these operations.
Environmental, social and governance matters and any related reporting obligations may impact our businesses.
U.S. and international regulators, investors and other stakeholders are increasingly focused on environmental, social and governance matters. For example, new domestic and international laws and regulations relating to environmental, social and governance matters, including environmental sustainability and climate change, human capital management and cybersecurity, are under consideration or being adopted, which may include specific, target-driven disclosure requirements or obligations. Our response will require increased cash balances throughcosts to comply, the issuanceimplementation of senior notes in Marchnew reporting processes, entailing additional compliance risk, a skilled workforce and May 2020. The Company did not pay a dividend with respect to fiscal 2020 operations and has not declared or paid a dividend with respect to fiscal 2021 operations; suspended certain capital projects; reduced certain discretionary expenditures (such as spending on marketing); reduced management compensation for several months in fiscal 2020 and temporarily eliminated Board of Director retainers and committee fees in fiscal 2020. other incremental investments.
In addition, we furloughed over 120,000have undertaken or announced a number of related actions and goals, which will require changes to operations and ongoing investment. There is no assurance that our initiatives will achieve their intended outcomes or that we will achieve any of these goals. Consumer, government and other stakeholder perceptions of our employees (who continuedefforts to receive Company provided medical benefits), most of which have returned from furlough as operations have reopened. At the end of fiscal 2020, the Company announced a workforce reduction plan, which was essentially completed in the first half of fiscal 2021. We may take additional mitigation actions in the future such as raising additional financing; not declaring future dividends; reducing, or not making, certain payments, such as some contributionsachieve these objectives often differ widely and present risks to our pensionreputation and postretirement medical plans; further suspending capital spending, reducing filmbrands. In addition, our ability to implement some initiatives or achieve some goals is dependent on external factors. For example, our ability to meet certain environmental sustainability goals or initiatives will depend in part on third-party collaboration, the availability of suppliers that can satisfy new requirements, mitigation innovations and/or the availability of economically feasible solutions at scale.
Damage to our reputation or brands may negatively impact our Company across businesses and television content investments;regions.
Our reputation and globally recognizable brands are integral to the success of our businesses. Because our brands engage consumers across our businesses, damage to our reputation or implementing additional furloughs or reductionsbrands in force; or modifying our operating strategies. Some of these measuresone business may have an adverse impact on our other businesses. Because some of our brands are globally recognized, brand damage may not be locally contained. Maintenance of the reputation of our Company and brands depends on many factors including the quality of our offerings, maintenance of trust with our customers and our ability to successfully innovate. In addition, we may pursue brand or product integration combining previously separate brands or products targeting different audiences under one brand or pursue other business initiatives inconsistent with one or more of our brands, and there is no assurance that these initiatives will be accepted by our customers and not adversely impact one or more of our brands. Significant negative claims or publicity regarding the Company or its operations, products, management, employees, practices, business partners, business decisions, social responsibility and culture, which may be amplified by social media, adversely impact our brands or reputation, even if such claims are untrue. Damage to our reputation or brands could impact our sales, business opportunities, profitability, recruiting and valuation of our securities.
Various risks may impact the success of our DTC streaming services.
We may not successfully execute on our DTC strategy. The most significant impact on operating income since the second quartersuccess of fiscal 2020 from COVID-19 was at the DPEP segment due to revenue lost as a resultour DTC strategy and profitability of closures and/or reduced operating capacities. Although results improved in the second half of fiscal 2021 compared to the second half of fiscal 2020 from reopening our DPEP businesses, we continue toDTC streaming services will be impacted by reduced operating capacities. COVID-19 also had a negative impact in fiscal 2021 at our DMED segment compared to fiscal 2020 as higher advertising revenue from the return of live sporting events was more than offset by higher sports programming costs. Our other film and television distribution businesses were impacted by revenue lost from the deferral or cancellation of significant film releases, partially offset by costs avoided due to a reduction in film cost amortization, marketing and distribution costs. The impact of COVID-19 on fiscal 2021 and 2020 results is not necessarily indicativesuccess of the impactreorganization of our media and entertainment business and our ability to advance our DTC strategies, drive subscriber additions and retention based on future period results.the attractiveness of our content,
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Themanage churn in reaction to price increases, achieve the desired financial impact of these disruptionsthe Disney+ ad supported service, pricing model and price increases, our ability to execute on cost realignment and the extenteffects of their adverseour determinations with regard to distribution for our creative content across windows. The initial costs of marketing campaigns are generally recognized in the business of initial exploitation, and amortization of capitalized production costs and licensed programming rights are generally allocated across businesses based on the estimated relative value of the distribution windows. Accordingly, our distribution determinations impact the costs of each business, including the applicable DTC service. There are a number of competing DTC businesses. Consumers may not be willing to pay for an expanding set of DTC streaming services at increasing prices, potentially exacerbated by an economic downturn. In addition, economic downturns negatively impact the purchase of and price for advertising on our DTC streaming services. We face competition for creative talent and sports and other programming rights and may not be successful in recruiting and retaining talent and obtaining desired programming rights or face increased costs to do so. Acquisition of new subscribers to our DTC streaming services is not linear, and we have experienced net losses of subscribers in some periods. Our content does not always successfully attract and retain subscribers in the quantities that we expect. Our content is subject to cost pressures and may cost more than we expect. We may not successfully manage our costs to meet our profitability goals. Government regulation, including revised foreign content and ownership regulations as well as government-imposed content restrictions, impacts the implementation of our DTC business plans. The highly competitive environment in which we operate puts pricing pressure on our DTC offerings and may require us to lower our prices or not take price increases to attract or retain customers or lead to higher churn rates. These and other risks may impact the profitability and success of our DTC streaming services.
Potential credit ratings actions, increases in interest rates, or volatility in the U.S. and global financial markets could impede access to, or increase the cost of, financing our operations and operational results will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unknowable duration and severity of the impacts of COVID-19 and its variants, and among other things, the impact and duration of governmental actions imposed in response to COVID-19 and individuals’ and companies’ risk tolerance regarding health matters going forward.investments.
Our businesses have incurred and will continue to incur additional costs to address government regulations and the safety of our employees, guests and talent. For example, when we reopened theme parks and retail stores, we incurred and will continue to incur costs for such things as additional custodial services, personal protection equipment, temperature screenings and testing, sanitizer and cleaning supplies and signage, among other items. Similarborrowing costs have been incurredand can be affected by short- and long-term debt ratings assigned by independent ratings agencies that are based, in the production of film and television content, including live sporting events, and productions may take longer to complete. The timing, duration and extent of these costs will dependpart, on the timingCompany’s performance as measured by credit metrics such as leverage and scopeinterest coverage ratios. As a result of the resumption of our operations. These costs totaled approximately $1 billion in fiscal 2021. Some of these costs have been capitalized and will be amortized over future periods. With the unknown duration of COVID-19, it is not possible to precisely estimate the impact of COVID-19 on our operations in future periods, although we estimate a modestly lower impact in fiscal 2022. In addition, we are no longer benefiting from certain savings related to the closure of certain businesses, such as related furloughs. The reopening or closure of our businesses is dependent on applicable government requirements, which vary by location and are subject to ongoing changes.
Additionally, see Part I., Item 1A. Risk Factors - The adversefinancial impact of COVID-19 on our businesses, Standard and Poor’s downgraded our long-term debt ratings by two notches to BBB+ and downgraded our short-term debt ratings by one notch to A-2. Fitch downgraded our long- and short-term credit ratings by one notch to A- and F2, respectively. On June 5, 2023, Standard and Poor’s upgraded our long-term debt ratings by one notch to A-. As of September 30, 2023 Moody’s Investors Service’s long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, Standard and Poor’s long- and short-term debt ratings for the Company were A- and A-2 (Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively. Any future downgrades could increase our cost of borrowing and/or make it more difficult for us to obtain financing on acceptable terms.
In addition, increases in interest rates have increased our cost of borrowing and volatility in U.S. and global financial markets could impact our access to, or further increase the cost of, financing. Past disruptions in the U.S. and global credit and equity markets made it more difficult for many businesses to obtain financing on acceptable terms. These conditions tended to increase the cost of borrowing and if they recur, our cost of borrowing could increase and it may be more difficult to obtain financing for our operations or investments.
Elevated indebtedness or leverage ratios could adversely affect us, including by decreasing our business flexibility.
Elevated indebtedness could have the effect of, among other things, reducing our financial flexibility and our ability to respond to changing business and economic conditions and other uncontrollable events. Debt repayment obligations could also reduce funds available for investments, capital expenditures, share repurchases and dividends, and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels. Our leverage ratios increased as the result of COVID-19’s impact on financial performance, which caused certain of the credit ratings agencies to downgrade their assessment of our credit ratings. Downgrades to our debt rating may negatively impact our cost of borrowings and/or make it more difficult for us to obtain financing on acceptable terms.
Labor disputes disrupt our operations and may adversely affect the profitability of one or more of our businesses.
A significant number of employees in various parts of our businesses, including employees of our theme parks, and writers, directors, actors and production personnel for our productions are covered by collective bargaining agreements. In addition, some of our employees outside the U.S. are represented by works councils, trade unions or other employee associations. Further, the employees of licensees who manufacture and retailers who sell our licensed consumer products, and employees of providers of programming content (such as sports leagues) may be covered by labor agreements with their employers. From time to time, collective bargaining agreements and other labor agreements expire, requiring renegotiation of their terms. In general, labor disputes and work stoppages involving our employees; persons employed on our productions; athletes or others employed by, or otherwise connected with, sports leagues or organizers; or the employees of our licensees or retailers who sell our licensed consumer products or providers of programming content may disrupt our operations and reduce our revenues. For example, on May 2, 2023, members of the Writers Guild of America (WGA) commenced a work stoppage, which lasted for almost five months. On July 14, 2023, members of SAG-AFTRA, the union representing television and movie actors, also commenced a work stoppage, which lasted for almost four months. These work stoppages have impacted our
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productions and the pipeline for programming and theatrical releases, which could result in reduced revenue and have an adverse effect on our profitability. The new collective bargaining agreements with the Directors Guild of America, WGA and SAG-AFTRA will lead to increased costs to create content, including as a result of increases in rates, residuals and benefits. Generally, resolution of disputes or negotiation of new agreements, including rate increases and other changes to employee benefits, has in the past increased our costs and may increase our costs in the future.
The seasonality of certain of our businesses and timing of certain of our product offerings could exacerbate negative impacts on our operations.
Each of our businesses is normally subject to seasonal variations and variations in connection with the timing of our product offerings, including as follows:
•Revenues at the Experiences segment fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and leisure activities and seasonal consumer purchasing behavior, which generally results in increased revenues during the Company’s first and fourth fiscal quarters. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early winter and spring holiday periods. Revenues at the Experiences segment also may fluctuate with changes in theme park attendance and resort occupancy resulting from special celebrations or events that may increase demand in the applicable periods and decrease demand in prior or later periods as guests time their vacations to occur during such special celebrations or events. In addition, licensing revenues fluctuate with the timing and performance of our theatrical releases and cable programming broadcasts.
•Revenues from television networks and stations are subject to seasonal advertising patterns and changes in viewership levels, including related to certain sporting events. In general, domestic general entertainment linear networks advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months, and sports advertising revenues are impacted by the timing of sports seasons and events, which varies throughout the year or may take place periodically.
•Revenues from content sales/licensing fluctuate due to the timing of content releases across various distribution markets. Release dates and methods are determined by a number of factors, including, among others, competition, and the timing of vacation and holiday periods.
•DTC revenues fluctuate based on: changes in the number of subscribers, mix of subscribers to different offerings and subscriber fees; viewership levels; and the demand for sports and film and television content. Each of these may depend on the availability of content, which varies from time to time throughout the year based on, among other things, sports seasons, content production schedules and sports league work stoppages.
Accordingly, negative impacts on our business occurring during a time of typical high seasonal demand such as our park closures due to COVID-19 restrictions or hurricane damage during the summer travel season or other high seasons, could have a disproportionate effect on the results of that business for the year.
Our operations are impacted by our ability to attract and retain employees and costs of employee wages and health, welfare and pension benefits, including postretirement medical benefits for some employees and retirees, may reduce our profitability.
With approximately 225,000 employees, the success of our businesses is substantially affected by our ability to attract and retain a workforce with the necessary skills for our varied businesses, including executing successfully on succession planning for the talent at all levels necessary to advance the Company’s key objectives and strategies. Further, our profitability is substantially affected by labor costs, including wages and our health, welfare and pension benefits, including the costs of medical benefits for current employees and the costs of postretirement medical benefits for some current employees and retirees. We may experience significant increases in these costs as a result of macroeconomic, regulatory, competitive and other factors. For example, labor costs in our parks and resorts have increased, and we expect will continue to increase, as a result of collective bargaining agreements and wage laws and regulations where we operate. Future health outbreaks and pandemics may lead to an increase in the cost of medical insurance and expenses. In addition, changes in investment returns and discount rates used to calculate pension and postretirement medical expense and related assets and liabilities can be volatile and may have an unfavorable impact on our costs in some years. These macroeconomic factors as well as a decline in the fair value of pension and postretirement medical plan assets may put upward pressure on the cost of providing pension and postretirement medical benefits and may increase future funding requirements. There can be no assurance that we will succeed in attracting and retaining the human resources necessary for an unknown lengththe success of timeour businesses or in limiting cost increases from wages and other employee benefits, which could reduce the profitability of our businesses.
We face risks related to costs and expenses in connection with the acquisition of NBCU’s equity interest in Hulu and the TFCF acquisition.
On November 1, 2023, NBCU exercised its right to require the Company to purchase NBCU’s equity interest in Hulu under a put/call arrangement between the parties. The purchase price for NBCU’s equity interest in Hulu will be determined
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based on NBCU’s equity ownership percentage of the greater of Hulu’s equity fair value as of September 30, 2023, and a guaranteed floor value. Further, the Company will share with NBCU 50% of the Company’s tax benefit from the purchase of NBCU’s interest in Hulu, which payments are expected to be made primarily over a 15-year period. In addition, we may incur significant costs and expenses in connection with the TFCF acquisition, including costs for which we have established reserves or which may lead to reserves in the future. The cost to purchase NBCU’s equity interest in Hulu and related obligations to NBCU and any such other costs could negatively impact the Company’s cash position and result in the Company incurring additional indebtedness.
GENERAL RISKS
The price of our common stock has been, and may continue to be, volatile.
The price of our common stock has experienced substantial volatility and may continue to be volatile. Various factors have impacted, and may continue to impact, certainthe price of our key sourcescommon stock, including, among others, changes in management; variations in our operating results; variations between our actual results and expectations of revenue.securities analysts; changes in our estimates, guidance or business plans; changes in financial estimates and recommendations by securities analysts; the activities, operating results or stock price of our competitors or other industry participants in the industries in which we operate; the announcement or completion of significant transactions by us or a competitor; events affecting the stock market generally; and the economic and political conditions in the U.S. and internationally, as well as other factors described in this Item 1A. Some of these factors may adversely impact the price of our common stock, regardless of our operating performance. Further, volatility in the price of our common stock may negatively impact one or more of our businesses, including by increasing cash compensation or stock awards for our employees who participate in our stock incentive programs or limiting our financing options for acquisitions and other business expansion.
The Company’s amended and restated bylaws provide to the fullest extent permitted by law that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its stockholders, which could increase costs to bring a claim, discourage claims or limit the ability of the Company’s stockholders to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company’s directors, officers or other employees.
The Company’s amended and restated bylaws provide to the fullest extent permitted by law that unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of the Company, (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action or proceeding asserting a claim arising pursuant to, or seeking to enforce any right, obligation or remedy under, any provision of the General Corporation Law of the State of Delaware (the “DGCL”), the Certificate of Incorporation or these Bylaws (as each may be amended from time to time), (iv) any action or proceeding as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware, (v) or any action or proceeding asserting a claim governed by the internal affairs doctrine. The choice of forum provision may increase costs to bring a claim, discourage claims or limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or the Company’s directors, officers or other employees, which may discourage such lawsuits against the Company or the Company’s directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in the Company’s amended and restated bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions. The exclusive forum provision in the Company’s amended and restated bylaws will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws including the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or the respective rules and regulations promulgated thereunder.
ITEM 1B. Unresolved Staff Comments
The Company has received no written comments regarding its periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of fiscal 2023 that remain unresolved.
ITEM 2. Properties
Our parks and resorts locations and other properties of the Company and its subsidiaries are described in Item 1 under the caption Experiences. Film and television library properties and television stations owned by the Company are described in Item 1 under the caption Entertainment.
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The Company and its subsidiaries own and lease properties throughout the world. In addition to the properties noted above, the table below provides a brief description of other significant properties and the related business segment.
LocationProperty /
Approximate Size		UseBusiness Segment
Burbank, CA & surrounding cities(1)
Land (201 acres) & Buildings (4,694,000 ft2)
Owned Office/Production/Warehouse (includes 240,000 ft2 leased to third-party tenants)
Corporate/Entertainment/Experiences
Burbank, CA & surrounding cities(1)
Buildings (1,834,000 ft2)
Leased Office/WarehouseCorporate/Entertainment/Experiences
Los Angeles, CA
Land (22 acres) & Buildings (605,000 ft2)
Owned Office/Production/Technical WarehouseCorporate/Entertainment
Los Angeles, CA
Buildings (2,640,000 ft2)
Leased Office/Production/Technical/TheaterCorporate/Entertainment/Experiences
New York, NY
Buildings (51,000 ft2)
Owned OfficeCorporate/Entertainment/Sports
New York, NY
Buildings (2,190,000 ft2)
Leased Office/Production/Theater/Warehouse (includes 679,000 ft2 leased to third-party tenants)
Corporate/Entertainment/Sports/Experiences
Bristol, CT
Land (117 acres) & Buildings (1,174,000 ft2)
Owned Office/Production/TechnicalSports
Bristol, CT
Buildings (273,000 ft2)
Leased Office/Warehouse/TechnicalSports
Emeryville, CA
Land (20 acres) & Buildings (430,000 ft2)
Owned Office/Production/TechnicalEntertainment
Emeryville, CA
Buildings (97,000 ft2)
Leased Office/StorageEntertainment
San Francisco, CA
Buildings (517,000 ft2)
Leased Office/Production/Technical/Theater (includes 47,000 ft2 leased to third-party tenants)
Corporate/Entertainment
USA & CanadaLand and Buildings (Multiple sites and sizes)Owned and Leased Office/ Production/Transmitter/Theaters/WarehouseCorporate/Entertainment/Experiences
Europe, Asia, Australia & Latin AmericaBuildings (Multiple sites and sizes)Leased Office/Warehouse/Retail/ResidentialEntertainment/Experiences
(1)Surrounding cities include Glendale, CA, North Hollywood, CA and Sun Valley, CA
ITEM 3. Legal Proceedings
As disclosed in Note 14 to the Consolidated Financial Statements, the Company is engaged in certain legal matters, and the disclosure set forth in Note 14 relating to certain legal matters is incorporated herein by reference.
ITEM 4. Mine Safety Disclosures
Not applicable.
Information About Our Executive Officers
The executive officers of the Company are elected each year at the organizational meeting of the Board of Directors, which follows the annual meeting of the shareholders, and at other Board of Directors meetings, as appropriate. Each of the executive officers has been employed by the Company in the position or positions indicated in the list and pertinent notes below.
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The executive officers of the Company are:
NameAgeTitleExecutive
Officer Since
Robert A. Iger72
Chief Executive Officer(1)
2022
Kevin A. Lansberry60
Interim Chief Financial Officer(2)
2023
Horacio E. Gutierrez58
Senior Executive Vice President, General Counsel and Chief Compliance Officer(3)
2022
Sonia L. Coleman51
Senior Executive Vice President and Chief Human Resources Officer(4)
2023
Kristina K. Schake53
Senior Executive Vice President and Chief Communications Officer(5)
2022
(1)Mr. Iger was appointed Chief Executive Officer effective November 20, 2022. He previously served as Executive Chairman of the Company from February 2020 through December 2021 and as Chief Executive Officer of the Company from September 2005 to February 2020.
(2)Mr. Lansberry was appointed Interim Chief Financial Officer effective July 1, 2023. He was previously Executive Vice President and Chief Financial Officer of the Company’s Parks, Experiences and Products segment from March 2018 and Executive Vice President and Chief Financial Officer, Walt Disney Parks and Resorts from May 2017. Over his more than 35 years with the Company, Mr. Lansberry has held a wide range of roles in the Company’s parks and experiences businesses, including in finance, business development, alliances and operations.
(3)Mr. Gutierrez was appointed Senior Executive Vice President and General Counsel effective February 1, 2022 and appointed Chief Compliance Officer effective March 27, 2023. Prior to joining the Company, he served as Head of Global Affairs and Chief Legal Officer for Spotify Technology S.A. (Spotify) from November 2019 to January 2022, where he led a global, multi-disciplinary team of business, corporate communications and public affairs, government relations, licensing, operations and legal professionals responsible for the company’s work in areas including industry relations, content partnerships, public policy, and trust & safety. He was previously Spotify’s General Counsel - Vice President, Business & Legal Affairs from April 2016 to November 2019.
(4)Ms. Coleman was appointed Senior Executive Vice President and Chief Human Resources Officer effective April 8, 2023. She was previously Senior Vice President, Human Resources at Disney General Entertainment and ESPN from August 2021. Ms. Coleman served as Senior Vice President, Human Resources for Disney General Entertainment from April 2017, Vice President, Human Resources for the Company from May 2016 and Vice President, Human Resources, Disney Consumer Products from May 2010.
(5)Ms. Schake was appointed Senior Executive Vice President and Chief Communications Officer effective June 29, 2022. Previously, she served as Executive Vice President, Global Communications from April 2022. Prior to joining the Company, she was appointed by the President of the United States as Counselor for Strategic Communications to the Secretary of the U.S. Department of Health and Human Services, leading a nationwide public education campaign from March 2021 to December 2021. Prior to that, she served as Global Communications Director for Instagram, a product of Meta Platforms, Inc., from March 2017 to March 2019, where she oversaw the communications teams in North America, Latin America, Europe and Asia.
On November 2, 2023, the Company appointed Hugh F. Johnston, 62, as Senior Executive Vice President and Chief Financial Officer commencing on December 4, 2023. Mr. Johnston currently serves as Executive Vice President and Chief Financial Officer, from 2010, and Vice Chairman, from 2015, of PepsiCo, Inc. (“PepsiCo”). In addition to providing strategic financial leadership for PepsiCo in these roles, Mr. Johnston’s portfolio has included a variety of responsibilities, including leadership of PepsiCo’s information technology function from 2015, PepsiCo’s global e-commerce business from 2015 to 2019, and the Quaker Foods North America division from 2014 to 2016. He also held a number of other leadership roles during his PepsiCo career, having served as Executive Vice President, Global Operations from 2009 to 2010, President of Pepsi-Cola North America from 2007 to 2009, Executive Vice President, Operations from 2006 to 2007 and Senior Vice President, Transformation from 2005 to 2006. Prior to that, he served as Senior Vice President and Chief Financial Officer of PepsiCo Beverages and Foods from 2002 through 2005, and as PepsiCo’s Senior Vice President of Mergers and Acquisitions in 2002. Mr. Johnston joined PepsiCo in 1987 as a Business Planner and held various finance positions until 1999 when he left to join Merck & Co., Inc. as Vice President, Retail, a position which he held until he rejoined PepsiCo in 2002.
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PART II
ITEM 5. Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s common stock is listed on the New York Stock Exchange under the ticker symbol “DIS”.
As of September 30, 2023, the approximate number of common shareholders of record was 768,000.
ITEM 6. [Reserved]
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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Direct-to-Consumer
Disney+, Disney+ Hotstar and Hulu are subscription services that provide video streaming of general entertainment and family programming. Disney+ and Disney+ Hotstar also provide video streaming of international sports programming. The services are offered individually or in various bundles, which may include ESPN+ (see Sports segment discussion), to customers directly or through third-party distributors on mobile and internet connected devices. The majority of Direct-to-Consumer revenue is derived from subscription fees and advertising.
Disney+ (including Star+ in Latin America)
Disney+ is a subscription-based DTC service with Disney, Pixar, Marvel, Star Wars and National Geographic branded programming, which are all top-level selections or “tiles” within the Disney+ interface. Outside the U.S. and Latin America, Disney+ also includes a Star branded tile, which features general entertainment programming.
Star+ is a standalone DTC service in Latin America with a variety of general entertainment and family content and live sports programming.
Disney+ (including Star+) is also referred to as Disney+ Core.
As of September 30, 2023, the estimated number of paid Disney+ Core subscribers, based on internal management reports, was approximately 113 million.
Disney+ Hotstar
Disney+ Hotstar is a subscription-based DTC service available in India, Indonesia, Malaysia, Philippines and Thailand. Programming includes television shows, movies, sports and original series in approximately ten languages, in addition to gaming and social features. Disney+ Hotstar has exclusive streaming rights to certain cricket programming.
As of September 30, 2023, the estimated number of paid Disney+ Hotstar subscribers, based on internal management reports, was approximately 38 million.
Disney+ Core and Disney+ Hotstar offer content from the Company’s various studios, including library titles, as well as content acquired from third parties.
The majority of Disney+ Core and Disney+ Hotstar revenue is derived from subscription fees and, to a lesser extent, Advertising. The Company launched an ad-supported Disney+ service in the U.S. in December 2022 and in select European markets and in Canada in November 2023. The Company plans to launch an ad-supported Disney+ service in additional international markets in calendar 2024.
Hulu
Hulu is a domestic subscription-based DTC service with general entertainment content from the Company’s various studios as well as content licensed from third parties. Hulu’s revenue is primarily derived from subscription fees and Advertising. Hulu offers subscription VOD (SVOD) services with or without advertising in addition to a digital OTT MVPD (Live TV) service. The Live TV service is available with either of Hulu’s SVOD services and includes live linear streams of cable networks and the major broadcast networks. In addition, Hulu offers subscriptions to premium services such as Max, Cinemax, Starz and Showtime, which can be added to the Hulu service. Certain programming from ABC Network, Freeform and FX Channels is also available on the Hulu SVOD service one day after the linear airing on these channels. As of September 30, 2023, the estimated number of paid Hulu subscribers, based on internal management reports, was approximately 49 million.
The Company has significantly increased67% ownership and full operational control of Hulu. NBC Universal (NBCU) owns the remaining 33% of Hulu. In November 2023, NBCU exercised its focusput right to require the Company to purchase NBCU’s interest in Hulu (see Note 2 of the Consolidated Financial Statements for additional information).
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Content Sales/Licensing and Other
The majority of Content Sales/Licensing revenue is derived from TV/VOD, theatrical and home entertainment distribution. In addition, revenue is generated from music distribution, stage plays and post-production services through Industrial Light & Magic and Skywalker Sound.
The Company also publishes National Geographic magazine, which is reported with Content Sales/Licensing.
TV/VOD Distribution
We license our content to third-party television networks, television stations and other video service providers for distribution to viewers on distributiontelevision or a variety of brandedinternet-connected devices, including through other DTC services.
Theatrical Distribution
The Company licenses full-length live-action and animated films to theaters globally. Cumulatively through September 30, 2023, the Company has released approximately 1,100 full-length live-action films and 100 full-length animated films. In the domestic and most major international markets, we generally distribute and market our films directly. In certain international markets our films are distributed by independent companies. In some territories, certain films may be exclusively distributed on our DTC streaming services. During fiscal 2024, we expect to release approximately 15 films, although the ultimate number of releases will depend on when productions resume following the writers/actors’ work stoppages.
The Company incurs significant marketing and advertising costs before and throughout the theatrical release of a film in an effort to generate public awareness of the film, to increase the public’s intent to view the film and to help generate consumer interest in the subsequent home entertainment and other ancillary markets. These costs are expensed as incurred, which may result in a loss on a film in the theatrical markets, including in periods prior to the theatrical release of the film.
Home Entertainment Distribution
We distribute the Company’s film and episodic content viain home entertainment markets on DVD and Blu-ray disc, through electronic home video licenses and VOD rentals globally.
Domestically and internationally, we distribute directly to retailers and through independent distribution companies. Electronic formats of our ownfilm and episodic content may be purchased through e-tailers such as Apple and Amazon, and MVPDs, such as Comcast and DirecTV, and physical formats are generally sold to retailers, such as Walmart and Target. The Company also operates Disney Movie Club, which sells DVD/Blu-ray discs directly to consumers in the U.S. and Canada.
Distribution of film content in the home entertainment window generally starts within three months after the theatrical release. Electronic formats are typically available approximately four to eight weeks ahead of the physical release. We also license titles to VOD e-tailers concurrent with physical home entertainment distribution.
Distribution of episodic content in the home entertainment window includes electronic sales of season passes that can be purchased prior to, during and after the broadcast season with individual episodes typically available to season pass customers shortly after the initial airing of the show in each territory. Access to individual episodes is also available for electronic purchase shortly after the initial airing in each territory.
Disney Theatrical Group
Disney Theatrical Group develops, produces and licenses live entertainment events on Broadway and around the world. Productions include The Lion King, Frozen, Aladdin and Beauty and the Beast.
Disney Theatrical Group also licenses the Company’s IP to Feld Entertainment, the producer of Disney On Ice and Marvel Universe Live!.
Disney Music Group
The Disney Music Group encompasses all aspects of the Company’s music commercialization and marketing including: recorded music (Walt Disney Records and Hollywood Records); music publishing; and concerts. Disney Music Group distributes music both physically and digitally and also licenses music throughout the world in various forms of media, including: television; print; gaming; and consumer products.
Equity Investment
The Company has a 30% effective interest in Tata Play Limited, which operates a direct-to-home satellite distribution platform in India.
Content Production and Acquisition
Produced content primarily consists of original films and episodic programs, network news and daytime/nighttime content and licensed content includes acquired episodic programming rights. Original content is generally produced under the following banners: ABC Signature; Disney Branded Television; FX Productions; Lucasfilm; Marvel; National Geographic Studios; Pixar;
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Searchlight Pictures; Twentieth Century Studios; 20th Television; and Walt Disney Pictures. Original content is also commissioned and produced by various third-party studios. Program development is carried out in collaboration with writers, producers and creative teams.
Costs to produce content are generally capitalized and allocated across Entertainment’s businesses based on the estimated relative value of the distribution windows.
Generally, the Company has full production and distribution rights to its IP. However, prior to the Company’s acquisition of Marvel, Sony Pictures Entertainment licensed from Marvel the rights to produce and distribute Spider-Man films in all windows except for the merchandise rights, which the Company retains.
The Company has a significant library of content spanning approximately 100 years of production history as well as acquired libraries. The library of content includes approximately 5,100 live-action film titles and 400 animated film titles, as well as episodic series with four or more seasons (approximately 75 dramas, 55 comedies, 35 non-scripted series, 15 animated series and 10 live-action series). In addition, the library includes approximately 100 series and 65 films that were produced for initial distribution on our DTC platforms.
In fiscal 2024, the Company plans to produce or commission approximately 225 episodic and film titles, although the ultimate number will depend on when productions resume following the writers/actors’ work stoppages. The vast majority of our productions will be distributed on our Linear Networks and/or DTC platforms or theatrically. Programming is also produced for third parties, which typically have domestic linear distribution rights while the Company retains domestic VOD and international distribution rights. We also license, acquire or produce local content for use in various countries/territories.
Competition and Seasonality
Linear Networks and Direct-to-Consumer compete for viewers’ attention and audience share primarily with other television networks, independent television stations and other media, such as other DTC streaming services. As a result, we are forgoing certain licensing revenue fromservices, social media and video games. With respect to the sale of advertising time, we compete with other television networks, independent television stations, MVPDs, other DTC streaming services and other advertising media such as digital content, newspapers, magazines, radio and billboards. Our television and radio stations primarily compete for audiences and advertisers in local market areas.
Linear Networks compete with other networks for carriage by MVPDs. The Company’s contractual agreements with MVPDs are renewed or renegotiated from time to time in the ordinary course of business. Consolidation and other market conditions in the cable, satellite and telecommunication distribution industry, including subscriber trends, and other factors may adversely affect the Company’s ability to obtain and maintain contractual terms for the distribution of its various programming services that are as favorable as those currently in place.
Content Sales/Licensing businesses compete with all forms of entertainment and a significant number of companies produce and/or distribute theatrical and episodic content, distribute products in the home entertainment market, provide pay TV/VOD services, and produce music and live theater.
The operating results of Content Sales/Licensing fluctuate due to the timing and performance of releases in the theatrical, home entertainment and television markets. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods.
We also compete with other media and entertainment companies, independent production companies and VOD services for creative and performing talent, story properties, show concepts, scripted and other programming, advertiser support, production facilities and exhibition outlets that are essential to the success of our Entertainment businesses.
Advertising revenues at Linear Networks and Direct-to-Consumer are subject to seasonal advertising patterns and changes in viewership levels. In general, domestic advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months. Affiliate revenues vary with the subscriber trends of MVPDs.
Sports
The Sports segment generally encompasses the Company’s sports-focused global television and DTC video streaming content production and distribution activities.
The significant lines of business within Sports are as follows:
•ESPN (generally owned 80% by the Company)
◦Domestic:
▪Eight ESPN-branded television channels
▪ESPN on ABC (sports programmed on the ABC Network by ESPN)
▪ESPN+ DTC video streaming service
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◦International: ESPN-branded channels outside of the U.S.
•Star: Star-branded sports channels in India
The significant revenues of Sports are as follows:
•Affiliate fees
•Advertising
•Subscription fees
•Other revenue - Fees from the following activities: pay-per-view events on ESPN+, sub-licensing of sports rights, programming ESPN on ABC and licensing the ESPN brand
The significant expenses of Sports are as follows:
•Operating expenses, consisting 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.
•Selling, general and administrative costs, including marketing costs
•Depreciation and amortization
Domestic ESPN
Branded television channels include eight 24-hour domestic television sports channels: ESPN and ESPN2 (both of which are dedicated to professional and college sports as well as sports news and original programming); ESPNU (which is dedicated to college sports); ESPNEWS (which re-airs select ESPN studio shows and airs a variety of other programming); SEC Network (which is dedicated to Southeastern Conference college athletics); ACC Network (which is dedicated to Atlantic Coast Conference college athletics); ESPN Deportes (which airs professional and college sports as well as studio shows in Spanish); and Longhorn Network (which is dedicated to The University of Texas athletics). In addition, ESPN programs ESPN on ABC and recognizes the direct revenues and costs for this programming and receives a fee from the ABC Network, which is eliminated in consolidation.
The Company has various sports programming rights, which are used to produce content aired on ESPN television networks and ESPN+, including live events and sports news. Rights include the National Football League (NFL), college football (including bowl games and the College Football Playoff) and basketball, the National Basketball Association (NBA), mixed martial arts, Major League Baseball (MLB), the National Hockey League (NHL), soccer, Top Rank Boxing, US Open Tennis, the Masters golf tournament, the Wimbledon Championships, the Professional Golfers’ Association (PGA) Championship and the Women’s National Basketball Association (WNBA).
The number of subscribers (in millions) for the significant domestic branded channels are as follows:
Subscribers
ESPN(1)
71
ESPN2(1)
71
ESPNU(1)
50
ESPNEWS(2)
53
SEC Network(2)
48
ACC Network(2)
46
(1)Based on Nielsen Media Research estimates as of September 2023. Estimates include traditional MVPD and the majority of digital OTT subscriber counts.
(2)Because Nielsen Media Research does not measure this channel, estimated subscribers are according to SNL Kagan as of December 2022.
ESPN+ is a domestic subscription-based DTC service offering thousands of live sporting events, on-demand sports content and other original programming. The service is offered individually or in various bundles with Disney+ and Hulu to customers directly or through third-party distributors on mobile and internet connected devices. ESPN+ revenue is derived from subscription fees, pay-per-view fees and, to a lesser extent, advertising. Live events available through the service include mixed martial arts, soccer, hockey, boxing, baseball, college sports, golf, tennis and cricket. ESPN+ is currently the exclusive distributor for Ultimate Fighting Championship (UFC) pay-per-view events in the U.S. As of September 30, 2023, the estimated number of paid ESPN+ subscribers, based on internal management reports, was approximately 26 million.
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International ESPN
The Company operates approximately 40 ESPN branded sports channels outside the U.S. in 4 languages and approximately 105 countries/territories. Channels previously branded Fox are now branded ESPN. In the Netherlands, the ESPN branded channels are operated by Eredivisie Media & Marketing CV (EMM) (owned 51% by the Company), which has the media and sponsorship rights of the Dutch Premier League for soccer. Rights include various soccer leagues (including English Premier League, LaLiga, Bundesliga and multiple UEFA leagues). As of September 2023, the estimated number of subscribers to ESPN branded channels outside the U.S., based on internal management reports, was approximately 59 million.
Star
The Company operates 10 Star branded sports channels in India, in 4 languages. Star has rights to various sports programming, primarily cricket and soccer. As of September 2023, the estimated number of subscribers to Star branded channels, based on internal management reports, was 82 million.
Equity Investments
The most significant equity investment at Sports is a 30% interest in CTV Specialty Television, Inc. (CTV). The Company’s share of CTV’s financial results is reported as “Equity in the income (loss) of investees, net” in the Company’s Consolidated Statements of Operations. CTV operates television networks in Canada, including The Sports Networks (TSN) 1-5, Le Réseau des Sports (RDS), RDS2, RDS Info, Discovery Canada, Discovery Science and Animal Planet Canada.
Investments
In fiscal 2023, the Company entered into an agreement with PENN Entertainment, Inc. (PENN), under which the Company will earn advertising and licensing revenues from providing promotional services and the ESPN BET trademark to PENN in connection with its operation of a sportsbook. In addition, the Company received warrants to purchase equity in PENN, which vest over the term of the agreement. The warrants are recorded at fair market value and adjustments to fair market value are reported as “Interest expense, net” in the Company’s Consolidated Statements of Operations.
Competition and Seasonality
Sports competes for viewers’ attention and audience share primarily with other television networks, independent television stations and other media, such as other DTC streaming services, social media and video games. With respect to the sale of advertising time, we compete with other television networks, independent television stations, MVPDs and other advertising media such as digital content, newspapers, magazines, radio and billboards.
The Sports television networks compete with other networks for carriage by MVPDs. The Company’s contractual agreements with MVPDs are renewed or renegotiated from time to time in the ordinary course of business. Consolidation and other market conditions in the cable, satellite and telecommunication distribution industry and other factors may adversely affect the Company’s ability to obtain and maintain contractual terms for the distribution of its various programming services that are as favorable as those currently in place.
We also compete with other media and entertainment companies and VOD services for sports rights, creative and performing talent and other programming, advertiser support and production facilities that are essential to the success of our Sports businesses.
Advertising revenues are subject to changes in viewership levels and the demand for sports programming. Advertising revenues generated from sports programming are also impacted by the timing of sports seasons and events, which timing may vary throughout the year or may take place periodically (e.g. biannually, quadrennially). Affiliate revenues vary with the subscriber trends of MVPDs.
EXPERIENCES
The significant lines of business within Experiences are as follows:
•Parks & Experiences:
◦Domestic:
▪Theme parks and resorts:
•Walt Disney World Resort in Florida
•Disneyland Resort in California
▪Experiences:
•Disney Cruise Line
•Disney Vacation Club
•National Geographic Expeditions (owned 73% by the Company) and Adventures by Disney
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•Aulani, a Disney Resort & Spa in Hawaii
◦International:
▪Theme parks and resorts:
•Disneyland Paris
•Hong Kong Disneyland Resort (48% ownership interest and consolidated in our financial results)
•Shanghai Disney Resort (43% ownership interest and consolidated in our financial results)
•In addition, the Company licenses its IP to a third party to operate Tokyo Disney Resort
•Consumer Products:
◦Licensing of our trade names, characters, visual, literary and other IP to various manufacturers, game developers, publishers and retailers throughout the world, for use on merchandise, published materials and games
◦Sale of branded merchandise through online, retail and wholesale businesses, and development and publishing of books, comic books and magazines (except National Geographic magazine, which is reported in Entertainment)
The significant revenues of Experiences are as follows:
•Theme park admissions - Sales of tickets for admission to our theme parks and for premium access to certain attractions (e.g. Genie+ and Lightning Lane)
•Resorts and vacations - Sales of room nights at hotels, sales of cruise and other vacations and sales and rentals of vacation club properties
•Parks & Experiences merchandise, food and beverage - Sales of merchandise, food and beverages at our theme parks and resorts and cruise ships
•Merchandise licensing and retail:
◦Merchandise licensing - Royalties from licensing our IP for use on consumer goods
◦Retail - Sales of merchandise through internet shopping sites (generally branded shopDisney) and at The Disney Store, as well as to wholesalers (including books, comic books and magazines)
•Parks licensing and other - Revenues from sponsorships and co-branding opportunities, real estate rent and sales and royalties earned on Tokyo Disney Resort revenues
The significant expenses of Experiences are as follows:
•Operating expenses, consisting primarily of operating labor, costs of goods sold, infrastructure costs, supplies, commissions and entertainment offerings. Infrastructure costs include technology support costs, repairs and maintenance, property taxes, utilities and fuel, retail occupancy costs, insurance and transportation
•Selling, general and administrative costs, including marketing costs
•Depreciation and amortization
Significant capital investments:
•In recent years, the majority of the Company’s capital spend has been at our parks and experiences business, which is principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and systems infrastructure.
Parks & Experiences
Walt Disney World Resort
The Walt Disney World Resort is located approximately 20 miles southwest of Orlando, Florida, on approximately 25,000 acres of land. The resort includes theme parks (the Magic Kingdom, EPCOT, Disney’s Hollywood Studios and Disney’s Animal Kingdom); hotels; vacation club properties; a retail, dining and entertainment complex (Disney Springs); a sports complex; conference centers; campgrounds; golf courses; water parks; and other recreational facilities designed to attract visitors for an extended stay.
The Walt Disney World Resort is marketed through a variety of international, national and local advertising and promotional activities. A number of attractions and restaurants in each of the theme parks are sponsored or operated by other companies under multi-year agreements.
Magic Kingdom — The Magic Kingdom consists of six themed areas: Adventureland, Fantasyland, Frontierland, Liberty Square, Main Street USA and Tomorrowland. Each land provides a unique guest experience featuring themed attractions, restaurants, merchandise shops and entertainment experiences.
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EPCOT — EPCOT consists of four major themed areas: World Showcase, World Celebration, World Nature and World Discovery. All areas feature themed attractions, restaurants, merchandise shops and entertainment experiences. Countries represented with pavilions include Canada, China, France, Germany, Italy, Japan, Mexico, Morocco, Norway, the United Kingdom and the U.S. The Journey of Water, inspired by Moana, opened in October 2023 as part of a multi-year transformation at EPCOT.
Disney’s Hollywood Studios — Disney’s Hollywood Studios consists of eight themed areas: Animation Courtyard, Commissary Lane, Echo Lake, Grand Avenue, Hollywood Boulevard, Star Wars: Galaxy’s Edge, Sunset Boulevard and Toy Story Land. The areas provide behind-the-scenes glimpses of Hollywood-style action through various shows and attractions and offer themed food service, merchandise shops and entertainment experiences.
Disney’s Animal Kingdom — Disney’s Animal Kingdom consists of a 145-foot tall Tree of Life centerpiece surrounded by five themed areas: Africa, Asia, DinoLand USA, Discovery Island and Pandora - The World of Avatar. Each themed area contains attractions, restaurants, merchandise shops and entertainment experiences. The park features more than 300 species of live mammals, birds, reptiles and amphibians and 3,000 varieties of vegetation.
Hotels, Vacation Club Properties and Other Resort Facilities — As of September 30, 2023, the Company owned and operated 18 resort hotels and vacation club facilities at the Walt Disney World Resort, with approximately 23,000 rooms and 3,600 vacation club units. Resort facilities include 500,000 square feet of conference meeting space and Disney’s Fort Wilderness camping and recreational area, which offers approximately 800 campsites.
Disney Springs is an approximately 120-acre retail, dining and entertainment complex and consists of four areas: Marketplace, The Landing, Town Center and West Side. The areas are home to more than 150 venues including the 64,000-square-foot World of Disney retail store. Most of the Disney Springs facilities are operated by third parties that pay rent to the Company.
Ten independently-operated hotels with approximately 7,000 rooms are situated on property leased from the Company.
ESPN Wide World of Sports Complex is a 230-acre center that hosts professional caliber training and competitions, festival and tournament events and interactive sports activities. The complex, which welcomes both amateur and professional athletes, accommodates multiple sporting events, including baseball, basketball, football, soccer, softball, tennis and track and field. It also includes a stadium, as well as two venues designed for cheerleading, dance competitions and other indoor sports.
Other recreational amenities and activities available at the Walt Disney World Resort include three championship golf courses, miniature golf courses, full-service spas, tennis, sailing, swimming, horseback riding and a number of other sports and leisure time activities. The resort also includes two water parks: Disney’s Blizzard Beach and Disney’s Typhoon Lagoon.
Disneyland Resort
The Company owns 489 acres and has rights under a long-term lease for use of an additional 52 acres of land in Anaheim, California. The Disneyland Resort includes two theme parks (Disneyland and Disney California Adventure), three resort hotels and a retail, dining and entertainment complex (Downtown Disney).
The Disneyland Resort is marketed through a variety of international, national and local advertising and promotional activities. A number of the attractions and restaurants in the theme parks are sponsored or operated by other companies under multi-year agreements.
Disneyland — Disneyland consists of nine themed areas: Adventureland, Critter Country, Fantasyland, Frontierland, Main Street USA, Mickey’s Toontown, New Orleans Square, Star Wars: Galaxy’s Edge and Tomorrowland. These areas feature themed attractions, restaurants, merchandise shops and entertainment experiences.
Disney California Adventure — Disney California Adventure is adjacent to Disneyland and includes eight themed areas: Avengers Campus, Buena Vista Street, Cars Land, Grizzly Peak, Hollywood Land, Paradise Gardens Park, Pixar Pier and San Fransokyo Square. These areas include themed attractions, restaurants, merchandise shops and entertainment experiences.
Hotels, Vacation Club Units and Other Resort Facilities — Disneyland Resort includes three Company owned and operated hotels and vacation club facilities with approximately 2,400 rooms, 180 vacation club units and 180,000 square feet of conference meeting space.
Downtown Disney is a themed 15-acre retail, entertainment and dining complex with approximately 30 venues located adjacent to both Disneyland and Disney California Adventure. Most of the Downtown Disney facilities are operated by third parties that pay rent to the Company.
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Aulani, a Disney Resort & Spa
Aulani, a Disney Resort & Spa is a family resort on a 21-acre oceanfront property on Oahu, Hawaii featuring approximately 350 hotel rooms, an 18,000-square-foot spa and 12,000 square feet of conference meeting space. The resort also has approximately 480 vacation club units.
Disneyland Paris
Disneyland Paris is located on approximately 5,200-acres in Marne-la-Vallée, approximately 20 miles east of Paris, France. The land is being developed pursuant to a master agreement with French governmental authorities. Disneyland Paris includes two theme parks (Disneyland Park and Walt Disney Studios Park); seven themed resort hotels; two convention centers; a shopping, dining and entertainment complex (Disney Village); and a 27-hole golf facility. Of the 5,200 acres comprising the site, approximately half have been developed to date, including a planned community (Val d’Europe).
Disneyland Park — Disneyland Park consists of five themed areas: Adventureland, Discoveryland, Fantasyland, Frontierland and Main Street USA. These areas include themed attractions, restaurants, merchandise shops and entertainment experiences.
Walt Disney Studios Park — Walt Disney Studios Park includes five themed areas: Front Lot, Production Courtyard, Toon Studio, Worlds of Pixar and Avengers Campus. These areas each include themed attractions, restaurants, merchandise shops and entertainment experiences. Walt Disney Studios Park is undergoing a multi-year expansion that will include a new themed area based on Frozen.
Hotels and Other Facilities — Disneyland Paris operates seven resort hotels, with approximately 5,750 rooms and 250,000 square feet of conference meeting space. In addition, five on-site hotels that are owned and operated by third parties provide approximately 1,500 rooms.
Disney Village is an approximately 500,000-square-foot retail, dining and entertainment complex located between the theme parks and the hotels. A number of the Disney Village facilities are operated by third parties that pay rent to the Company.
Val d’Europe is a planned community near Disneyland Paris that is being developed in phases. Val d’Europe currently includes a regional train station, hotels and a town center consisting of a shopping center as well as office, commercial and residential space. Third parties operate these developments on land leased or purchased from the Company.
Hong Kong Disneyland Resort
The Company owns a 48% interest in Hong Kong Disneyland Resort and the Government of the Hong Kong Special Administrative Region (HKSAR) owns a 52% interest. The resort is located on 310 acres on Lantau Island and is in close proximity to the Hong Kong International Airport and the Hong Kong-Zhuhai-Macau Bridge. Hong Kong Disneyland Resort includes one theme park and three themed resort hotels. A separate Hong Kong subsidiary of the Company is responsible for managing Hong Kong Disneyland Resort. The Company is entitled to receive royalties and management fees based on the operating performance of Hong Kong Disneyland Resort.
Hong Kong Disneyland — Hong Kong Disneyland consists of eight themed areas: Adventureland, Fantasyland, Grizzly Gulch, Main Street USA, Mystic Point, Tomorrowland, Toy Story Land and World of Frozen, which opened in November 2023. These areas feature themed attractions, restaurants, merchandise shops and entertainment experiences.
Hotels — Hong Kong Disneyland Resort includes three themed hotels with approximately 1,750 rooms and 16,000 square feet of conference meeting space.
Shanghai Disney Resort
The Company owns a 43% interest in Shanghai Disney Resort and Shanghai Shendi (Group) Co., Ltd (Shendi) owns a 57% interest. The resort is located in the Pudong district of Shanghai on approximately 1,000 acres of land, which includes the Shanghai Disneyland theme park; two themed resort hotels; a retail, dining and entertainment complex (Disneytown); and an outdoor recreation area. A management company, in which the Company has a 70% interest and Shendi has a 30% interest, is responsible for operating the resort and receives a management fee based on the operating performance of Shanghai Disney Resort. The Company is also entitled to royalties based on the resort’s revenues.
Shanghai Disneyland — Shanghai Disneyland consists of seven themed areas: Adventure Isle, Fantasyland, Gardens of Imagination, Mickey Avenue, Tomorrowland, Toy Story Land and Treasure Cove. These areas feature themed attractions, shows, restaurants, merchandise shops and entertainment experiences. The Company is constructing an eighth themed area based on the animated film Zootopia, which is scheduled to open in late calendar 2023.
Hotels and Other Facilities — Shanghai Disneyland Resort includes two themed hotels with approximately 1,200 rooms. Disneytown is an 11-acre outdoor complex of dining, shopping and entertainment venues located adjacent to Shanghai Disneyland. Most Disneytown facilities are operated by third parties that pay rent to Shanghai Disney Resort. The Company is currently constructing a third themed hotel, which will have approximately 400 rooms.
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Tokyo Disney Resort
Tokyo Disney Resort is located on 494 acres of land, six miles east of downtown Tokyo, Japan. The Company earns royalties on revenues generated by the Tokyo Disney Resort, which is owned and operated by Oriental Land Co., Ltd. (OLC), a third-party Japanese corporation. The resort includes two theme parks (Tokyo Disneyland and Tokyo DisneySea); five Disney-branded hotels; six other hotels (operated by third parties other than OLC); a retail, dining and entertainment complex (Ikspiari); and Bon Voyage, a Disney-themed merchandise location.
Tokyo Disneyland — Tokyo Disneyland consists of seven themed areas: Adventureland, Critter Country, Fantasyland, Tomorrowland, Toontown, Westernland and World Bazaar.
Tokyo DisneySea — Tokyo DisneySea is divided into seven “ports of call,” including American Waterfront, Arabian Coast, Lost River Delta, Mediterranean Harbor, Mermaid Lagoon, Mysterious Island and Port Discovery. OLC is expanding Tokyo DisneySea to include an eighth themed port, Fantasy Springs expected to open in spring 2024.
Hotels and Other Resort Facilities — Tokyo Disney Resort includes five Disney-branded hotels with a total of more than 3,000 rooms and a monorail, which links the theme parks and resort hotels with Ikspiari. OLC is currently constructing a 475-room Disney-branded hotel at Tokyo DisneySea that is expected to open in spring 2024.
Disney Vacation Club (DVC)
DVC offers ownership interests in 16 resort facilities located at the Walt Disney World Resort; Disneyland Resort; Aulani; Vero Beach, Florida; and Hilton Head Island, South Carolina. Available units are offered for sale under a vacation ownership plan and are operated as hotel rooms when not occupied by vacation club members. The Company’s vacation club units range from deluxe studios to three-bedroom grand villas. Unit counts in this document are presented in terms of two-bedroom equivalents. DVC had approximately 4,500 vacation club units as of September 30, 2023, including The Villas at Disneyland Hotel, which opened in September 2023. The Company plans to open The Cabins at Disney’s Fort Wilderness Resort - A Disney Vacation Club Resort and additional units at Disney’s Polynesian Village Resort in 2024.
Storyliving by Disney
The Company is developing its first Storyliving by Disney residential community, Cotino, in Rancho Mirage, California.
Disney Cruise Line
Disney Cruise Line is a five-ship vacation cruise line, which operates out of ports in North America, Europe and the South Pacific. The Disney Magic and the Disney Wonder are 85,000-ton 875-stateroom ships; the Disney Dream and the Disney Fantasy are 130,000-ton 1,250-stateroom ships; and the Disney Wish is a 140,000-ton 1,250-stateroom ship. The ships cater to families, children, teenagers and adults, with themed areas and activities for each group. Many cruise vacations include a visit to Disney’s Castaway Cay, a 1,000-acre private Bahamian island.
Disney Cruise Line is adding the Disney Treasure, the Disney Adventure and an eighth ship. The Disney Treasure and the Disney Adventure are scheduled to be delivered from the shipyard in fiscal 2025 and the eighth ship is scheduled to be delivered in fiscal 2026. The Disney Treasure and eighth ship will be approximately 140,000 tons with 1,250 staterooms. The Disney Adventure will be approximately 200,000 tons with approximately 2,100 staterooms and will operate in Southeast Asia.
Disney Lookout Cay at Lighthouse Point on the island of Eleuthera is scheduled to open as a Disney Cruise Line destination in the summer of 2024.
Adventures by Disney and National Geographic Expeditions
Adventures by Disney and National Geographic Expeditions offer guided tour packages predominantly at non-Disney sites around the world.
Walt Disney Imagineering
Walt Disney Imagineering provides master planning, real estate development, attraction, entertainment and show design, engineering support, production support, project management and research and development.
Consumer Products
Licensing
The Company’s merchandise licensing operations cover a diverse range of product categories, the most significant of which are: toys, apparel, games, home décor and furnishings, accessories, health and beauty, food, books, stationery, footwear, magazines and consumer electronics. The Company licenses characters from its film, television and other properties for use on third-party products in these categories and earns royalties, which are usually based on a fixed percentage of the wholesale or retail selling price of the products. Some of the major properties licensed by the Company include: Mickey and Friends, Star Wars, Spider-Man, Disney Princess, Avengers, Frozen, Toy Story, Winnie the Pooh and Lilo & Stitch.
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Retail
The Company sells Disney-, Marvel-, Pixar- and Lucasfilm-branded products through shopDisney branded internet sites and Disney Store branded retail locations. At September 30, 2023, the Company owns and operates approximately 40 stores in Japan, 20 stores in North America, two stores in Europe and one store in China.
The Company creates, distributes and publishes a variety of products in multiple countries and languages based on the Company’s branded franchises. The products include children’s books and comic books.
Competition and Seasonality
The Company’s theme parks and resorts as well as Disney Cruise Line and Disney Vacation Club compete with other forms of entertainment, lodging, tourism and recreational activities. The profitability of the leisure-time industry may be influenced by various factors that are not directly controllable, such as economic conditions including business cycle and exchange rate fluctuations, health concerns, the political environment, travel industry trends, amount of available leisure time, oil and transportation prices, weather patterns and natural disasters. The licensing and retail business competes with other licensors, retailers and publishers of character, brand and celebrity names, as well as other licensors, publishers and developers of game software, online video content, websites, other types of home entertainment and retailers of toys and kids merchandise.
All of the theme parks and the associated resort facilities are operated on a year-round basis. Typically, theme park attendance and resort occupancy fluctuate based on the seasonal nature of vacation travel and leisure activities, the opening of new guest offerings and pricing and promotional offers. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early winter and spring holiday periods. In addition, theme park and resort revenues may be higher during significant celebrations such as theme park or character anniversaries and lower in the periods following such celebrations. The licensing, retail and wholesale businesses are influenced by seasonal consumer purchasing behavior, which generally results in higher revenues during the Company’s first and fourth fiscal quarter, and by the timing and performance of theatrical and game releases and cable programming broadcasts.
INTELLECTUAL PROPERTY PROTECTION
The Company’s businesses throughout the world are affected by its ability to exploit and protect against infringement of its IP, including trademarks, trade names, copyrights, patents and trade secrets. Important IP includes rights in the content of motion pictures, television programs, electronic games, sound recordings, character likenesses, theme park attractions, books and magazines and merchandise. Risks related to the protection and exploitation of IP rights and information concerning the expiration of certain of our copyrights are set forth in Item 1A – Risk Factors.
FEDERAL REGULATION — ENTERTAINMENT AND SPORTS
Television broadcasting is subject to extensive regulation by the Federal Communications Commission (FCC) under federal laws and regulations, including the Communications Act of 1934, as amended. Violation of FCC regulations can result in substantial monetary fines, limited renewals of licenses and, in egregious cases, denial of license renewal or revocation of a license. FCC regulations that affect linear channels include the following:
•Licensing of television stations. Each of the television stations we own must be licensed by the FCC. These licenses are granted for periods of up to eight years, and we must obtain renewal of licenses as they expire in order to continue operating the stations. We (and the acquiring entity in the case of a divestiture) must also obtain FCC approval whenever we seek to have a license transferred in connection with the acquisition or divestiture of a station. The FCC may decline to renew or approve the transfer of a license in certain circumstances and may delay renewals while permitting a licensee to continue operating. Although we have received such renewals and approvals in the past or have been permitted to continue operations when renewal is delayed, there can be no assurance that this will be the case in the future.
•Station ownership limits. The FCC imposes limitations on the number of television stations and radio stations an entity can own in a specific market, on the combined number of television and radio stations an entity can own in a single market and on the aggregate percentage of the national audience that can be reached by television stations. Currently:
◦FCC regulations may restrict our ability to own more than one television station in a market, depending on the size and nature of the market. We do not own more than one television station in any market.
◦Federal statutes permit our television stations in the aggregate to reach a maximum of 39% of the national audience. Pursuant to the most recent decision by the FCC as to how to calculate compliance with this limit, our eight stations reach approximately 20% of the national audience.
•Dual networks. FCC rules currently prohibit any of the four major broadcast television networks — ABC, CBS, Fox and NBC — from being under common ownership or control.
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•Regulation of programming. The FCC regulates broadcast programming by, among other things, banning “indecent” programming, regulating political advertising and imposing commercial time limits during children’s programming. Penalties for broadcasting indecent programming can be over $400,000 per indecent utterance or image per station.
Federal legislation and FCC rules also limit the amount of commercial matter that may be shown on broadcast or cable channels during programming designed for children 12 years of age and younger. In addition, broadcast stations are generally required to provide an average of three hours per week of programming that has as a “significant purpose” meeting the educational and informational needs of children 16 years of age and younger. FCC rules also give television station owners the right to reject or refuse network programming in certain circumstances or to substitute programming that the licensee reasonably believes to be of greater local or national importance.
•Cable and satellite carriage of broadcast television stations. With respect to MVPDs operating within a television station’s Designated Market Area, FCC rules require that every three years each television station elect either “must carry” status, pursuant to which MVPDs generally must carry a local television station in the station’s market, or “retransmission consent” status, pursuant to which the MVPDs must negotiate with the television station to obtain the consent of the television station prior to carrying its signal. The ABC owned television stations have historically elected retransmission consent.
•Cable and satellite carriage of programming. The Communications Act and FCC rules regulate some aspects of negotiations between programmers and distributors regarding the carriage of networks by cable and satellite distribution companies, and some cable and satellite distribution companies have sought regulation of additional aspects of the carriage of programming on their systems. New legislation, court action or regulation in this area could have an impact on the Company’s operations.
The foregoing is a brief summary of certain provisions of the Communications Act, other legislation and specific FCC rules and policies. Reference should be made to the Communications Act, other legislation, FCC rules and public notices and rulings of the FCC for further information concerning the nature and extent of the FCC’s regulatory authority.
FCC laws and regulations are subject to change, and the Company generally cannot predict whether new legislation, court action or regulations, or a change in the extent of application or enforcement of current laws and regulations, would have an adverse impact on our operations.
AVAILABLE INFORMATION
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are available without charge on our website, www.disney.com/investors, as soon as reasonably practicable after they are filed electronically with the U.S. Securities and Exchange Commission (SEC). We are providing the address to our internet site solely for the information of investors. We do not intend the address to be an active link or to otherwise incorporate the contents of the website into this report.
ITEM 1A. Risk Factors
For an enterprise as large and complex as the Company, a wide range of factors could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in our filings with the SEC, the most significant factors affecting our business include the following:
BUSINESS, ECONOMIC, MARKET and OPERATING CONDITION RISKS
Declines in U.S., global, and regional economic conditions generally adversely affect the profitability of our businesses.
Declines in economic conditions, such as recession, economic downturn, and/or inflationary conditions in the U.S. and other regions of the world in which we do business, or a failure of conditions to improve as anticipated typically adversely affect demand and/or expenses for one or more of our businesses, reducing our revenue and earnings. Past declines in economic conditions reduced guest spending at our parks and resorts, purchases of and prices for advertising on our broadcast and cable networks and owned stations, performance of our home entertainment releases, and purchases of Company-branded consumer products, and similar impacts can be expected as such conditions recur. Recent inflationary conditions increased certain of our costs. The current economic conditions could also have the effect of reducing attendance at our parks and resorts, prices that MVPDs pay for our cable programming, purchases of and prices for advertising on our DTC products or subscription levels for our cable programming or DTC products, while also continuing to increase the prices we pay for goods, services and labor. Unfavorable economic conditions also impair the ability of those with whom we do business to satisfy their obligations to us. In addition, an increase in price levels generally, or in price levels in a particular sector, could result in a shift in consumer demand away from the entertainment and experiences we offer, which could also adversely affect our revenues and, at the same time, increase our costs. A decline in economic conditions or a failure of conditions to improve as anticipated could impact
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implementation or success of our business plans, such as our plans to increase investment in our Experiences segment, the realignment of our cost structure and plans for our DTC ad-supported services, enhancements, pricing structure and price increases. In addition, actions to reduce inflation, including raising interest rates, increase our cost of borrowing, which in turn make it more difficult to obtain financing for our operations or investments on favorable terms. Further, global economic conditions impact foreign currency exchange rates against the U.S. dollar. The current or continued strength in the value of the U.S. dollar has adversely impacted the U.S. dollar value of revenue we receive and expect to receive from other markets and may reduce international demand for our products and services. Although we hedge exposure to certain foreign currency fluctuations, any such hedging activity may not substantially offset the negative financial impact of exchange rate fluctuations and is not expected to offset all such negative financial impact, particularly in periods of sustained U.S. dollar strength relative to multiple foreign currencies. Further, economic or political conditions in countries outside the U.S. also have reduced, and could continue to reduce, our ability to hedge exposure to currency fluctuations in those countries or our ability to repatriate revenue from those countries. Broader or targeted supply chain delays, such as those that have impacted global distribution from time to time, may further exacerbate inflationary pressures and impact our ability to sell and deliver goods or otherwise disrupt our operations. The adverse impact on our businesses of declines in economic conditions or a failure of conditions to improve as anticipated will depend, in part, on the severity and duration of such economic conditions and our ability to mitigate the impacts of economic conditions on our businesses may be limited.
Changes in technology, in consumer consumption patterns and in how entertainment products are created affect demand for our entertainment products, the revenue we can generate from these products and the cost of producing or distributing these products.
The media entertainment and internet businesses in which we participate increasingly depend on our ability to successfully adapt to new technologies including shifting patterns of content consumption and how entertainment products are generated. New technologies affect the demand for our products, the manner in which our products are distributed to consumers, ways we charge for and receive revenue for our entertainment products and the stability of those revenue streams, the sources and nature of competing content offerings, the time and manner in which consumers acquire and view some of our entertainment products and the options available to advertisers for reaching their desired audiences. These developments have impacted the business model for certain traditional forms of distribution, as evidenced by the industry-wide decline in ratings for broadcast and cable television, the reduction in demand for home entertainment sales of theatrical content, the development of alternative distribution channels for broadcast and cable programming and declines in subscriber levels for traditional cable channels. These trends have decreased advertising and affiliate revenue at some of our linear networks. In addition, theater-going to watch movies currently is, and may continue to be, below pre-COVID-19 levels.
Rules governing new technological developments, such as developments in generative artificial intelligence (AI), remain unsettled, and these developments may affect aspects of our existing business model, including revenue streams for the use of our IP and how we create our entertainment products. In order to respond to the impact of new technologies on our businesses, we regularly consider, and from time to time implement changes to our business models, most recently by developing, investing in and acquiring DTC products, reorganizing our media and entertainment businesses to advance our DTC strategies, and developing new media offerings. There can be no assurance that our DTC offerings, new media offerings and other efforts will successfully respond to technological changes. In addition, declines in certain traditional forms of distribution may increase the cost of content allocable to our DTC offerings, negatively impacting the profitability of our DTC offerings. We expect to forgo revenue from traditional sources, particularly as we expand our DTC offerings. To date our DTC streaming services have experienced significant losses. There can be no assurance that the DTC model and other business models we may develop will ultimately be profitable or as profitable as our existing or historic business models.
We face risks relating to misalignment with public and consumer tastes and preferences for entertainment, travel and consumer products, which impact demand for our entertainment offerings and products and the profitability of any of our businesses.
Our businesses create entertainment, travel and consumer products whose success depends substantially on consumer tastes and preferences that change in often unpredictable ways. The success of our businesses depends on our ability to consistently create compelling content, which may be distributed, among other ways, through broadcast, cable, theaters, internet or mobile technology, and used in theme park attractions, hotels and other resort facilities and travel experiences and consumer products. Such distribution must meet the changing preferences of the broad consumer market and respond to competition from an expanding array of choices facilitated by technological developments in the delivery of content. The success of our theme parks, resorts, cruise ships and experiences, as well as our theatrical releases, depends on demand for public or out-of-home entertainment experiences. Demand for certain out-of-home entertainment experiences, such as theater-going to watch movies, has not returned to pre-pandemic levels. In addition, many of our businesses increasingly depend on acceptance of our offerings and products by consumers outside the U.S. The success of our businesses therefore depends on our ability to successfully predict and adapt to changing consumer tastes and preferences outside as well as inside the U.S. Moreover, we must often invest substantial amounts in content production and acquisition, acquisition of sports rights, launch of new sports-related studio programming, theme park attractions, cruise ships or hotels and other facilities or customer facing platforms before we
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know the extent to which these products will earn consumer acceptance, and these products may be introduced into a significantly different market or economic or social climate from the one we anticipated at the time of the investment decisions. Generally, our revenues and profitability are adversely impacted when our entertainment offerings and products, as well as our methods to make our offerings and products available to consumers, do not achieve sufficient consumer acceptance. Further, consumers’ perceptions of our position on matters of public interest, including our efforts to achieve certain of our environmental and social goals, often differ widely and present risks to our reputation and brands. Consumer tastes and preferences impact, among other items, revenue from advertising sales (which are based in part on ratings for the programs in which advertisements air), affiliate fees, subscription fees, theatrical film receipts, the license of rights to other distributors, theme park admissions, hotel room charges and merchandise, food and beverage sales, sales of licensed consumer products or sales of our other consumer products and services.
The success of our businesses is highly dependent on the existence and maintenance of intellectual property rights in the entertainment products and services we create.
The value to us of our IP is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from our IP may decrease, or the cost of obtaining and maintaining rights may increase. The terms of some copyrights for IP related to some of our products and services have expired and other copyrights will expire in the future. For example, in the United States and countries that look to the United States copyright term when shorter than their own, the copyright term for early works such as the short film Steamboat Willie (1928), and the specific early versions of characters depicted in those works, expires at the end of the 95th calendar year after the date the copyright was originally secured in the United States. As copyrights expire, we expect that revenues generated from such IP will be negatively impacted to some extent.
The unauthorized use of our IP may increase the cost of protecting rights in our IP or reduce our revenues. The convergence of computing, communication and entertainment devices, increased broadband internet speed and penetration, increased availability and speed of mobile data transmission and increasingly sophisticated attempts to obtain unauthorized access to data systems have made the unauthorized digital copying and distribution of our films, television productions and other creative works easier and faster and protection and enforcement of IP rights more challenging. The unauthorized distribution and access to entertainment content generally continues to be a significant challenge for IP rights holders. Inadequate laws or weak enforcement mechanisms to protect entertainment industry IP in one country can adversely affect the results of the Company’s operations worldwide, despite the Company’s efforts to protect its IP rights. Distribution innovations, including in response to COVID-19, have increased opportunities to access content in unauthorized ways. Additionally, negative economic conditions coupled with a shift in government priorities could lead to less enforcement. These developments require us to devote substantial resources to protecting our IP against unlicensed use and present the risk of increased losses of revenue as a result of unlicensed distribution of our content and other commercial misuses of our IP. The legal landscape for some new technologies, including some generative AI, remains uncertain, and development of the law in this area could impact our ability to protect against infringing uses.
With respect to IP developed by the Company and rights acquired by the Company from others, the Company is subject to the risk of challenges to our copyright, trademark and patent rights by third parties. In addition, the availability of copyright protection and other legal protections for IP generated by certain new technologies, such as generative AI, is uncertain. Successful challenges to our rights in IP may result in increased costs for obtaining rights or the loss of the opportunity to earn revenue from or utilize the IP that is the subject of challenged rights. From time to time, the Company has been notified that it may be infringing certain IP rights of third parties. Technological changes in industries in which the Company operates and extensive patent coverage in those areas may increase the risk of such claims being brought and prevailing.
Protection of electronically stored data and other cybersecurity is costly, and if our data or systems are materially compromised in spite of this protection, we may incur additional costs, lost opportunities, damage to our reputation, disruption of service or theft of our assets.
We maintain information necessary to conduct our business, including confidential and proprietary information as well as personal information regarding our customers and employees, in digital form. We also use computer systems to deliver our products and services and operate our businesses. Data maintained in digital form is subject to the risk of unauthorized access, modification, exfiltration, destruction or denial of access and our computer systems are subject to cyberattacks that may result in disruptions in service. We use many third-party systems and software, which are also subject to supply chain and other cyberattacks. We develop and maintain an information security program to identify and mitigate cyber risks but the development and maintenance of this program is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Accordingly, despite our efforts, the risk of unauthorized access, modification, exfiltration, destruction or denial of access with respect to data or systems and other cybersecurity attacks cannot be eliminated entirely, and the risks associated with a potentially material incident remain. In
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addition, we provide confidential, proprietary and personal information to third parties in TV/SVOD markets. Wecertain cases, which information is also expectsubject to forgorisk of compromise.
If our information or cyber security systems or data are compromised in a material way, our ability to conduct our business may be impaired, we may lose profitable opportunities or the value of those opportunities may be diminished and, as described above, we may lose revenue as we shut down channels in certain markets as a result of unlicensed use of our intellectual property. If personal information of our customers or employees is misappropriated, our reputation with our customers and employees may be damaged resulting in loss of business or morale, and related remediation of harm to our customers and employees or damages arising from litigation and/or fines or other actions we take with respect to judicial or regulatory actions arising out of an incident create additional costs. Insurance we obtain does not cover all potential losses or damages associated with such attacks or events. Our systems and users and those of third parties with whom we engage are continually attacked, sometimes successfully, and there can be no assurance that future incidents will not have material adverse effects on our operations or financial results.
A variety of uncontrollable events may disrupt our businesses, reduce demand for or consumption of our products and services, impair our ability to provide our products and services or increase the cost or reduce the profitability of providing our products and services.
The operation and profitability of our businesses and demand for and consumption of our products and services, particularly our parks and experiences businesses, are highly dependent on the general environment for travel and tourism, including in the specific regions in which our parks and experiences businesses operate. In addition, we have extensive international operations, including our international theme parks and resorts, which are dependent on domestic and international regulations consistent with trade and investment in those regions. The operation of our businesses and the environment for travel and tourism, as well as demand for and consumption of our other entertainment products, can be significantly adversely affected in the U.S., globally or in specific regions as a result of a variety of factors beyond our control, including: health concerns (including as it has been by COVID-19 and could be by future health outbreaks and pandemics); adverse weather conditions arising from short-term weather patterns or long-term climate change, including longer and more regular excessive heat conditions, catastrophic events or natural disasters (such as excessive heat or rain, hurricanes, typhoons, floods, droughts, tsunamis and earthquakes); international, political or military developments, including trade and other international disputes and social unrest; macroeconomic conditions, including a decline in economic activity, inflation and foreign exchange rates; and terrorist attacks. These events and others, such as fluctuations in travel and energy costs and computer virus attacks, intrusions or other widespread computing or telecommunications failures, may also damage our ability to provide our products and services or to obtain insurance coverage with respect to some of these events. An incident that affected our property directly would have a direct impact on our ability to provide goods and services and could have an extended effect of discouraging consumers from attending our facilities. Moreover, the costs of protecting against such incidents reduces the profitability of our operations.
For example, COVID-19 and measures to prevent its spread impacted our businesses in a number of ways, most significantly at the Experiences segment where our theme parks and resorts were closed and cruise ship sailings and guided tours were suspended. In addition, we delayed, or in some cases, shortened or canceled theatrical releases and experienced disruptions in the production and availability of content. Collectively, our impacted businesses historically have been the source of the majority of our revenue. In addition, hurricanes have impacted the profitability of Walt Disney World Resort and may do so in the future. The Company has paused certain operations in certain regions, including in response to sanctions, trade restrictions and related developments and the profitability of certain operations has been impacted as a result of events in the corresponding regions.
In addition, we derive affiliate fees and royalties from the distribution of our programming, sales of our licensed goods and services by third parties, and the management of businesses operated under brands licensed from the Company, and we are therefore dependent on the successes of those third parties for that portion of our revenue. The profitability of one or more of our businesses could be adversely impacted by the significant contraction of distribution channels for our products and services, including through third-party licensees or sellers of our licensed goods and services. In addition, third-party suppliers provide products and services essential to the operation of a number of our businesses. A wide variety of factors could influence the success of those third parties and if negative factors significantly impacted a sufficient number of those third parties or materially impacted a supplier of a significant product or service, the profitability of one or more of our businesses could be adversely affected. In specific geographic markets, we have experienced delayed and/or partial payments from certain third parties due to liquidity issues.
We obtain insurance against the risk of losses relating to some of these events, generally including certain physical damage to our property and resulting business interruption, certain injuries occurring on our property and some liabilities for alleged breach of legal responsibilities. When insurance is obtained it is subject to deductibles, exclusions, terms, conditions and limits of liability. The types and levels of coverage we obtain vary from time to time depending on our view of the likelihood of specific types and levels of loss in relation to the cost of obtaining coverage for such types and levels of loss and we may experience material losses not covered by our insurance.
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We face risks related to changes in our business strategy or restructuring of our businesses, which have affected and may continue to affect our cost structure, the profitability of our businesses or the value of our assets.
As changes in our business environment occur we have adjusted, continue to adjust and may further adjust our business strategies to meet these changes and we may otherwise decide to further restructure our operations or particular businesses or assets. For example, in fiscal 2023, we reorganized our media and entertainment operations, which had been previously reported in one segment, into two segments, Entertainment and Sports; in fiscal 2023 we announced that we would review content, primarily on our DTC services, for alignment with a strategic change in our approach to content curation, resulting in removal of certain content from our platforms and related impairment charges; in fiscal 2022, we announced plans to introduce an ad-supported Disney+ service, new pricing model and price increases and cost realignment; in fiscal 2021, we announced the closure of a substantial number of our Disney-branded retail stores; and we have announced exploration of a number of new types of businesses. Changes in strategy, such as was the case with the most recent reorganization of our media and entertainment operations, can lead to workforce disruptions. Our new organization and strategies are, among other things, subject to execution risk and may not produce the anticipated benefits, such as supporting our growth strategies and enhancing shareholder value. For example, notwithstanding our announced plans to rationalize costs, the costs of our DTC strategy, and associated losses, may continue to grow or be reduced more slowly than anticipated, which may impact our distribution strategy across businesses/distribution platforms, the types of content we distribute through various businesses/distribution platforms, and the timing and sequencing of content windows. Our new organization and strategies could be less successful than our previous organizational structure and strategies. In addition, external events including changing technology, changing consumer purchasing patterns, acceptance of content offerings and changes in macroeconomic conditions may impair the value of our assets. When these changes or events occur, we have incurred and may continue to incur costs to change our business strategy and have needed and may in the future need to write-down the value of assets. In addition to the content impairment noted above, among other assets, we have impaired goodwill and intangible assets at our linear networks and impaired the value of certain of our retail store assets. We may write down other assets as our strategy evolves to account for the current business environment.
We also make investments in existing or new businesses, including investments in international expansion of our business and in new business lines. For example, in fiscal 2023, we announced that we are developing plans to accelerate and expand investment in our Experiences segment. In addition, in recent years, other investments have included expansion and renovation of certain of our theme parks, expansion of our fleet of cruise ships, the acquisition of TFCF Corporation (TFCF) and investments related to DTC offerings. Some of these and future investments may ultimately result in returns that are negative or low, the ultimate business prospects of the businesses related to these investments are uncertain, and these investments may impact the resources available to, and the profitability of, our other businesses. In addition, our costs may increase, we may have significant charges associated with the write-down of assets, as occurred in connection with the closure of Star Wars: Galactic Starcruiser or returns on new investments may be negative or lower than prior to the change in strategy or restructuring. Even if our strategies are effective in the long term, our new offerings will generally not be profitable in the short term, growth of our new offerings is unlikely to be even quarter over quarter and we may not expand into new markets as or when anticipated. Our ability to forecast for new businesses may be impacted by our lack of experience operating in those new businesses, speed with which the competitive landscape changes, volatility beyond our control (such as the events beyond our control noted above) and our ability to obtain or develop the content and rights on which our projections are based. Accordingly, we may not achieve our forecasted outcomes.
Increased competitive pressures impact our revenues and increase our costs.
We face substantial competition in each of our businesses from alternative providers of the products and services we offer and from other forms of entertainment, lodging, tourism and recreational activities. This includes, among other types, competition for human resources, content and other resources we require in operating our business. For example:
•Our programming and production operations compete to obtain creative, performing, production and business talent, sports and other programming, story properties, advertiser support, production facilities and market share with traditional and new media platforms, including other studio operators, television networks, VOD providers and other sources of broadband delivered content.
•Our television networks and stations and DTC offerings compete for the sale of advertising time with traditional and new media platforms, including other television and VOD services, as well as with newspapers, magazines, billboards and radio stations, and various forms of internet and mobile delivered content, which offer advertising delivery technologies that are more targeted than can be achieved through traditional means.
•Our television networks compete for carriage of their programming with other programming providers.
•Our theme parks and resorts compete for guests with all other forms of entertainment, lodging, tourism and recreation activities and compete for creative, performing and business talent, including with other theme park and resort operators.
•Our content sales/licensing operations compete for customers with all other forms of entertainment.
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•Our consumer products business competes with other licensors and creators of IP.
•Our DTC streaming services compete for customers with an increasing number of competitors’ DTC offerings, all other forms of media and all other forms of entertainment, as well as for technology, creative, performing and business talent and for content.
Competition in each of these areas may further increase as a result of technological developments and changes in market structure, including consolidation of suppliers of resources and distribution channels. Increased competition has increased, and may continue to increase, the cost of programming, including sports and other products and diverts consumers from, or delays their consumption of, our creative or other products, or to other products or other forms of entertainment and experiences, which could reduce our revenue or increase our marketing costs.
Competition for the acquisition of resources can further increase the cost of producing our products and services; change the composition of our offerings, including sports; deprive us of talent needed for our entertainment and experiences businesses, including the talent necessary to produce high quality creative material; increase employee turnover and staffing instability; or increase the cost of compensation for our employees. Such competition may also reduce, or limit growth in, prices for our products and services, including advertising rates and subscription fees at our media networks and DTC offerings, parks and resorts admissions and room rates and prices for consumer products from which we derive license revenues.
Our results may be adversely affected if long-term programming or distribution contracts are not renewed on sufficiently favorable terms.
We enter into long-term contracts for both the acquisition and the distribution of media programming and products, including contracts for the acquisition of programming rights for sporting events and other programs, and contracts for the distribution of our programming to content distributors. As these contracts expire, we must renew or renegotiate the contracts, which from time to time has led to service blackouts when distribution contracts expired before renewal terms were agreed, and if we are unable to renew these contracts on acceptable terms, we may lose programming rights or distribution rights. As a result, our portfolio of programming rights we acquire and the distributors of our programming and the portfolio of programming rights our distributors acquire have changed and may continue to change over time. Even if these contracts are renewed, the cost of obtaining certain programming rights has increased and may continue to increase (or increase at faster rates than our historical experience) and programming distributors, facing pressures resulting from increased subscription fees and alternative distribution challenges, have demanded and may continue to demand terms (including with respect to the pricing for, and the nature and amount of, programming distributed) that reduce our revenue from distribution of programs (or increase revenue at slower rates than our historical experience). For example, a recent carriage agreement renewal includes fewer of our linear networks but provides for certain of our DTC streaming services to be made available to the distributor’s subscribers. Moreover, our ability to renew these contracts on favorable terms may be affected by a number of factors, such as consolidation in the market for program distribution and the entrance of new participants in the market for distribution of content on digital platforms. With respect to the acquisition of programming rights, particularly sports programming rights, the impact of these long-term contracts on our results over the term of the contracts depends on a number of factors, including the strength of advertising markets, subscription levels and programming rights costs increases, effectiveness of marketing efforts and the size of viewer audiences. There can be no assurance that revenues from programming based on these rights will exceed the cost of the rights plus the other costs of producing and distributing the programming.
Regulations applicable to our businesses may impair the profitability of our businesses.
Each of our businesses, including our broadcast networks and television stations, is subject to a variety of U.S. and international regulations, which impact the operations and profitability of our businesses. Some of these regulations include:
•U.S. FCC regulation of our television and radio networks, our national programming networks and our owned television stations. See Item 1 — Federal Regulation - Entertainment and Sports.
•Federal, state and foreign privacy and data protection laws and regulations.
•Regulation of the safety and supply chain of consumer products and theme park operations, including regulation regarding the sourcing, importation and the sale of goods.
•Environmental protection regulations.
•U.S. and international anti-corruption laws, sanction programs, trade restrictions and anti-money laundering laws.
•Restrictions on the manner in which content is currently licensed and distributed, ownership restrictions or film or television content requirements, investment obligations or quotas.
•Domestic and international labor laws, tax laws or currency controls.
New laws and regulations, as well as changes in any of these current laws and regulations or regulator activities in any of these areas, or others, may require us to spend additional amounts to comply with the regulations, or may restrict our ability to offer products and services in ways that are profitable, and create an increasingly unpredictable regulatory landscape. In addition, ongoing and future developments in international political, trade and security policy may lead to new regulations
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limiting international trade and investment and disrupting our operations outside the U.S., including our international theme parks and resorts operations in France, mainland China and Hong Kong. For example, in 2022 the U.S. and other countries implemented a series of sanctions against Russia in response to events in Russia and Ukraine; U.S. agencies have enhanced trade restrictions, including new prohibitions on the importation of goods from certain regions and other jurisdictions are considering similar measures; U.S. state governments have become more active in passing legislation targeted at specific sectors and companies and applying existing laws in novel ways to new technologies, including streaming and online commerce; and in many countries/regions around the world (including but not limited to the EU) regulators are requiring us to broadcast on our linear (or display on our DTC streaming services) programming produced in specific countries as well as invest specified amounts of our revenues in local content productions. In Florida, steps directed at the Company (including the passage of legislation) have been taken and future actions have been threatened, which collectively could negatively impact (and may have already impacted) our ability to execute on our business strategy, our costs and the profitability of our operations in Florida.
Further, in response to the COVID-19 pandemic, public health and other regional, national, state and local regulations and policies impacted most of our businesses. Government requirements could be reinstated and new government requirements may be imposed to address COVID-19 or future health outbreaks or pandemics.
Our operations outside the U.S. may be adversely affected by the operation of laws in those jurisdictions.
Our operations in non-U.S. jurisdictions are in many cases subject to the laws of the jurisdictions in which they operate rather than, or in addition to, U.S. law. Laws in some jurisdictions differ in significant respects from those in the U.S. These differences can affect our ability to react to changes in our business, and our rights or ability to enforce rights may be different than would be expected under U.S. law. Moreover, enforcement of laws in some international jurisdictions can be inconsistent and unpredictable, which can affect both our ability to enforce our rights and to undertake activities that we believe are beneficial to our business. In addition, the business and political climate in some jurisdictions may encourage corruption, which could reduce our ability to compete successfully in those jurisdictions while remaining in compliance with local laws or U.S. anti-corruption laws applicable to our businesses. As a result, our ability to generate revenue and our expenses in non-U.S. jurisdictions may differ from what would be expected if U.S. law alone governed these operations.
Environmental, social and governance matters and any related reporting obligations may impact our businesses.
U.S. and international regulators, investors and other stakeholders are increasingly focused on environmental, social and governance matters. For example, new domestic and international laws and regulations relating to environmental, social and governance matters, including environmental sustainability and climate change, human capital management and cybersecurity, are under consideration or being adopted, which may include specific, target-driven disclosure requirements or obligations. Our response will require increased costs to comply, the implementation of new reporting processes, entailing additional compliance risk, a skilled workforce and other incremental investments.
In addition, we have undertaken or announced a number of related actions and goals, which will require changes to operations and ongoing investment. There is no assurance that our initiatives will achieve their intended outcomes or that we will achieve any of these goals. Consumer, government and other stakeholder perceptions of our efforts to achieve these objectives often differ widely and present risks to our reputation and brands. In addition, our ability to implement some initiatives or achieve some goals is dependent on external factors. For example, our ability to meet certain environmental sustainability goals or initiatives will depend in part on third-party collaboration, the availability of suppliers that can satisfy new requirements, mitigation innovations and/or the availability of economically feasible solutions at scale.
Damage to our reputation or brands may negatively impact our Company across businesses and regions.
Our reputation and globally recognizable brands are integral to the success of our businesses. Because our brands engage consumers across our businesses, damage to our reputation or brands in one business may have an impact on our other businesses. Because some of our brands are globally recognized, brand damage may not be locally contained. Maintenance of the reputation of our Company and brands depends on many factors including the quality of our offerings, maintenance of trust with our customers and our ability to successfully innovate. In addition, we may pursue brand or product integration combining previously separate brands or products targeting different audiences under one brand or pursue other business initiatives inconsistent with one or more of our brands, and there is no assurance that these initiatives will be accepted by our customers and not adversely impact one or more of our brands. Significant negative claims or publicity regarding the Company or its operations, products, management, employees, practices, business partners, business decisions, social responsibility and culture, which may be amplified by social media, adversely impact our brands or reputation, even if such claims are untrue. Damage to our reputation or brands could impact our sales, business opportunities, profitability, recruiting and valuation of our securities.
Various risks may impact the success of our DTC streaming services.
We may not successfully execute on our DTC strategy. The success of our DTC strategy and profitability of our DTC streaming services will be impacted by the success of the reorganization of our media and entertainment business and our ability to advance our DTC strategies, drive subscriber additions and retention based on the attractiveness of our content,
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manage churn in reaction to price increases, achieve the desired financial impact of the Disney+ ad supported service, pricing model and price increases, our ability to execute on cost realignment and the effects of our determinations with regard to distribution for our creative content across windows. The initial costs of marketing campaigns are generally recognized in the business of initial exploitation, and amortization of capitalized production costs and licensed programming rights are generally allocated across businesses based on the estimated relative value of the distribution windows. Accordingly, our distribution determinations impact the costs of each business, including the applicable DTC service. There are a number of competing DTC businesses. Consumers may not be willing to pay for an expanding set of DTC streaming services at increasing prices, potentially exacerbated by an economic downturn. In addition, economic downturns negatively impact the purchase of and price for advertising on our DTC streaming services. We face competition for creative talent and sports and other programming rights and may not be successful in recruiting and retaining talent and obtaining desired programming rights or face increased costs to do so. Acquisition of new subscribers to our DTC streaming services is not linear, and we have experienced net losses of subscribers in some periods. Our content does not always successfully attract and retain subscribers in the quantities that we expect. Our content is subject to cost pressures and may cost more than we expect. We may not successfully manage our costs to meet our profitability goals. Government regulation, including revised foreign content and ownership regulations as well as government-imposed content restrictions, impacts the implementation of our DTC business plans. The highly competitive environment in which we operate puts pricing pressure on our DTC offerings and may require us to lower our prices or not take price increases to attract or retain customers or lead to higher churn rates. These and other risks may impact the profitability and success of our DTC streaming services.
Potential credit ratings actions, increases in interest rates, or volatility in the U.S. and global financial markets could impede access to, or increase the cost of, financing our operations and investments.
Our borrowing costs have been and can be affected by short- and long-term debt ratings assigned by independent ratings agencies that are based, in part, on the Company’s performance as measured by credit metrics such as leverage and interest coverage ratios. As a result of the financial impact of COVID-19 on our businesses, Standard and Poor’s downgraded our long-term debt ratings by two notches to BBB+ and downgraded our short-term debt ratings by one notch to A-2. Fitch downgraded our long- and short-term credit ratings by one notch to A- and F2, respectively. On June 5, 2023, Standard and Poor’s upgraded our long-term debt ratings by one notch to A-. As of September 30, 2023 Moody’s Investors Service’s long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, Standard and Poor’s long- and short-term debt ratings for the Company were A- and A-2 (Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively. Any future downgrades could increase our cost of borrowing and/or make it more difficult for us to obtain financing on acceptable terms.
In addition, increases in interest rates have increased our cost of borrowing and volatility in U.S. and global financial markets could impact our access to, or further increase the cost of, financing. Past disruptions in the U.S. and global credit and equity markets made it more difficult for many businesses to obtain financing on acceptable terms. These conditions tended to increase the cost of borrowing and if they recur, our cost of borrowing could increase and it may be more difficult to obtain financing for our operations or investments.
Elevated indebtedness or leverage ratios could adversely affect us, including by decreasing our business flexibility.
Elevated indebtedness could have the effect of, among other things, reducing our financial flexibility and our ability to respond to changing business and economic conditions and other uncontrollable events. Debt repayment obligations could also reduce funds available for investments, capital expenditures, share repurchases and dividends, and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels. Our leverage ratios increased as the result of COVID-19’s impact on financial performance, which caused certain of the credit ratings agencies to downgrade their assessment of our credit ratings. Downgrades to our debt rating may negatively impact our cost of borrowings and/or make it more difficult for us to obtain financing on acceptable terms.
Labor disputes disrupt our operations and may adversely affect the profitability of one or more of our businesses.
A significant number of employees in various parts of our businesses, including employees of our theme parks, and writers, directors, actors and production personnel for our productions are covered by collective bargaining agreements. In addition, some of our employees outside the U.S. are represented by works councils, trade unions or other employee associations. Further, the employees of licensees who manufacture and retailers who sell our licensed consumer products, and employees of providers of programming content (such as sports leagues) may be covered by labor agreements with their employers. From time to time, collective bargaining agreements and other labor agreements expire, requiring renegotiation of their terms. In general, labor disputes and work stoppages involving our employees; persons employed on our productions; athletes or others employed by, or otherwise connected with, sports leagues or organizers; or the employees of our licensees or retailers who sell our licensed consumer products or providers of programming content may disrupt our operations and reduce our revenues. For example, on May 2, 2023, members of the Writers Guild of America (WGA) commenced a work stoppage, which lasted for almost five months. On July 14, 2023, members of SAG-AFTRA, the union representing television and movie actors, also commenced a work stoppage, which lasted for almost four months. These work stoppages have impacted our
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productions and the pipeline for programming and production investmentstheatrical releases, which could result in reduced revenue and have an adverse effect on our profitability. The new collective bargaining agreements with the Directors Guild of America, WGA and SAG-AFTRA will lead to increased costs to create exclusive content, including as a result of increases in rates, residuals and benefits. Generally, resolution of disputes or negotiation of new agreements, including rate increases and other changes to employee benefits, has in the past increased our costs and may increase our costs in the future.
The seasonality of certain of our businesses and timing of certain of our product offerings could exacerbate negative impacts on our operations.
Each of our businesses is normally subject to seasonal variations and variations in connection with the timing of our product offerings, including as follows:
•Revenues at the Experiences segment fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and leisure activities and seasonal consumer purchasing behavior, which generally results in increased revenues during the Company’s first and fourth fiscal quarters. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early winter and spring holiday periods. Revenues at the Experiences segment also may fluctuate with changes in theme park attendance and resort occupancy resulting from special celebrations or events that may increase demand in the applicable periods and decrease demand in prior or later periods as guests time their vacations to occur during such special celebrations or events. In addition, licensing revenues fluctuate with the timing and performance of our theatrical releases and cable programming broadcasts.
•Revenues from television networks and stations are subject to seasonal advertising patterns and changes in viewership levels, including related to certain sporting events. In general, domestic general entertainment linear networks advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months, and sports advertising revenues are impacted by the timing of sports seasons and events, which varies throughout the year or may take place periodically.
•Revenues from content sales/licensing fluctuate due to the timing of content releases across various distribution markets. Release dates and methods are determined by a number of factors, including, among others, competition, and the timing of vacation and holiday periods.
•DTC revenues fluctuate based on: changes in the number of subscribers, mix of subscribers to different offerings and subscriber fees; viewership levels; and the demand for sports and film and television content. Each of these may depend on the availability of content, which varies from time to time throughout the year based on, among other things, sports seasons, content production schedules and sports league work stoppages.
Accordingly, negative impacts on our business occurring during a time of typical high seasonal demand such as our park closures due to COVID-19 restrictions or hurricane damage during the summer travel season or other high seasons, could have a disproportionate effect on the results of that business for the year.
Our operations are impacted by our ability to attract and retain employees and costs of employee wages and health, welfare and pension benefits, including postretirement medical benefits for some employees and retirees, may reduce our profitability.
With approximately 225,000 employees, the success of our businesses is substantially affected by our ability to attract and retain a workforce with the necessary skills for our varied businesses, including executing successfully on succession planning for the talent at all levels necessary to advance the Company’s key objectives and strategies. Further, our profitability is substantially affected by labor costs, including wages and our health, welfare and pension benefits, including the costs of medical benefits for current employees and the costs of postretirement medical benefits for some current employees and retirees. We may experience significant increases in these costs as a result of macroeconomic, regulatory, competitive and other factors. For example, labor costs in our parks and resorts have increased, and we expect will continue to increase, as a result of collective bargaining agreements and wage laws and regulations where we operate. Future health outbreaks and pandemics may lead to an increase in the cost of medical insurance and expenses. In addition, changes in investment returns and discount rates used to calculate pension and postretirement medical expense and related assets and liabilities can be volatile and may have an unfavorable impact on our costs in some years. These macroeconomic factors as well as a decline in the fair value of pension and postretirement medical plan assets may put upward pressure on the cost of providing pension and postretirement medical benefits and may increase future funding requirements. There can be no assurance that we will succeed in attracting and retaining the human resources necessary for the success of our businesses or in limiting cost increases from wages and other employee benefits, which could reduce the profitability of our businesses.
We face risks related to costs and expenses in connection with the acquisition of NBCU’s equity interest in Hulu and the TFCF acquisition.
On November 1, 2023, NBCU exercised its right to require the Company to purchase NBCU’s equity interest in Hulu under a put/call arrangement between the parties. The purchase price for NBCU’s equity interest in Hulu will be determined
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based on NBCU’s equity ownership percentage of the greater of Hulu’s equity fair value as of September 30, 2023, and a guaranteed floor value. Further, the Company will share with NBCU 50% of the Company’s tax benefit from the purchase of NBCU’s interest in Hulu, which payments are expected to be made primarily over a 15-year period. In addition, we may incur significant costs and expenses in connection with the TFCF acquisition, including costs for which we have established reserves or which may lead to reserves in the future. The cost to purchase NBCU’s equity interest in Hulu and related obligations to NBCU and any such other costs could negatively impact the Company’s cash position and result in the Company incurring additional indebtedness.
GENERAL RISKS
The price of our common stock has been, and may continue to be, volatile.
The price of our common stock has experienced substantial volatility and may continue to be volatile. Various factors have impacted, and may continue to impact, the price of our common stock, including, among others, changes in management; variations in our operating results; variations between our actual results and expectations of securities analysts; changes in our estimates, guidance or business plans; changes in financial estimates and recommendations by securities analysts; the activities, operating results or stock price of our competitors or other industry participants in the industries in which we operate; the announcement or completion of significant transactions by us or a competitor; events affecting the stock market generally; and the economic and political conditions in the U.S. and internationally, as well as other factors described in this Item 1A. Some of these factors may adversely impact the price of our common stock, regardless of our operating performance. Further, volatility in the price of our common stock may negatively impact one or more of our businesses, including by increasing cash compensation or stock awards for our employees who participate in our stock incentive programs or limiting our financing options for acquisitions and other business expansion.
The Company’s amended and restated bylaws provide to the fullest extent permitted by law that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its stockholders, which could increase costs to bring a claim, discourage claims or limit the ability of the Company’s stockholders to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company’s directors, officers or other employees.
The Company’s amended and restated bylaws provide to the fullest extent permitted by law that unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of the Company, (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action or proceeding asserting a claim arising pursuant to, or seeking to enforce any right, obligation or remedy under, any provision of the General Corporation Law of the State of Delaware (the “DGCL”), the Certificate of Incorporation or these Bylaws (as each may be amended from time to time), (iv) any action or proceeding as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware, (v) or any action or proceeding asserting a claim governed by the internal affairs doctrine. The choice of forum provision may increase costs to bring a claim, discourage claims or limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or the Company’s directors, officers or other employees, which may discourage such lawsuits against the Company or the Company’s directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in the Company’s amended and restated bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions. The exclusive forum provision in the Company’s amended and restated bylaws will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws including the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or the respective rules and regulations promulgated thereunder.
ITEM 1B. Unresolved Staff Comments
The Company has received no written comments regarding its periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of fiscal 2023 that remain unresolved.
ITEM 2. Properties
Our parks and resorts locations and other properties of the Company and its subsidiaries are described in Item 1 under the caption Experiences. Film and television library properties and television stations owned by the Company are described in Item 1 under the caption Entertainment.
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The Company and its subsidiaries own and lease properties throughout the world. In addition to the properties noted above, the table below provides a brief description of other significant properties and the related business segment.
LocationProperty /
Approximate Size		UseBusiness Segment
Burbank, CA & surrounding cities(1)
Land (201 acres) & Buildings (4,694,000 ft2)
Owned Office/Production/Warehouse (includes 240,000 ft2 leased to third-party tenants)
Corporate/Entertainment/Experiences
Burbank, CA & surrounding cities(1)
Buildings (1,834,000 ft2)
Leased Office/WarehouseCorporate/Entertainment/Experiences
Los Angeles, CA
Land (22 acres) & Buildings (605,000 ft2)
Owned Office/Production/Technical WarehouseCorporate/Entertainment
Los Angeles, CA
Buildings (2,640,000 ft2)
Leased Office/Production/Technical/TheaterCorporate/Entertainment/Experiences
New York, NY
Buildings (51,000 ft2)
Owned OfficeCorporate/Entertainment/Sports
New York, NY
Buildings (2,190,000 ft2)
Leased Office/Production/Theater/Warehouse (includes 679,000 ft2 leased to third-party tenants)
Corporate/Entertainment/Sports/Experiences
Bristol, CT
Land (117 acres) & Buildings (1,174,000 ft2)
Owned Office/Production/TechnicalSports
Bristol, CT
Buildings (273,000 ft2)
Leased Office/Warehouse/TechnicalSports
Emeryville, CA
Land (20 acres) & Buildings (430,000 ft2)
Owned Office/Production/TechnicalEntertainment
Emeryville, CA
Buildings (97,000 ft2)
Leased Office/StorageEntertainment
San Francisco, CA
Buildings (517,000 ft2)
Leased Office/Production/Technical/Theater (includes 47,000 ft2 leased to third-party tenants)
Corporate/Entertainment
USA & CanadaLand and Buildings (Multiple sites and sizes)Owned and Leased Office/ Production/Transmitter/Theaters/WarehouseCorporate/Entertainment/Experiences
Europe, Asia, Australia & Latin AmericaBuildings (Multiple sites and sizes)Leased Office/Warehouse/Retail/ResidentialEntertainment/Experiences
(1)Surrounding cities include Glendale, CA, North Hollywood, CA and Sun Valley, CA
ITEM 3. Legal Proceedings
As disclosed in Note 14 to the Consolidated Financial Statements, the Company is engaged in certain legal matters, and the disclosure set forth in Note 14 relating to certain legal matters is incorporated herein by reference.
ITEM 4. Mine Safety Disclosures
Not applicable.
Information About Our Executive Officers
The executive officers of the Company are elected each year at the organizational meeting of the Board of Directors, which follows the annual meeting of the shareholders, and at other Board of Directors meetings, as appropriate. Each of the executive officers has been employed by the Company in the position or positions indicated in the list and pertinent notes below.
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The executive officers of the Company are:
NameAgeTitleExecutive
Officer Since
Robert A. Iger72
Chief Executive Officer(1)
2022
Kevin A. Lansberry60
Interim Chief Financial Officer(2)
2023
Horacio E. Gutierrez58
Senior Executive Vice President, General Counsel and Chief Compliance Officer(3)
2022
Sonia L. Coleman51
Senior Executive Vice President and Chief Human Resources Officer(4)
2023
Kristina K. Schake53
Senior Executive Vice President and Chief Communications Officer(5)
2022
(1)Mr. Iger was appointed Chief Executive Officer effective November 20, 2022. He previously served as Executive Chairman of the Company from February 2020 through December 2021 and as Chief Executive Officer of the Company from September 2005 to February 2020.
(2)Mr. Lansberry was appointed Interim Chief Financial Officer effective July 1, 2023. He was previously Executive Vice President and Chief Financial Officer of the Company’s Parks, Experiences and Products segment from March 2018 and Executive Vice President and Chief Financial Officer, Walt Disney Parks and Resorts from May 2017. Over his more than 35 years with the Company, Mr. Lansberry has held a wide range of roles in the Company’s parks and experiences businesses, including in finance, business development, alliances and operations.
(3)Mr. Gutierrez was appointed Senior Executive Vice President and General Counsel effective February 1, 2022 and appointed Chief Compliance Officer effective March 27, 2023. Prior to joining the Company, he served as Head of Global Affairs and Chief Legal Officer for Spotify Technology S.A. (Spotify) from November 2019 to January 2022, where he led a global, multi-disciplinary team of business, corporate communications and public affairs, government relations, licensing, operations and legal professionals responsible for the company’s work in areas including industry relations, content partnerships, public policy, and trust & safety. He was previously Spotify’s General Counsel - Vice President, Business & Legal Affairs from April 2016 to November 2019.
(4)Ms. Coleman was appointed Senior Executive Vice President and Chief Human Resources Officer effective April 8, 2023. She was previously Senior Vice President, Human Resources at Disney General Entertainment and ESPN from August 2021. Ms. Coleman served as Senior Vice President, Human Resources for Disney General Entertainment from April 2017, Vice President, Human Resources for the Company from May 2016 and Vice President, Human Resources, Disney Consumer Products from May 2010.
(5)Ms. Schake was appointed Senior Executive Vice President and Chief Communications Officer effective June 29, 2022. Previously, she served as Executive Vice President, Global Communications from April 2022. Prior to joining the Company, she was appointed by the President of the United States as Counselor for Strategic Communications to the Secretary of the U.S. Department of Health and Human Services, leading a nationwide public education campaign from March 2021 to December 2021. Prior to that, she served as Global Communications Director for Instagram, a product of Meta Platforms, Inc., from March 2017 to March 2019, where she oversaw the communications teams in North America, Latin America, Europe and Asia.
On November 2, 2023, the Company appointed Hugh F. Johnston, 62, as Senior Executive Vice President and Chief Financial Officer commencing on December 4, 2023. Mr. Johnston currently serves as Executive Vice President and Chief Financial Officer, from 2010, and Vice Chairman, from 2015, of PepsiCo, Inc. (“PepsiCo”). In addition to providing strategic financial leadership for PepsiCo in these roles, Mr. Johnston’s portfolio has included a variety of responsibilities, including leadership of PepsiCo’s information technology function from 2015, PepsiCo’s global e-commerce business from 2015 to 2019, and the Quaker Foods North America division from 2014 to 2016. He also held a number of other leadership roles during his PepsiCo career, having served as Executive Vice President, Global Operations from 2009 to 2010, President of Pepsi-Cola North America from 2007 to 2009, Executive Vice President, Operations from 2006 to 2007 and Senior Vice President, Transformation from 2005 to 2006. Prior to that, he served as Senior Vice President and Chief Financial Officer of PepsiCo Beverages and Foods from 2002 through 2005, and as PepsiCo’s Senior Vice President of Mergers and Acquisitions in 2002. Mr. Johnston joined PepsiCo in 1987 as a Business Planner and held various finance positions until 1999 when he left to join Merck & Co., Inc. as Vice President, Retail, a position which he held until he rejoined PepsiCo in 2002.
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PART II
ITEM 5. Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s common stock is listed on the New York Stock Exchange under the ticker symbol “DIS”.
As of September 30, 2023, the approximate number of common shareholders of record was 768,000.
ITEM 6. [Reserved]
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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CONSOLIDATED RESULTS
($ in millions, except per share data)
 
% Change
Better (Worse)
 2023202220212023
vs.
2022		2022
vs.
2021
Revenues:
Services$79,562  $74,200  $61,768  7  %20  %
Products9,336  8,522  5,650  10  %51  %
Total revenues88,898  82,722  67,418  7  %23  %
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)(53,139) (48,962) (41,129) (9) %(19) %
Cost of products (exclusive of depreciation and amortization)(6,062) (5,439) (4,002) (11) %(36) %
Selling, general, administrative and other(15,336) (16,388) (13,517) 6  %(21) %
Depreciation and amortization(5,369) (5,163) (5,111) (4) %(1) %
Total costs and expenses(79,906) (75,952) (63,759) (5) %(19) %
Restructuring and impairment charges(3,892) (237) (654) >(100) %64  %
Other income (expense), net96  (667) 201  nmnm
Interest expense, net(1,209) (1,397) (1,406) 13  %1  %
Equity in the income of investees, net782  816  761  (4) %7  %
Income from continuing operations before income taxes4,769  5,285  2,561  (10) %>100  %
Income taxes from continuing operations(1,379) (1,732) (25) 20  %>(100) %
Net income from continuing operations3,390  3,553  2,536  (5) %40  %
Loss from discontinued operations, net of income tax benefit of $0, $14 and $9, respectively—  (48) (29) 100  %(66) %
Net income3,390  3,505  2,507  (3) %40  %
Net income from continuing operations attributable to noncontrolling and redeemable noncontrolling interests(1,036) (360) (512) >(100) %30  %
Net income attributable to Disney$2,354  $3,145  $1,995  (25) %58  %
Diluted earnings per share attributable to Disney$1.29  $1.75  $1.11(26) %58  %
Organization of Information
Management’s Discussion and Analysis provides a narrative on the Company’s financial performance and condition that should be read in conjunction with the accompanying financial statements. It includes the following sections:
•Consolidated Results and Non-Segment Items
•Business Segment Results
•Corporate and Unallocated Shared Expenses
•Restructuring Activities
•Liquidity and Capital Resources
•Critical Accounting Policies and Estimates
•DTC offerings.Product Descriptions, Key Definitions and Supplemental Information
•Supplemental Guarantor Financial Information
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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 Company’s fiscal year endprior Disney Media and Entertainment Distribution segment has been reorganized into the Entertainment and Sports segments
•A portion of Consumer Products revenues is on the Saturday closest to September 30 and consists of fifty-two weeks with the exception that approximately every six years, we have a fifty-three week year. Fiscal 2020 was a fifty-three week year, which began on September 29, 2019 and ended on October 3, 2020. We estimate that the additional week of operations in fiscal 2020 resulted in a benefit to pre-tax income in the prior year of approximately $200 million, primarilyrecognized at the DMED segment.Entertainment segment, which is meant to reflect royalties on merchandise licensing revenues generated on IP created by the Entertainment segment
2023 vs. 2022
Revenues for fiscal 20212023 increased 3%7%, or $2.0$6.2 billion, to $67.4$88.9 billion; net income attributable to Disney increased $4.9decreased $0.8 billion to income of $2.0 billion;$2.4 billion compared to $3.1 billion in the prior year; and diluted earnings per share (EPS) from continuing operations attributable to Disney increaseddecreased to income of $1.11$1.29 compared to a loss of $1.57$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 increase for the yeardecrease was due to higher restructuring and impairment charges and lower operating income at Entertainment. These decreases were partially offset by the comparison to goodwill and intangible asset impairments recognized in the prior yearimpact of the Content License Early Termination, higher operating income at our International Channels business, an income tax benefitExperiences in the current year compared to tax expense in the prior year and lower amortization of fair value step-up on filminvestment gains in the current year compared to investment losses in the prior year.
Revenues
Service revenues for fiscal 2023 increased 7%, or $5.4 billion, to $79.6 billion, due to growth at our theme parks and television costsresorts, higher subscription revenue, an increase in theatrical distribution revenue and intangible assets from the TFCF acquisition and consolidation of Hulu (collectively TFCF and Hulu acquisition amortization).comparison to the revenue reduction for the Content License Early Termination in the prior year. These increases were partially offset by lower net investment gainsdecreases in advertising revenue, TV/VOD distribution sales and a decrease in segment operating incomeaffiliate revenue. Growth at DMED.
Revenues
Service revenues for fiscal 2021 increased 4%, or $2.5 billion, to $61.8 billion,theme parks and resorts was due to higher DTCvolumes and guest spending. The increase in subscription revenue advertising revenuewas due to subscriber growth and higher rates. Service revenues reflected an approximate 1 percentage point decrease due to a lesser extent, increased merchandise licensing revenue. These increases were partially offset by a decrease in TV/SVOD distribution revenue, lower theatrical revenues, a decrease in revenue at our parks and experiences businesses and, to a lesser extent, lower electronic home entertainment sales, allan unfavorable movement of which reflectedthe U.S. dollar against major currencies including the impact of COVID-19. The decrease at parks and experiences was due to lower volumes from closure/generally reduced operating capacities, partially offset by an increase in average guest spending. The decrease in TV/SVOD distribution revenue also reflected the shift from licensing our content to third parties to distributing it on our DTC streaming services.hedging program (Foreign Exchange Impact).
Product revenues for fiscal 2021 decreased 8%2023 increased 10%, or $0.5$0.8 billion, to $5.7$9.3 billion, due to lower home entertainmenthigher sales volumes and a decrease inof merchandise, food and beverage sales at our theme parks and experiences as lower volumes wereresorts, partially offset by lower home entertainment volumes. Product revenues reflected an increase in average guest spending.approximate 2 percent point decrease due to an unfavorable Foreign Exchange Impact.
Costs and expenses
Cost of services for fiscal 20212023 increased 4%9%, or $1.7$4.2 billion, to $41.1$53.1 billion, due to higher programming and production costs, inflation and technology costs at Disney+ and Hulu and higher sports programming costs. The increase in sports programming costs was due to NBA, cricket, college football and soccer events, many of which shifted from fiscal 2020 to fiscal 2021 due to COVID-19. These increases were partially offset by a decrease in film and television production cost amortization and distribution costs at
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Content Sales/Licensing reflecting lower revenues and, to a lesser extent, lowerincreased volumes at our parks and experiences businesses.
Cost of products for fiscal 2021 decreased 11%, or $0.5 billion, to $4.0 billion, due to lower merchandise, food and beverage sales 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 home entertainment volumes.production cost amortization due to lower TV/VOD distribution sales. Costs of services reflected an approximate 1 percentage point decrease due to a favorable Foreign Exchange Impact.
Cost of products for fiscal 2023 increased 11%, or $0.6 billion, to $6.1 billion, due to higher sales volumes of merchandise, food and beverage and cost inflation at our theme parks and resorts. Cost of products reflected an approximate 1 percent point decrease due to a favorable Foreign Exchange Impact.
Selling, general, administrative and other costs for fiscal 2021 increased 9%2023 decreased 6%, or $1.1 billion, to $13.5$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 marketing costsdepreciation at Direct-to-Consumerour domestic parks and Linear Networks,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 marketing costs at Content Sales/Licensing.
Depreciation and amortization costs decreased 4%, or $0.2 billion, to $5.1 billion due to lower amortization of intangible assets from the acquisition of TFCF and Hulu and lower depreciation at our theme parks and resorts.Hulu.
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)
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•$357 million for severance
•$141 million for an impairment of an equity investment
•$96 million for exiting our businesses in Russia and other charges
Restructuring and impairment charges in fiscal 2022 were $237 million primarily due to the impairment of an intangible and other assets related to exiting our businesses in Russia.
Other Income (expense), net
($ in millions)20232022% Change
Better (Worse)
DraftKings gain (loss)$169   $(663)  nm
Other, net(73)  (4)  >(100) %
Other income (expense), net$96   $(667)  nm
In fiscal 2023, the Company recognized a gain of $169 million on its investment in DraftKings, Inc. (DraftKings), which was sold in the current fiscal year.
In fiscal 2022, the Company recognized a non-cash loss of $663 million from the adjustment of its investment in DraftKings to fair value.
Interest Expense, net
($ in millions)20232022% Change
Better (Worse)
Interest expense$(1,973)  $(1,549)  (27) %
Interest income, investment income and other764 152 >100  %
Interest expense, net$(1,209)  $(1,397)  13  %
The increase in interest expense was due to higher average rates, partially offset by lower average debt balances and higher capitalized interest.
The increase in interest income, investment income and other resulted from higher interest income on cash balances, which reflected an increase in interest rates, and a larger benefit from pension and postretirement benefit costs, other than service cost.
Equity in the Income of Investees
Equity in the income of investees decreased $34 million to $782 million in the current year primarily due to lower income from A+E.
Effective Income Tax Rate
($ in millions)20232022
Income from continuing operations before income taxes$4,769      $5,285     
Income tax expense on continuing operations1,379      1,732     
Effective income tax rate - continuing operations28.9%32.8%
The decrease in the effective income tax rate was due to the following:
•A lower effective tax rate on foreign earnings in the current year compared to the prior year;
•A favorable comparison from adjustments related to previous year’s tax matters, which was a benefit in the current year and a detriment in the prior year; partially offset by
•New tax regulations issued in the prior year that limited our ability to use certain accumulated foreign tax credits;
•An unfavorable impact in the current year from goodwill impairments, which were not tax deductible; and
•An unfavorable impact in the current year compared to a favorable impact in the prior year for the tax effect of employee share-based awards.
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Noncontrolling Interests
($ in millions)20232022% Change
Better (Worse)
Net income from continuing operations attributable to noncontrolling interests$(1,036)$(360)>(100) %
The increase in net income from continuing operations attributable to noncontrolling interests was due to improved results at our Asia Theme Parks and higher accretion of NBC Universal’s interest in Hulu.
Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.
Certain Items Impacting Results in the Year
Results for fiscal 2023 were impacted by the following:
•TFCF and Hulu acquisition amortization of $1,998 million
•Other income of $96 million due to the DraftKings gain of $169 million
•Restructuring and impairment charges of $3,892 million
Results for fiscal 2022 were impacted by the following:
•TFCF and Hulu acquisition amortization of $2,353 million
•A $1.0 billion reduction in revenue for the Content License Early Termination
•Other expense of $667 million due to the DraftKings loss of $663 million
•Restructuring and impairment charges of $237 million
A summary of the impact of these items on EPS is as follows:
($ in millions, except per share data)Pre-Tax Income (Loss)
Tax Benefit (Expense)(1)
After-Tax Income (Loss)
EPS Favorable (Adverse)(2)
Year Ended September 30, 2023:
Restructuring and impairment charges(3)
$(3,836)  $717   $(3,119)  $(1.69)
TFCF and Hulu acquisition amortization(4)
(1,998)  465(1,533)  (0.82)
Other income (expense), net96   (13)83   0.05 
Total$(5,738)  $1,169   $(4,569)  $(2.46)  
Year Ended October 1, 2022:
TFCF and Hulu acquisition amortization(4)
$(2,353)  $549   $(1,804)  $(0.97)
Contract License Early Termination(1,023)  238(785)  (0.43)
Other income (expense), net(667)  156(511)  (0.28)
Restructuring and impairment charges(237)  55(182)  (0.10)
Total$(4,280)  $998   $(3,282)  $(1.78)  
(1)Tax benefit (expense) is determined using the tax rate applicable to the individual item.
(2)EPS is net of noncontrolling interest, where applicable. Total may not equal the sum of the column due to rounding.
(3)Restructuring and impairment charges include the impact of a content license agreement termination with A+E, which generated a gain at A+E. The Company’s 50% interest in this gain was $56 million (A+E gain) and is included in Restructuring and impairment charges in this table.
(4)Includes amortization of intangibles related to TFCF equity investees.
2022 vs. 2021
Revenues for fiscal 2022 increased 23%, or $15.3 billion, to $82.7 billion; net income attributable to Disney increased $1.2 billion, to income of $3.1 billion compared to $2.0 billion in fiscal 2021; and EPS from continuing operations attributable to Disney increased to $1.75 compared to $1.11 in fiscal 2021. The EPS increase was due to growth at Experiences, partially offset by lower operating results at Entertainment, higher income tax expense and the Content License Early Termination.
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Revenues
Service revenues for fiscal 2022 increased 20%, or $12.4 billion, to $74.2 billion, due to increased revenues at our theme parks and resorts, subscription revenue growth and, to a lesser extent, higher theatrical distribution and advertising revenue. These increases were partially offset by the Content License Early Termination. The increase at theme parks and resorts was due to higher volumes, which generally reflected the impact of operating with capacity restrictions in fiscal 2021 as a result of COVID-19, and higher average per capita ticket revenue. The increase in subscription revenue was due to subscriber growth and higher average rates. Service revenues reflected an approximate 1 percent point decrease due to an unfavorable Foreign Exchange Impact.
Product revenues for fiscal 2022 increased 51%, or $2.9 billion, to $8.5 billion, due to higher sales volumes of merchandise, food and beverage at our theme parks and resorts.
Costs and expenses
Cost of services for fiscal 2022 increased 19%, or $7.8 billion, to $49.0 billion, due to higher programming and production costs, increased volumes at our theme parks and resorts and higher technology and distribution costs at Entertainment Direct-to-Consumer. The increase in programming and production costs was due to higher costs at Entertainment Direct-to-Consumer, an increase in sports right costs and higher production cost amortization due to theatrical revenue growth. These increases were partially offset by lower programming and production costs as a result of international channel closures.
Cost of products for fiscal 2022 increased 36%, or $1.4 billion, to $5.4 billion, due to higher merchandise, food and beverage sales at our theme parks and resorts.
Selling, general, administrative and other costs for fiscal 2022 increased 21%, or $2.9 billion, to $16.4 billion, primarily due to higher marketing costs at Entertainment Direct-to-Consumer and, to a lesser extent, our theatrical distribution and parks and experiences businesses.
Restructuring and Impairment Charges
Restructuring and impairment charges in fiscal 2022 were $0.2 billion primarily due to the impairment of an intangible and other assets related to exiting our businesses in Russia.
Restructuring and impairment charges in fiscal 2021 were $0.7 billion due to $0.4comprising:
•$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 and $0.3
•$0.3 billion of severance and other costs in connection with the integration of TFCF and workforce reductions at DPEP.
Restructuring and impairment charges in fiscal 2020 were $5.7 billion due to $5.0 billion of impairment charges for goodwill and intangible assets at our International Channels business and $0.8 billion of severance and other costs in connection with the acquisition and integration of TFCF and at our DPEP segment.Experiences
Other Income (expense), net
(in millions)20212020% Change
Better (Worse)
fuboTV gain$186   $—   nm
German FTA gain126   —   nm
DraftKings gain (loss)(111)  973   nm
Endemol Shine gain— 65 —  %
Other income, net$201   $1,038   (81) %
($ in millions)20222021% 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 to adjustfrom the adjustment of our investment in DraftKings Inc. to fair value (DraftKings gain (loss)).value.
In fiscal 2020, the Company recognized a $973 million DraftKings gain and a $65 million gain on the sale of our 50% interest in Endemol Shine Group (Endemol Shine gain).
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Interest Expense, net
(in millions)20212020% Change
Better (Worse)
($ in millions)($ in millions)20222021% Change
Better (Worse)
Interest expenseInterest expense$(1,546)  $(1,647)  6  %Interest expense$(1,549)  $(1,546)  —  %
Interest income, investment income and otherInterest income, investment income and other140 156 (10) %Interest income, investment income and other152 140 9  %
Interest expense, netInterest expense, net$(1,406)  $(1,491)  6  %Interest expense, net$(1,397)  $(1,406)  1  %
The decreaseInterest expense in interest expensefiscal 2022 was primarily duecomparable to lowerfiscal 2021 as the impact of higher average interest rates and higher capitalized interest, partiallywas offset by higherthe impact of lower average debt balances.
The decreaseincrease in interest income, investment income and other was due to highera 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 lower investment impairments.losses in fiscal 2022 compared to investment gains in fiscal 2021.
Equity in the Income of Investees
Equity in the income of investees increased $110$55 million to $761$816 million in the current yearfiscal 2022 due to higher income from A+E Television Networks and Tata Sky Limited and lowerthe comparison to investment impairments.
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impairments in fiscal 2021.
Effective Income Tax Rate
20212020
Income (loss) from continuing operations before income taxes$2,561  $(1,743) 
($ in millions)($ in millions)20222021
Income from continuing operations before income taxesIncome from continuing operations before income taxes$5,285     $2,561     
Income tax expense on continuing operationsIncome tax expense on continuing operations25 699 Income tax expense on continuing operations1,732     25     
Effective income tax rate - continuing operationsEffective income tax rate - continuing operations1.0%(40.1)%Effective income tax rate - continuing operations32.8%1.0%
The effective income tax rate in fiscal 2022 was higher than the current yearU.S. statutory rate primarily due to higher effective tax rates on foreign earnings. The effective income tax rate in fiscal 2021 was lower than the U.S. statutory rate due to favorable adjustments related to prior years and excess tax benefits on employee share-based awards, partially offset by an unfavorable impact from foreign losses for which we are unable to recognize a tax benefit. Thehigher effective income tax rate in the prior year included unfavorable impacts from the goodwill impairment, which was not tax deductible, higher tax rates than the U.S. statutory rateon foreign earnings. Higher effective tax rates on foreign earnings in both fiscal 2022 and 2021 reflected the impact of foreign losses and, to a lesser extent, foreign tax credits for which we are unable to recognize a tax benefit.
Noncontrolling Interests
(in millions)20212020% Change
Better (Worse)
Net income from continuing operations attributable to noncontrolling interests$(512)$(390)(31)%
($ in millions)20222021% Change
Better (Worse)
Net income from continuing operations attributable to noncontrolling interests$(360)$(512)30  %
The increasedecrease in net income from continuing operations attributable to noncontrolling interests was primarily due to lowerhigher losses at Shanghai Disney Resort and at our DTC sports business, and Hong Kong Disneyland Resort and higher accretion of the fair value of the redeemable noncontrolling interest in BAMTech. These increases were partially offset by lowerhigher results atfor 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
•TheOther income of $201 million due to the fuboTV gain of $186 million and the German FTA gain of $126 million, andpartially offset by the DraftKings loss of $111 million
Results for fiscal 2020 were impacted by the following:
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•Goodwill and intangible asset impairments of $4,953 million and restructuring charges of $782 million
•TFCF and Hulu acquisition amortization of $2,846 million
•The DraftKings gain of $973 million and Endemol Shine gain of $65 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 2, 2021:
TFCF and Hulu acquisition amortization(3)
$(2,418)  $562   $(1,856)  $(1.00)  
Restructuring and impairment charges(654)  152   (502)  (0.27)  
fuboTV and German FTA gains, partially offset by DraftKings loss201 (46)155   0.08   
Total$(2,871)  $668   $(2,203)  $(1.18)  
Year Ended October 3, 2020:
Restructuring and impairment charges$(5,735)  $571   $(5,164)  $(2.86)  
TFCF and Hulu acquisition amortization(3)
(2,846)  662   (2,184)  (1.17)  
DraftKings and Endemol Shine gains1,038   (242)  796   0.44   
Total$(7,543)$991 $(6,552)$(3.59)
($ in millions, except per share data)Pre-Tax Income (Loss)
Tax Benefit (Expense)(1)
After-Tax Income (Loss)
EPS Favorable (Adverse)(2)
Year Ended October 1, 2022:
TFCF and Hulu acquisition amortization(3)
$(2,353)  $549   $(1,804)  $(0.97)
Contract License Early Termination(1,023)  238(785)  (0.43)
Other income (expense), net(667)  156(511)  (0.28)
Restructuring and impairment charges(237)  55(182)  (0.10)
Total$(4,280)  $998   $(3,282)  $(1.78)  
Year Ended October 2, 2021:
TFCF and Hulu acquisition amortization(3)
$(2,418)  $562   $(1,856)  $(1.00)  
Restructuring and impairment charges(654)  152   (502)  (0.27)  
Other income (expense), net201 (46)155   0.08   
Total$(2,871)  $668   $(2,203)  $(1.18)  
(1)Tax benefit/expense adjustments arebenefit (expense) is determined using the tax rate applicable to the individual item affecting comparability.item.
(2)EPS is net of noncontrolling interest, where applicable. Total may not equal the sum of the column due to rounding.
(3)Includes amortization of intangibles related to TFCF equity investees.
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BUSINESS SEGMENT RESULTS
The Company evaluates the performance of its operating segments based on segment revenue and segment operating income.
Below is a discussion of the major revenue and expense categories for our business segments. Costs and expenses for each segment consist of operating expenses, selling, general, administrative and other costs, and depreciation and amortization. Selling, general, administrative and other costs include third-party and internal marketing expenses.
Our DMEDThe Entertainment segment primarily generates revenue acrosscomprises three significant lines of business/distribution platforms: business:
•Linear Networks, Direct-to-Consumer and Content Sales/Licensing. Programming and production costs to support these businesses/distribution platforms are largely incurred across three content creation groups: Studios, General Entertainment and Sports. Programming and production costs include amortization of acquired licensed programming rights (including sports rights), amortization of capitalized production costs (including participations and residuals) and production costs related to live programming such as news and sports.
The Linear Networks businesswhich primarily generates revenue from affiliate fees and advertising salesadvertising. 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 fees from sub-licensingthe lapse of sports programmingcarriage agreements to third parties. Operating expenses include programming and production costs, technical support costs, operating labor and distribution costs.certain networks.
The •Direct-to-Consumer, businesswhich primarily generates revenue from subscription fees advertising sales and pay-per-view and Premier Access fees. Operating expenses include programming and production costs, technology support costs, operating labor and distribution costs. Operating expenses also includes fees paid to Linear Networks for the right to air the linear networks feed and other services.advertising
The •Content Sales/Licensing, businesswhich primarily generates revenue from the sale of film and episodic television content in the TV/SVODVOD and home entertainment markets, distribution of films in the theatrical market, licensing of our music rights, sales of tickets to stage play performances and licensing of our IP for use in stage plays. Revenues also include an intersegment allocation of revenues from the Experiences segment, which is meant to reflect royalties on consumer products merchandise licensing revenues generated on IP created by the Entertainment segment.
Operating expenses includeat the Entertainment segment primarily consist of programming and production costs, technology support costs, operating labor, distribution expensescosts and cost of sales. Programming and production costs include the following:
•Amortization of capitalized production costs and licensed programming rights
•Subscriber-based fees for programming the Hulu Live service, including fees paid by Hulu to the Sports segment and other Entertainment segment businesses for the right to air their linear networks on Hulu Live
•Production costs related to live programming (primarily news)
•Amortization of participations and residual obligations
•Fees paid to the Sports segment to program ESPN on ABC and certain sports content on Star+
Amortization of capitalized production costs and licensed programming rights is generally allocated across Entertainment’s businesses based on the estimated relative value of the distribution windows. The initial costs of sales.marketing campaigns are generally recognized in the business of initial exploitation.
Our DPEPThe 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
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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.
The Experiences segment primarily generates revenue from the sale of admissions to theme parks, the sale of food, beverage and merchandise at our theme parks and resorts, charges for room nights at hotels, sales of cruise vacations, sales and rentals of vacation club properties, royalties from licensing our IP for use on consumer goods and the sale of branded merchandise. Revenues are also generated from sponsorships and co-branding opportunities, real estate rent and sales, and royalties from Tokyo Disney Resort. Significant expenses include operating labor, costs of goods sold, infrastructure costs, depreciation and other operating expenses. Infrastructure costs include information systems expense,technology support costs, repairs and maintenance, utilities and fuel, property taxes, retail occupancy costs, insurance and transportation. Other operating expenses include costs for such items as supplies, commissions and entertainment offerings.
The following transactions are recognized in segment revenues and eliminated in total Company evaluatesrevenue:
•Fees paid by Hulu to the performance of its operating segments basedSports segment and other Entertainment segment businesses for the right to air their linear networks on Hulu Live
•Fees paid by the Entertainment segment operating income,to the Sports segment to program ESPN on ABC and management uses total segment operating income as a measure of the overall performance of the operating businesses. Total segment operating income is not a financial measure defined by GAAP, should be reviewed in conjunction with the relevant GAAP financial measure and may not be comparable to similarly titled measures reported by other companies. The Company believes that information about total segment operating income assists investors by allowing them to evaluate changes in the operating results of the Company’s portfolio of businesses separate from factors other than business operations that affect net income.certain sports content on Star+
BUSINESS SEGMENT RESULTS - 2023 vs. 2022
The following table reconcilespresents revenues from our operating segments and other components of revenues:
($ in millions)20232022% Change
Better (Worse)
Entertainment$40,635  $39,569  3  %
Sports17,111  17,270  (1) %
Experiences32,549  28,085  16  %
Eliminations(1,397) (1,179) (18) %
Content License Early Termination—  (1,023) 100  %
Revenues$88,898  $82,722  7  %
The following table presents income (loss)from our operating segments and other components of income from continuing operations before income taxes to total segment operating income:taxes:
(in millions)20212020% Change
Better (Worse)
Income (loss) from continuing operations before income taxes$2,561   $(1,743)  nm
Add (subtract):
Corporate and unallocated shared expenses928   817   (14) %
Restructuring and impairment charges654   5,735   89  %
Other income, net(201)  (1,038)  (81) %
Interest expense, net1,406   1,491   6  %
TFCF and Hulu acquisition amortization2,418   2,846   15  %
Total segment operating income$7,766   $8,108   (4) %
($ in millions)20232022% Change
Better (Worse)
Entertainment operating income$1,444   $2,126   (32) %
Sports operating income2,465   2,710   (9) %
Experiences operating income8,954   7,285   23  %
Content License Early Termination— (1,023)100  %
Corporate and unallocated shared expenses(1,147)  (1,159)  1  %
Restructuring and impairment charges(1)
(3,836)  (237)  >(100) %
Other income (expense), net96   (667)nm
Interest expense, net(1,209)  (1,397)  13  %
TFCF and Hulu acquisition amortization(1,998)  (2,353)  15  %
Income from continuing operations before income taxes$4,769   $5,285   (10) %
(1) Includes the A+E gain.
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The following is a summary of segment revenue and operating income:
(in millions)20212020% Change
Better (Worse)
Revenues:
Disney Media and Entertainment Distribution$50,866 $48,350 5  %
Disney Parks, Experiences and Products16,552 17,038 (3) %
$67,418   $65,388   3  %
Segment operating income:
Disney Media and Entertainment Distribution$7,295 $7,653 (5) %
Disney Parks, Experiences and Products471 455 4  %
$7,766   $8,108   (4) %
Disney Media and Entertainment Distribution
Revenue and operating results for the DMED segmentEntertainment are as follows:
(in millions)20212020% Change
Better (Worse)
Revenues:
Linear Networks$28,093   $27,583   2  %
Direct-to-Consumer16,319 10,552 55  %
Content Sales/Licensing and Other7,346 10,977 (33) %
Elimination of Intrasegment Revenue(1)
(892)(762)(17) %
$50,866 $48,350 5  %
Segment operating income (loss):
Linear Networks$8,407 $9,413 (11) %
Direct-to-Consumer(1,679) (2,913)42  %
Content Sales/Licensing and Other567 1,153 (51) %
$7,295 $7,653 (5) %
(1) Reflects fees received by the Linear Networks from other DMED businesses for the right to air our Linear Networks and related services.
($ in millions)20232022% Change
Better (Worse)
Revenues:
Linear Networks$11,701   $12,828   (9) %
Direct-to-Consumer19,886 17,975 11  %
Content Sales/Licensing and Other9,048 8,766 3  %
$40,635 $39,569 3  %
Segment operating income (loss):
Linear Networks$4,119 $5,198 (21) %
Direct-to-Consumer(2,496) (3,424)27  %
Content Sales/Licensing and Other(179)352 nm
$1,444 $2,126 (32) %
Linear Networks
Operating results for Linear Networks are as follows:
(in millions)20212020% Change
Better (Worse)
Revenues
Affiliate fees$18,652   $18,691   —  %
Advertising8,853   8,252   7  %
Other588   640   (8) %
Total revenues28,093   27,583   2  %
Operating expenses(16,808)  (15,309)  (10) %
Selling, general, administrative and other(3,491)  (3,330)  (5) %
Depreciation and amortization(168)  (262)  36  %
Equity in the income of investees781   731   7  %
Operating Income$8,407   $9,413   (11) %
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($ in millions)20232022% Change
Better (Worse)
Revenues
Affiliate fees$7,369   $7,739   (5) %
Advertising4,159   4,877   (15) %
Other173   212   (18) %
Total revenues11,701   12,828   (9) %
Operating expenses(5,577)  (5,777)  3  %
Selling, general, administrative and other(2,641)  (2,571)  (3) %
Depreciation and amortization(54)  (65)  17  %
Equity in the income of investees690   783   (12) %
Operating Income$4,119   $5,198   (21) %
Revenues
Affiliate revenue isfees are as follows:
(in millions)20212020% Change
Better (Worse)
Domestic Channels$15,244   $15,018 2  %
International Channels3,408 3,673 (7) %
$18,652 $18,691   —  %
The increase in affiliate revenue at the Domestic Channels was due to an increase of 7% from higher contractual rates, partially offset by decreases of 4% from fewer subscribers and 2% from the comparison to the additional week of operations in the prior year.
($ in millions)20232022% Change
Better (Worse)
Domestic$6,136 $6,257 (2) %
International1,233 1,482 (17) %
$7,369   $7,739   (5) %
The decrease in domestic affiliate revenue at the International Channels was duefees 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 4%8% from fewer subscribers driven by channel closures, primarily in Europe4% from lower contractual rates and Asia, 2% from the comparison to the additional week of operations in the prior year and 1%4% from an unfavorable foreign exchange impact.Foreign Exchange Impact.
Advertising revenue is as follows:
(in millions)20212020% Change
Better (Worse)
Cable$3,681   $3,648 1  %
Broadcasting3,239 3,278 (1) %
Domestic Channels6,920 6,926 —  %
International Channels1,933 1,326   46  %
$8,853 $8,252 7  %
($ in millions)20232022% Change
Better (Worse)
Domestic$3,178 $3,716 (14) %
International981   1,161   (16) %
$4,159 $4,877 (15) %
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The increasedecrease in Cabledomestic advertising revenue was due to an increase of 10% from higher rates, partially offset by decreases of 12% from fewer impressions and 2% from lower rates. The decrease in impressions was due to lower average viewership.
Lower international advertising revenue was due to decreases of 9% from an unfavorable Foreign Exchange Impact, 6% from fewer impressions and 4%1% from the comparison to the additional week of operations in the prior year. Thea decrease in rates. Lower impressions reflected lower average viewership, partially offset by higher units delivered.
Thea decrease in Broadcasting advertising revenue was primarily due to decreases of 7% from fewer impressions at ABC and 2% from the comparison to the additional week of operations in the prior year, partially offset by increases of 4% from higher rates at ABC and 4% from the owned television stations. The decrease in impressions reflected lower average viewership, partially offset by higher units delivered. The increase at the owned television stations was primarily due to higher rates reflecting political advertising.
The increase in International Channels advertising revenue was due to increases of 43% from higher impressions, reflecting an increase in average viewership, 6% from higher rates and 2% from a favorable foreign exchangewhich included the impact partially offset by a decrease of 5% from the comparison to the additional week of operations in the prior year. The increase in impressions was due to the airing of live sporting events in the current year that were not aired in the prior year, primarily Indian Premier League (IPL) cricket matches.channel closures.
Other revenue decreased $52$39 million, to $588$173 million from $640$212 million, due todriven by an unfavorable foreign exchange impact.Foreign Exchange Impact.
Costs and Expenses
Operating expenses are as follows:
(in millions)20212020% Change
Better (Worse)
Programming and production costs
Cable$(9,353)  $(8,538)  (10) %
Broadcasting(2,767)(2,605)(6) %
Domestic Channels(12,120)(11,143)(9) %
International Channels(3,139)(2,693)(17) %
(15,259)(13,836)(10) %
Other operating expenses(1,549)(1,473)(5) %
$(16,808)$(15,309)(10) %
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($ in millions)20232022% Change
Better (Worse)
Programming and production costs
Domestic$(3,858)  $(3,894)  1  %
International(712)  (796)  11  %
Total programming and production costs(4,570)  (4,690)  3  %
Other operating expenses(1,007)  (1,087)  7  %
$(5,577)  $(5,777)  3  %
The increasedecrease in domestic programming and production costs at Cable was due to the timinga lower average cost mix of live sporting events,programming, partially offset by the comparison to the additional week of operationsan increase in the prior year. As a result of COVID-19, events have been delayed since March 2020. The most significant impacts were due to the shift of NBAprogramming fees for ESPN on ABC and college football games from fiscal 2020 into the current fiscal year.higher program write-offs.
The increase inInternational programming and production costs at Broadcasting wasdecreased primarily due to an increase in the average cost of programming reflecting incremental costs of health and safety measures.
The increase in programming and production costs at the International Channels was due to an increase in sports programming costs, partially offset by the comparison to the additional week of operations in the prior yeara favorable Foreign Exchange Impact and the impact of channel closures. Higher sports programming costs were
The decrease in other operating expenses was due to the timingrealignment of live sporting events driven by the shift of IPL cricket matches into the current year from fiscal 2020.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 $161$70 million, to $3,491$2,641 million from $3,330 million, due to$2,571 million. The increase includes the realignment of certain costs previously primarily reported in other operating expenses and higher marketinglabor-related costs, at FX Channels and ABC reflecting more titles premiering in the current year, partially offset by lower bad debt expense.
Depreciation and amortization decreased $94 million, to $168 million from $262 million, primarily due to the transfer of technology assets and related depreciation primarily between Linear Networks and Content Sales/Licensing and Other and higher asset write-offs in the prior year.marketing costs.
Equity in the Income of Investees
Income from equity investees increased $50decreased $93 million, to $781$690 million from $731$783 million, primarily due to higherlower income from A+E Television Networks driven by an increaseattributable to decreases in program salesadvertising and lower programming costs,affiliate revenue, partially offset by lower advertising revenue and higher marketing costs.program sales income.
Operating Income from Linear Networks
Operating income decreased 11%21%, to $8,407$4,119 million from $9,413$5,198 million due to decreases at Cablelower results both domestically and to a lesser extent, Broadcasting, partially offset by an increase at the International Channels and higher income from equity investees.internationally.
The following table provides supplemental revenue and operating income detail for Linear Networks:
(in millions)20212020% Change
Better (Worse)
Supplemental revenue detail
Domestic Channels$22,463   $22,244   1  %
International Channels5,630   5,339   5  %
$28,093   $27,583   2  %
Supplemental operating income detail
Domestic Channels$6,594   $7,708   (14) %
International Channels1,032   974   6  %
Equity in the income of investees781   731   7  %
$8,407   $9,413   (11) %
($ in millions)20232022% Change
Better (Worse)
Supplemental revenue detail
Domestic$9,406 $10,073 (7) %
International2,295 2,755 (17) %
$11,701 $12,828 (9) %
Supplemental operating income detail
Domestic$2,735 $3,358 (19) %
International694 1,057 (34) %
Equity in the income of investees690 783 (12) %
$4,119   $5,198   (21) %
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Direct-to-Consumer
Operating results for Direct-to-Consumer are as follows:
(in millions)20212020% Change
Better (Worse)
Revenues
Subscription fees$12,020   $7,645   57  %
Advertising3,366   2,357   43  %
TV/SVOD distribution and other933   550   70  %
Total revenues16,319   10,552   55  %
Operating expenses(13,234)  (10,078)  (31) %
Selling, general, administrative and other(4,435)  (3,126)  (42) %
Depreciation and amortization(329)  (260)  (27) %
Equity in the loss of investees—   (1)  100  %
Operating Loss$(1,679)  $(2,913)  42  %
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($ in millions)20232022% Change
Better (Worse)
Revenues
Subscription fees$16,420   $14,178   16  %
Advertising3,260   3,614   (10) %
Other206   183   13  %
Total revenues19,886   17,975   11  %
Operating expenses(17,859)  (15,641)  (14) %
Selling, general, administrative and other(4,168)  (5,395)  23  %
Depreciation and amortization(355)  (363)  2  %
Operating Loss$(2,496)  $(3,424)  27  %
Revenues
The increase in subscription fees wasreflected increases of 11% from more subscribers, due to higher subscribers driven by growth at Disney+, Hulu Core and, to a lesser extent, ESPN+,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 Disney+ and, to a lesser extent, ESPN+.
Higher advertising revenue reflected increasesat Disney+, partially offset by growth of 39% from higher impressions and 3%2% from higher rates due to an increase at Hulu. HigherThe decrease in impressions were due to increases at Hulu, Disney+ and, to a lesser extent, ESPN+.
The increase in TV/SVOD distribution and other revenue was due to higherthe comparison to Indian Premier League (IPL) cricket programming on Disney+ Premier Access revenues and an increase in Ultimate Fighting Championship (UFC) pay-per-view fees. Higher Disney+ Premier Access revenues were due to four releases in the current year, Black Widow, Raya, Jungle Cruise and Cruella, compared to one release in the prior year, Mulan. The increase in UFC pay-per-view fees reflected the benefit of thirteen events in the current year compared to elevenHotstar in the prior year, and higher pricing.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 the number of paidadditional information about Disney+ and Hulu(1).
Paid subscribers(1) (in millions) for Disney+, ESPN+ and Hulu as of:
(in millions)(in millions)September 30, 2023October 1, 2022% Change
Better (Worse)
Disney+(2)
Disney+(2)
Domestic (U.S. and Canada)Domestic (U.S. and Canada)46.5 46.4 —  %
International (excluding Disney+ Hotstar)(1)
International (excluding Disney+ Hotstar)(1)
66.1 56.5 17  %
Disney+ Core(2)
Disney+ Core(2)
112.6 102.9 9  %
October 2, 2021October 3, 2020% Change
Better (Worse)
Disney+(2)
118.1 73.7 60  %
ESPN+17.1 10.3 66  %
Disney+ HotstarDisney+ Hotstar37.6 61.3 (39) %
HuluHuluHulu
SVOD OnlySVOD Only39.7 32.5 22  %SVOD Only43.9 42.8 3  %
Live TV + SVODLive TV + SVOD4.0 4.1 (2) %Live TV + SVOD4.6 4.4 5  %
Total Hulu(3)
43.8 36.6 20  %
Total Hulu(2)
Total Hulu(2)
48.5 47.2 3  %
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The following table presents the average monthly revenue per paid subscriberAverage Monthly Revenue Per Paid Subscriber(4)(1) for the fiscal year ended:
20212020% Change
Better (Worse)		20232022% Change
Better (Worse)
Disney+Disney+$4.08$4.80(15) %Disney+
ESPN+$4.57$4.355  %
Domestic (U.S. and Canada)Domestic (U.S. and Canada)$6.97$6.3410  %
International (excluding Disney+ Hotstar)(1)
International (excluding Disney+ Hotstar)(1)
5.936.10(3) %
Disney+ CoreDisney+ Core6.396.223  %
Disney+ HotstarDisney+ Hotstar0.660.88(25) %
HuluHuluHulu
SVOD OnlySVOD Only$12.86$12.245  %SVOD Only12.1712.72(4) %
Live TV + SVODLive TV + SVOD$81.35$67.2421  %Live TV + SVOD90.5287.623  %
(1)Reflects subscribers for which we recognized subscription revenue. Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method. Subscribers to the bundled offering in the U.S. are counted as a paid subscriber for each service included in the bundle (Disney+, HuluSee discussion on page 66—DTC Product Descriptions, Key Definitions and ESPN+). Star+ in Latin America is offered as a standalone service or along with Disney+. If a subscriber has either the standalone Disney+ or Star+ service or both the Disney+ and Star+ services, they are counted as one Disney+ paid subscriber. When we aggregate the total number of paid subscribers across our DTC streaming services, whether acquired individually, through a wholesale arrangement or via the bundle, we refer to them as paid subscriptions.Supplemental Information
(2)Includes Disney+ Hotstar and Star+. Disney+ Hotstar launched on April 3, 2020 in India (as a conversion of the preexisting Hotstar service), on September 5, 2020 in Indonesia, on June 1, 2021 in Malaysia, and on June 30, 2021 in Thailand. Disney+ Hotstar average monthly revenue per paid subscriber is significantly lower than the average monthly revenue per paid subscriber for Disney+ in other markets. Star+ launched in Latin America on August 31, 2021.
(3)Total may not equal the sum of the column due to rounding.
(4)Revenue per paid subscriber is calculated based on the average of the monthly average paid subscribers for each month in the period. The monthly average paid subscribers is calculated as the sum of the beginning of the month and end of the month paid subscriber count, divided by two.Domestic 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 earnedincreased from selling advertising spots$6.34 to other Company businesses) and premium and feature add-on revenue but excludes Premier Access and Pay-Per-View revenue. The average revenue per subscriber is net of discounts on bundled services. The bundled discount is allocated to each service based on the relative retail price of each service on a standalone basis. In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third party platforms like Apple.
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The average monthly revenue per paid subscriber for Disney+ decreased from $4.80 to $4.08$6.97 due to a higher mix of Disney+ Hotstar subscribersan increase in the current year, partially offset by a lower mix of wholesale subscribers in the current year and increases in retail pricing.
The average monthly revenue per paid subscriber for ESPN+ increased from $4.35 to $4.57 primarily due to increases in retail pricing in August 2021 and August 2020,higher advertising revenue, partially offset by a higher mix of subscribers to the bundled offering.multi-product offerings.
TheInternational Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber for the Hulu SVOD Only service increaseddecreased from $12.24$6.10 to $12.86 primarily$5.93 due to a higher per-subscriber advertising revenue,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 per-subscriber premium add-onwholesale 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 the bundled offering. The average monthly revenue per paid subscriber for the Hulu Live TV + SVOD service increased from $67.24 to $81.35 due to an increase in retail pricing in December 2020, higher per-subscriber advertising revenuemulti-product offerings and to a lesser extent,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 $90.52 due to an increase in average retail pricing, partially offset by lower advertising revenue, a higher mix of subscribers to the bundled offering.multi-product offerings and lower per-subscriber premium and feature add-on revenue.
Costs and Expenses
Operating expenses are as follows:
(in millions)20212020% Change
Better (Worse)
($ in millions)($ in millions)20232022% Change
Better (Worse)
Programming and production costsProgramming and production costs$(10,716) $(8,124) (32) %Programming and production costs
Disney+Disney+$(5,674) $(4,466) (27) %
HuluHulu(8,265) (7,564) (9) %
OtherOther(20) (25) 20  %
Total programming and production costsTotal programming and production costs(13,959) (12,055) (16) %
Other operating expenseOther operating expense(2,518) (1,954) (29) %Other operating expense(3,900) (3,586) (9) %
$(13,234) $(10,078) (31) %$(17,859) $(15,641) (14) %
The increase in programming and production costs at Disney+ was attributable to more content provided on the service and higher costs per hour of non-sports content available on the service, partially offset by a decrease in sports programming costs reflecting the comparison to IPL cricket programming in the prior year.
The increase in programming and production costs at Hulu was due to higher costs at Disney+, Hulu and, to a lesser extent, ESPN+. The increase at Disney+ was due to the ongoing expansion including launches in additional markets. Higher costs at Hulu were due to an increase in subscriber-based fees for programming the Live TV service driven byand higher average monthly subscriberscosts per hour of content available on the service. Higher subscriber-based fees for programming the Live TV service resulted from rate increases and rate increases. Higher ESPN+ costs werean increase in the number of subscribers.
Other operating expenses increased primarily due to new soccer programming rights, higher costs for UFC programming rights driven by two additional events in the current year, and new college sports rights. Other operating expenses, which include technical supporttechnology and distribution costs increased due to higher distribution costs at Disney+ due to the ongoing expansion..
Selling, general, administrative and other costs increased $1,309decreased $1,227 million, to $4,435$4,168 million from $3,126$5,395 million, dueprimarily attributable to higherlower marketing and general and administrative costs at Disney+ driven by the ongoing expansion.and, to a lesser extent, Hulu.
Depreciation and amortization increased $69 million, to $329 million from $260 million, driven by the ongoing expansion of Disney+.
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Operating Loss from Direct-to-Consumer
Operating loss from Direct-to-Consumer decreased $1,234$928 million, to $1,679$2,496 million from $2,913$3,424 million due to improved resultsa lower loss at HuluDisney+ and, to a lesser extent, ESPN+, partially offset by a higher lossoperating income at Disney+.Hulu.
Content Sales/Licensing and Other
Operating results for Content Sales/Licensing and Other are as follows:
(in millions)20212020% Change
Better (Worse)
Revenues
TV/SVOD distribution$4,206   $5,673   (26) %
Theatrical distribution920   2,134   (57) %
Home entertainment1,014   1,802   (44) %
Other1,206   1,368   (12) %
Total revenues7,346   10,977   (33) %
Operating expenses(4,536)  (6,871)  34  %
Selling, general, administrative and other(1,963)  (2,628)  25  %
Depreciation and amortization(294)  (291)  (1) %
Equity in the income (loss) of investees14   (34)  nm
Operating Income$567   $1,153   (51) %
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COVID-19
Our Content Sales/Licensing businesses have been impacted by COVID-19 in a number of ways. We have delayed, or in some cases, shortened or cancelled, theatrical releases, and stage play performances were suspended as of March 2020. Stage play operations resumed, generally at reduced capacity, in the first quarter of fiscal 2021. Theaters have been subject to capacity limitations and shifting government mandates or guidance regarding COVID-19. We experienced significant disruptions in the production and availability of content, including the suspension of most film and television production in March 2020. Although film and television production generally resumed beginning in the fourth quarter of 2020, we continue to see disruption of production activities depending on local circumstances. Fewer theatrical releases and production delays have limited the availability of film content to be sold in distribution windows subsequent to the theatrical release.
($ in millions)20232022% Change
Better (Worse)
Revenues
TV/VOD distribution$2,618   $3,520   (26) %
Theatrical distribution3,174   1,875   69  %
Home entertainment distribution931   1,083   (14) %
Other2,325   2,288   2  %
Total revenues9,048   8,766   3  %
Operating expenses(6,280)  (5,508)  (14) %
Selling, general, administrative and other(2,595)  (2,610)  1  %
Depreciation and amortization(347)  (296)  (17) %
Equity in the income (loss) of investees(5)  —   nm
Operating Income (Loss)$(179)  $352   nm
Revenues
The decrease in TV/SVODVOD distribution revenue reflectedwas due to lower sales volumes of both lower episodic and film content, sales. The decrease in episodic content sales was primarily due to lower sales of Homeland, How to Get Away with Murder, Modern Family, Grey’s Anatomy and This is Us in the current year and the comparison to prior-year sales of Ratched, The Politician, Tales from the Loop and The Wilds. Lower film content sales reflected less content available due topart driven by the impact of COVID-19 and the shift from licensing our content to third parties to distributing it on our DTCEntertainment Direct-to-Consumer streaming services.
The decreaseincrease in theatrical distribution revenue was due to the prior-year performance of Frozen IIAvatar: The Way of Water in the current year. The current year also included the Marvel titles: Black Panther: Wakanda Forever;Guardians of the Galaxy Vol. 3; and Star Wars: The Rise of SkywalkerAnt-Man and the Wasp: Quantumania, which were both released prior to COVID-19’s impact on our business. Other significantthe Disney live action title: The Little Mermaid, the Lucasfilm title: Indiana Jones and the Dial of Destiny and two animation titles released in the. The prior year included the Marvel titles: Maleficent: MistressDoctor Strange in the Multiverse of Evil Madness;Thor: Love and Thunder;Ford v Ferrari, whereas the current year included Shang-Chi and the Legend of the Ten Rings, Black WidowEternals; and the co-produced title Free GuySpider-Man: No Way Home., along with two animation titles.
The decrease in home entertainment distribution revenue was due to decreases of 36% from lower unit sales and 5% from lower average net effective pricing. New release titles in the current year included Mulan, Raya and the Last Dragon and Black Widow, whereas the prior year included Frozen II, Star Wars: The Rise of Skywalker, The Lion King, Toy Story 4, Maleficent: Mistress of Evil, Onward, Ford v Ferrari, Aladdin and Avengers: Endgame. The decrease in average net effective pricing was due to a lower mix of new release titles, which have a higher sales price than catalog titles.volumes.
The decreaseincrease in other revenue was due to lowerhigher revenue from stage plays, reflecting the impact of COVID-19,resulting from improved performance, partially offset by an increase in revenue from Lucasfilm’s special effects business driven by more projects.
Costs and Expensesunfavorable Foreign Exchange Impact.
Operating expenses are as follows:
(in millions)20212020% Change
Better (Worse)
($ in millions)($ in millions)20232022% Change
Better (Worse)
Programming and production costsProgramming and production costs$(3,611)$(5,729)37  %Programming and production costs$(5,383)$(4,688)(15)  %
Distribution costs and cost of goods soldDistribution costs and cost of goods sold(925)(1,142)19  %Distribution costs and cost of goods sold(897)(820)(9)  %
$(4,536)$(6,871)34  %$(6,280)$(5,508)(14)  %
The decreaseincrease in programming and production costs was due to lowerhigher production cost amortization drivenattributable to the increase in theatrical revenue, partially offset by a decline in revenues anddecrease as a result of lower film and television cost impairments.TV/VOD distribution revenues.
The decrease inHigher distribution costs and cost of goods sold was primarilywere due to lower home entertainment volumes, a decreasethe realignment of certain costs previously reported in general and administrative costs for stage plays as a result of a limited number of performances in the current year and lowerincreased theatrical distribution costs due to fewer theatrical releases, partially offset by more projects at Lucasfilm’s special effects business.costs.
Selling, general, administrative and other costs decreased $665$15 million, to $1,963$2,595 million from $2,628$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 lower theatrical and home entertainment marketing costs and, to a lesser extent, a decreaseincreased investment in bad debt expense.technology assets.    
Equity in the Income (Loss) of Investees
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Income from equity investments increased $48 million, to income of $14 million from a loss of $34 million, primarily due to higher income from Tata Sky Limited and the absence of an investment impairment recognized in the prior year.
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Operating Income (Loss) from Content Sales/Licensing and Other
Operating incomeresults from Content Sales/Licensing and Other decreased $586$531 million, to $567a loss of $179 million from $1,153income of $352 million, primarily due to lower theatricalTV/VOD distribution and home entertainment results, partially offset by lower film and television cost impairments.
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results.
Items Excluded from Segment Operating Income Related to Disney Media and Entertainment Distribution
The following table presents supplemental information for items related to the DMED segmentEntertainment that are excluded from segment operating income:
(in millions)20212020% Change Better (Worse)
TFCF and Hulu acquisition amortization(1)
$(2,410)  $(2,838)15  %
Restructuring and impairment charges(2)
(315)  (5,394)  94  %
German FTA gain126   —   nm
($ in millions)20232022% Change Better (Worse)
Restructuring and impairment charges(1)
$(3,431)  $(228)   >(100) %
TFCF and Hulu acquisition amortization(2)
(1,602)  (1,946)   18  %
Content License Early Termination—   (1,023)   100  %
Gain on sale of a business28   —    nm
(1)Fiscal 2023 includes $2,521 million for the Content Impairment Charge (net of the A+E gain), $425 million for a goodwill impairment, $248 million of severance, a $141 million impairment of an equity investment and $96 million primarily related to exiting our businesses in Russia. Fiscal 2022 includes impairments of assets related to exiting our businesses in Russia.
(2)In the current year,fiscal 2023, amortization of step-up on film and television costs was $646$439 million and amortization of intangible assets was $1,749$1,151 million. In the prior year,fiscal 2022, amortization of step-up on film and television costs was $899$634 million and amortization of intangible assets was $1,913$1,300 million.
(2)The current year 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. The prior year includes goodwill and intangible asset impairments and severance and contract termination charges in connection with the acquisition and integration of TFCF.
Disney Parks, Experiences and ProductsSports
Operating results for the DPEP segmentSports are as follows:
(in millions)20212020% Change
Better (Worse)
Revenues
Theme park admissions$3,848   $4,038   (5) %
Parks & Experiences merchandise, food and beverage3,299   3,441   (4) %
Resorts and vacations2,701   3,402   (21) %
Merchandise licensing and retail5,241   4,721   11  %
Parks licensing and other1,463   1,436   2  %
Total revenues16,552   17,038   (3) %
Operating expenses(10,799)  (11,485)  6  %
Selling, general, administrative and other(2,886)  (2,642)  (9) %
Depreciation and amortization(2,377)  (2,437)  2  %
Equity in the loss of investees(19)  (19)  —  %
Operating Income$471   $455   4  %
COVID-19
($ in millions)20232022% Change
Better (Worse)
Revenues
Affiliate fees$10,590   $10,796   (2) %
Advertising3,920   4,370   (10) %
Subscription fees1,517   1,113   36  %
Other1,084   991   9  %
Total revenues17,111   17,270   (1) %
Operating expenses(13,314)  (13,084)  (2) %
Selling, general, administrative and other(1,314)  (1,441)  9  %
Depreciation and amortization(73)  (90)  19  %
Equity in the income of investees55   55   — %
Operating Income$2,465   $2,710   (9) %
Revenues at
Affiliate fees are as follows:
($ in millions)20232022% Change
Better (Worse)
ESPN
Domestic$9,267   $9,437 (2) %
International1,051 1,084 (3) %
10,318 10,521   (2) %
Star (India)272 275 (1) %
$10,590   $10,796   (2) %
The decrease in domestic ESPN affiliate fees was due to decreases of 7% from fewer subscribers and 1% from the DPEP segmenttemporary suspension of carriage with an affiliate, partially offset by an increase of 5% from higher contractual rates.
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Lower international ESPN affiliate fees were adversely impactedattributable to decreases of 14% from an unfavorable Foreign Exchange Impact and 3% from fewer subscribers, partially offset by COVID-19an increase of 14% from higher contractual rates.
Advertising revenue is as follows:
($ in millions)20232022% Change
Better (Worse)
ESPN
Domestic$3,413 $3,424 —  %
International189   173   9  %
3,602 3,597 —  %
Star (India)318 773 (59) %
$3,920   $4,370   (10) %
Domestic ESPN advertising revenue was comparable to the prior year reflecting a modest decrease in rates, largely offset by a slight increase in impressions.
The increase in international ESPN advertising revenue was due to an increase of 16% from higher impressions, partially offset by a decrease of 6% from an unfavorable Foreign Exchange Impact. The increase in impressions was attributable to higher average viewership.
Lower Star advertising revenue was due to decreases of 38% from fewer impressions, 14% from lower rates and 7% from an unfavorable Foreign Exchange Impact. Fewer impressions reflected a decrease in average units delivered and, to a lesser extent, fewer IPL matches aired in the current year compared to the prior year as matches from the 2021 season shifted into fiscal 2022 due to COVID-19.
Growth in subscription fees reflected increases of 19% from higher rates and 18% from more subscribers.
The increase in other revenue was primarily due to higher fees received for programming ESPN on ABC.
The following table presents additional information about ESPN+:
September 30, 2023October 1, 2022% Change
Better (Worse)
Paid subscribers at fiscal year end (in millions)26.0  24.3  7  %
Average Monthly Revenue per Paid Subscriber for the fiscal year$5.49  $4.80  14  %
ESPN+ average monthly revenue per paid subscriber increased from $4.80 to $5.49 due to an increase in retail pricing, partially offset by a higher mix of subscribers to multi-product offerings.
Costs and Expenses
Operating expenses are as follows:
($ in millions)20232022% Change
Better (Worse)
Programming and production costs
ESPN
Domestic$(10,221)  $(10,003)  (2) %
International(1,127)  (998)  (13) %
(11,348)  (11,001)  (3) %
Star (India)(1,025)  (1,284)  20  %
(12,373)  (12,285)  (1) %
Other operating expenses(941)  (799)  (18) %
$(13,314)  $(13,084)  (2) %
The increase in domestic ESPN programming and production costs was due to contractual rate increases for NBA and College Football Playoffs (CFP) programming, new motor sports programming and higher costs for NFL and Ultimate Fighting Championship (UFC) programming. These increases were partially offset by lower costs for college football programming (excluding CFP) due to the non-renewal of certain contracts. NFL programming costs increased as a result of airing one additional regular season game on our linear networks in the closure/generally reducedcurrent year compared to the prior year, partially offset by lower
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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 capacity across our theme parksexpenses increased $142 million, to $941 million from $799 million, driven by higher technology and resorts. 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 $2,710 million due to decreases at Star and international ESPN, partially offset by an increase at domestic ESPN.
The following table summarizes the approximate number of weeks of operations in the currentprovides supplemental revenue and prior year:operating income detail for Sports:
Weeks of Operation
20212020
Walt Disney World Resort52   36   
Disneyland Resort22   24   
Disneyland Paris19   35   
Hong Kong Disneyland Resort (1)
40   22   
Shanghai Disney Resort52   38   
($ in millions)20232022% Change
Better (Worse)
Supplemental revenue detail
ESPN
Domestic$14,945   $14,636     2  %
International1,437   1,434     —  %
16,382   16,070   2  %
Star (India)729 1,200 (39) %
$17,111   $17,270   (1) %
Supplemental operating income (loss) detail
ESPN
Domestic$2,881   $2,814   2  %
International(39)  78   nm
2,842   2,892   (2) %
Star (India)(432)(237)  (82) %
Equity in the income of investees55   55     —  %
$2,465   $2,710   (9) %
Items Excluded from Segment Operating Income Related to Sports
The following table presents supplemental information for items related to Sports that are excluded from segment operating income:
($ in millions)20232022% Change
Better (Worse)
TFCF acquisition amortization(1)
$(388)  $(399)  3  %
Restructuring and impairment charges(2)
(346)  (1)  >(100) %
(1) Hong Kong Disneyland Resort generally operated 5 days per week in fiscal 2021Represents amortization of intangible assets.
(2)Fiscal 2023 includes $296 million for a goodwill impairment and 7 days per week in fiscal 2020$50 million for severance.
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Experiences
Operating results for Experiences are as follows:
($ in millions)20232022% Change
Better (Worse)
Revenues
Theme park admissions$10,423   $8,602   21  %
Resorts and vacations7,949   6,410   24  %
Parks & Experiences merchandise, food and beverage7,712   6,579   17  %
Merchandise licensing and retail4,358   4,609   (5) %
Parks licensing and other2,107   1,885   12  %
Total revenues32,549   28,085   16  %
Operating expenses(17,129)  (14,936)  (15) %
Selling, general, administrative and other(3,675)  (3,403)  (8) %
Depreciation and amortization(2,789)  (2,451)  (14) %
Equity in the loss of investees(2)  (10)  80  %
Operating Income$8,954   $7,285   23  %
Revenues
The decreaseincrease in theme park admissions revenue was due to a decreaseincreases 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 lower attendance, partially offset by an increase of 8%additional passenger cruise days, 4% from higher average ticket prices.
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occupied hotel room nights and 3% growth from guided tours.
Parks & Experiences merchandise, food and beverage revenue growth was lower comparedattributable to the prior year due to a decreaseincreases of 9%12% from lowerhigher volumes partially offset by an increase ofand 3% from higher average guest spending.
The decrease in resortsLower merchandise licensing and vacationsretail revenue was due to decreases of 17%2% from fewer passenger cruise dayslicensing, 2% from retail and 3%1% from lower occupied room nights.
Merchandisean unfavorable Foreign Exchange Impact. The decrease in licensing and retail revenue growth was due to an increaselower sales of 9% from merchandise licensing driven by higher revenues from merchandise based on Star Wars, Frozen, Toy Story and Mickey and Minnie, Spider-Man, Star Wars, including The Mandalorian, and Disney Princesses,Friends, partially offset by higher minimum guarantee shortfall recognition. Lower retail revenue was primarily due to a decrease in revenues from merchandise based on Frozen.online sales.
The increase in parks licensing and other revenue was primarily dueattributable to an increase in sponsorship revenue, partially offset by a decrease in royalties from Tokyo Disney Resort as a resultand higher co-branding and sponsorship revenues, partially offset by lower real estate sales.
In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our theme parks and resorts, and we believe these metrics are useful to investors in analyzing the resort operating at reduced capacities.business:
The following table presents supplemental park and hotel statistics:
Domestic
International(1)
Total Domestic
International(1)
Total
202120202021202020212020 202320222023202220232022
ParksParksParks
Increase (decrease)Increase (decrease)Increase (decrease)
Attendance(2)
Attendance(2)
(17) %(47) %(4) %(53) %(14) %(49) %
Attendance(2)
6 %>100 %55 %54 %17 %87 %
Per Capita Guest Spending(3)
Per Capita Guest Spending(3)
17  %8  %(3) %(3) %11  %7  %
Per Capita Guest Spending(3)
3 %13 %21 %24 %2 %18 %
HotelsHotelsHotels
Occupancy(4)
Occupancy(4)
42  %43  %21  %35  %37  %41  %
Occupancy(4)
85 %82 %74 %56 %83 %76 %
Available Room Nights (in thousands)(5)
Available Room Nights (in thousands)(5)
10,45111,1143,1793,20713,63014,321
Available Room Nights (in thousands)(5)
10,09610,0733,1783,17913,27413,252
Per Room Guest Spending(6)
$374$367$377$308$374$355
Change in Per Room Guest Spending(6)
Change in Per Room Guest Spending(6)
— %19 %14 %(7) %1 %15 %
(1)Per capita guest spending growth rate is stated on a constant currency basis. Perand per room guest spending is stated atgrowth rate exclude the averageimpact of changes in foreign currency exchange rate for the same period in the prior year.rates.
(2)Attendance is used to analyze volume trends at our theme parks and is based on the number of unique daily entries, i.e. a person visiting multiple theme parks in a single day is counted only once. Our attendance count includes
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complimentary entries but excludes entries by children under the age of three.
(3)Per capita guest spending is used to analyze guest spending trends and is defined as total revenue from ticket sales and sales of food, beverage and merchandise in our theme parks, divided by total theme park attendance.
(4)Occupancy is used to analyze the usage of available capacity at hotels and is defined as the number of room nights occupied by guests as a percentage of available hotel room nights.
(5)Available hotel room nights are defined as the total number of room nights that are available at our hotels and at DVC properties located at our theme parks and resorts that are not utilized by DVC members. Available hotel room nights include rooms temporarily taken out of service.
(6)Per room guest spending is used to analyze guest spending at our hotels and is defined as total revenue from room rentals and sales of food, beverage and merchandise at our hotels, divided by total occupied hotel room nights. In the current year, the Company revised its method of allocating revenue on the sales of Disneyland Paris vacation packages between hotel room revenue and admissions revenue. The new method resulted in a decrease in the percentage of revenue allocated to hotel rooms. If we had applied the new method in the prior year, the impact would have been a decrease of approximately $50 million in the prior year.
Costs and Expenses
Operating expenses are as follows:
(in millions)20212020% Change
Better (Worse)
($ in millions)($ in millions)20232022% Change Better (Worse)
Operating laborOperating labor$(4,711)  $(4,870)3  %Operating labor$(7,550)  $(6,577)(15)  %
Infrastructure costsInfrastructure costs(2,308)(2,422)5  %Infrastructure costs(3,127)(2,766)(13)  %
Cost of goods sold and distribution costsCost of goods sold and distribution costs(2,086)(2,202)5  %Cost of goods sold and distribution costs(3,357)(2,938)(14)  %
Other operating expense(1,694)(1,991)15  %
Other operating expensesOther operating expenses(3,095)(2,655)(17)  %
$(10,799)$(11,485)  6  %$(17,129)$(14,936)  (15)  %
The decreaseincrease in operating labor was due to lowerinflation, higher volumes and decreased furloughincreased costs (netfor new guest offerings. Higher cost of government credits), partially offset by inflationgoods sold and andistribution costs were due to increased volumes, while the increase in incentive compensation costs. The decrease in infrastructure costs was primarily due to the prior year write-down of assets at our retail storeshigher operations support costs, increased costs for new guest offerings and reduced volumes. Lower cost of goods sold werehigher technology spending. Other operating expenses increased due to lower
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volumes. The decrease in other operating expenses was due to lowerhigher volumes and the comparison to prior-year charges for capital project abandonments.inflation.
Selling, general, administrative and other costs increased $244$272 million from $2,642$3,403 million to $2,886$3,675 million, driven by higher marketing 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 higher incentive compensation costsaccelerated depreciation related to the closure of Star Wars: Galactic Starcruiser and increased marketing spend.
Depreciation and amortization decreased $60 million from $2,437 million to $2,377 million, primarily due to lower depreciation at our theme parks and resorts.for the Disney Wish, which launched in the fourth quarter of the prior year.
Segment Operating Income
Segment operating income increased $16$1,669 million, to $471$8,954 million due to an increasegrowth at our consumer products business, largelyinternational and domestic parks and experiences, partially offset by a decrease at our domestic parks and experiences.consumer products business.
The following table presents supplemental revenue and operating income detail for the Parks, Experiences and Products segment:
(in millions)20212020% Change
Better (Worse)
($ in millions)($ in millions)20232022% Change
Better (Worse)
Supplemental revenue detailSupplemental revenue detailSupplemental revenue detail
Parks & ExperiencesParks & ExperiencesParks & Experiences
DomesticDomestic$9,353   $10,226   (9) %Domestic$22,677   $20,131   13  %
InternationalInternational1,859   2,020   (8) %International5,475   3,297   66  %
Consumer ProductsConsumer Products5,340   4,792   11  %Consumer Products4,397   4,657   (6) %
$16,552   $17,038   (3) %$32,549   $28,085   16  %
Supplemental operating income detail
Supplemental operating income (loss) detailSupplemental operating income (loss) detail
Parks & ExperiencesParks & ExperiencesParks & Experiences
DomesticDomestic$(1,139)  $(623)  (83) %Domestic$5,876   $5,332   10  %
InternationalInternational(1,074)  (1,073)  —  %International1,104   (237)  nm
Consumer ProductsConsumer Products2,684   2,151   25  %Consumer Products1,974   2,190   (10) %
$471   $455   4  %$8,954   $7,285   23  %
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Items Excluded from Segment Operating Income Related to Parks, Experiences and Products
The following table presents supplemental information for items related to the DPEP segmentExperiences that are excluded from segment operating income:
(in millions)20212020% Change
Better (Worse)
Restructuring and impairment charges(1)
$(327)  $(265)  (23) %
Amortization of TFCF intangible assets(8)  (8)  —  %
($ in millions)20232022% Change
Better (Worse)
Charge related to a legal ruling$(101)  $—   nm
Restructuring and impairment charges(1)
(25)  —   nm
TFCF acquisition amortization(8)  (8)  —  %
(1)TheCharges for the current year were due to severance.
BUSINESS SEGMENT RESULTS - 2022 vs. 2021
The following table presents revenues from our operating segments and other components of revenues:
($ in millions)20222021% Change
Better (Worse)
Entertainment$39,569   $36,489   8  %
Sports17,270 15,960 8  %
Experiences28,085 15,961 76  %
Eliminations(1,179)(992)(19) %
Content License Early Termination(1,023)— nm
Revenues$82,722 $67,418 23  %
The following table presents income (loss) from our operating segments and other components of income from continuing operations before income taxes:
($ in millions)20222021% Change
Better (Worse)
Entertainment operating income$2,126   $5,196 (59) %
Sports operating income2,710   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)20222021% Change
Better (Worse)
Revenues:
Linear Networks$12,828   $13,516   (5) %
Direct-to-Consumer17,975 15,036 20  %
Content Sales/Licensing and Other8,766 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 Other352 1,177 (70) %
$2,126 $5,196 (59) %
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Linear Networks
Operating results for Linear Networks are as follows:
($ in millions)20222021% Change
Better (Worse)
Revenues
Affiliate fees$7,739   $8,043   (4) %
Advertising4,877   5,215   (6) %
Other212   258   (18) %
Total revenues12,828   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 investees783   730   7  %
Operating Income$5,198   $5,271   (1) %
Revenues
Affiliate fees are as follows:
($ in millions)20222021% Change
Better (Worse)
Domestic$6,257   $6,045 4  %
International1,482 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)20222021% Change
Better (Worse)
Domestic$3,716   $4,021   (8) %
International1,161   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)20222021% Change
Better (Worse)
Programming and production costs
Domestic$(3,894)  $(3,940)  1  %
International(796)  (1,165)  32  %
(4,690)(5,105)8  %
Other operating expenses(1,087)(1,145)5  %
$(5,777)$(6,250)8  %
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The decrease in domestic programming and production costs was due to a lower cost mix of programming at FX Channels, partially offset by an increase in programming and production costs at the ABC Network. The increase at the ABC Network was due to higher costs for non-primetime news programming and an increase in programming fees for ESPN on ABC, partially offset by a lower cost mix of primetime programming.
Lower international programming and production costs were due to the impact of channel closures and, to a lesser extent, a favorable Foreign Exchange Impact.
Selling, general administrative and other costs decreased $76 million, to $2,571 million from $2,647 million, due to lower marketing costs.
Equity in the Income of Investees
Income from equity investees increased $53 million, to $783 million from $730 million, due to higher income from A+E and the comparison to impairments in fiscal 2021. The increase at A+E resulted from lower programming costs, partially offset by decreases in affiliate and advertising revenue and higher marketing costs.
Operating Income from Linear Networks
Operating income decreased 1%, to $5,198 million from $5,271 million due to lower domestic results, partially offset by higher income from our equity investees and an increase in international results.
The following table provides supplemental revenue and operating income detail for Linear Networks:
($ in millions)20222021% Change
Better (Worse)
Supplemental revenue detail
Domestic$10,073 $10,223 (1) %
International2,755 3,293 (16) %
$12,828 $13,516 (5) %
Supplemental operating income detail
Domestic$3,358   $3,537   (5) %
International1,057   1,004   5  %
Equity in the income of investees783   730   7  %
$5,198   $5,271   (1) %
Direct-to-Consumer
Operating results for Direct-to-Consumer are as follows:
($ in millions)20222021% Change
Better (Worse)
Revenues
Subscription fees$14,178   $11,295   26  %
Advertising3,614   3,284   10  %
Other183   457   (60) %
Total revenues17,975   15,036   20  %
Operating expenses(15,641)  (11,906)  (31) %
Selling, general, administrative and other(5,395)  (4,067)  (33) %
Depreciation and amortization(363)  (315)  (15) %
Operating Loss$(3,424)  $(1,252)  >(100) %
Revenues
Higher subscription fees reflected increases of 18% from subscriber growth and 9% from higher average rates due to increases in retail pricing, partially offset by a decrease of 2% from an unfavorable Foreign Exchange Impact.
Advertising revenue growth reflected increases of 7% from higher rates due to increases at Hulu, and to a lesser extent, at Disney+, and 3% from higher impressions primarily attributable to Disney+ Hotstar. The increase in impressions at Disney+ Hotstar was primarily due to airing the ICC T20 World Cup and Asia Cricket Council (ACC) Asia Cup in fiscal 2022, neither of which were aired in fiscal 2021. The ICC T20 World Cup generally occurs every two years and was not held in fiscal 2021 due to COVID-19. The ACC Asia Cup was rescheduled from fiscal 2020 to fiscal 2022 as a result of COVID-19.
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The decrease in other revenue was due to Disney+ Premier Access revenue in fiscal 2021 compared to none in fiscal 2022, partially offset by a favorable Foreign Exchange Impact. Disney+ Premier Access titles in fiscal 2021 included Black Widow, Raya and the Last Dragon, Jungle Cruise and Cruella.
The following table presents additional information about our Disney+ and Hulu product offerings.
Paid subscribers as of:
(in millions)October 1, 2022October 2, 2021% Change
Better (Worse)
Disney+
Domestic (U.S. and Canada)46.438.820  %
International (excluding Disney+ Hotstar)56.536.057  %
Disney+ Core(1)
102.974.838  %
Disney+ Hotstar61.343.342  %
Hulu
SVOD Only42.839.78  %
Live TV + SVOD4.44.010  %
Total Hulu(1)
47.243.78  %
Average Monthly Revenue Per Paid Subscriber for the fiscal year ended:
20222021% Change
Better (Worse)
Disney+
Domestic (U.S. and Canada)$6.34$6.33—  %
International (excluding Disney+ Hotstar)6.105.3115  %
Disney+ Core6.225.876  %
Disney+ Hotstar0.880.6829  %
Hulu
SVOD Only12.7212.86(1) %
Live TV + SVOD87.6281.358  %
(1)Total may not equal the sum of the column due to rounding
Domestic Disney+ average monthly revenue per paid subscriber was comparable to fiscal 2021, as an increase in retail pricing and a lower mix of wholesale subscribers was essentially offset by a higher mix of subscribers to multi-product offerings.
International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.31 to $6.10 due to an increase in average retail pricing, partially offset by an unfavorable Foreign Exchange Impact.
Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.68 to $0.88 driven by higher advertising revenue and increases in retail pricing, partially offset by a higher mix of wholesale subscribers.
Hulu SVOD Only average monthly revenue per paid subscriber decreased from $12.86 to $12.72 driven by lower per-subscriber advertising revenue, a higher mix of subscribers to multi-product offerings and, to a lesser extent, to promotional offerings, partially offset by an increase in average retail pricing.
Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $81.35 to $87.62 driven by an increase in average retail pricing and higher advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.
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Costs and Expenses
Operating expenses are as follows:
($ in millions)20222021% 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)20222021% Change
Better (Worse)
Revenues
TV/VOD distribution$3,520   $3,925   (10) %
Theatrical distribution1,875   920   >100  %
Home entertainment distribution1,083   1,297   (16) %
Other2,288   1,795   27  %
Total revenues8,766   7,937   10  %
Operating expenses(5,508)  (4,536)  (21) %
Selling, general, administrative and other(2,610)  (1,944)  (34) %
Depreciation and amortization(296)  (294)  (1) %
Equity in the income of investees—   14   (100) %
Operating Income$352   $1,177   (70) %
Revenues
The decrease in TV/VOD distribution revenue reflected lower sales volumes, which included the impact of the shift from licensing our content to third parties to distributing it on our Entertainment Direct-to-Consumer streaming services.
The increase in theatrical distribution revenue was due to more titles released in fiscal 2022 compared to fiscal 2021 and revenue in fiscal 2022 from the co-production of Marvel’s Spider-Man: No Way Home. Although COVID-19 continued to impact our theatrical distribution business in certain markets in fiscal 2022, the impact in fiscal 2021 was more significant. Titles released in fiscal 2022 included Doctor Strange in The Multiverse of Madness, Thor: Love and Thunder, Eternals,
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Encanto and Lightyear. Titles released in fiscal 2021 included Shang-Chi and the Legend of the Ten Rings, Black Widow and Free Guy.
The decrease in home entertainment distribution revenue was attributable to lower unit sales despite the benefit of more new release titles in fiscal 2022. Net effective pricing was comparable to fiscal 2021 as lower unit pricing was offset by a higher mix of new release titles, which have a higher sales price than catalog titles.
The increase in other revenue was due to more stage play performances in fiscal 2022 as productions were generally shut down in fiscal 2021 due to COVID-19.
Costs and Expenses
Operating expenses are as follows:
($ in millions)20222021% 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)20222021% Change Better (Worse)
TFCF and Hulu acquisition amortization(1)
$(1,946)  $(2,006)3  %
Content License Early Termination(1,023)  —   nm
Restructuring and impairment charges(2)
(228)  (300)  24  %
German FTA gain—   126   (100) %
(1)In fiscal 2022, amortization of step-up on film and episodic costs was $634 million and amortization of intangible assets was $1,300 million. In fiscal 2021, amortization of step-up on film and episodic costs was $646 million and amortization of intangible assets was $1,345 million.
(2)Fiscal 2022 includes impairments of assets related to exiting our businesses in Russia. Fiscal 2021 includes impairments and severance costs related to the closure of an animation studio and severance costs and contract termination charges in connection with the integration of TFCF.
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Sports
Operating results for Sports are as follows:
($ in millions)20222021% Change
Better (Worse)
Revenues
Affiliate fees$10,796   $10,609   2  %
Advertising4,370   3,720   17  %
Subscription fees1,113   725   54  %
Other991   906   9  %
Total revenues17,270   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 investees55   51   8  %
Operating Income$2,710   $2,690   1  %
Revenues
Affiliate fees are as follows:
($ in millions)20222021% Change
Better (Worse)
ESPN
Domestic$9,437   $9,199 3  %
International1,084 1,114 (3) %
10,521 10,313 2  %
Star (India)275 296   (7) %
$10,796 $10,609 2  %
The increase in domestic ESPN affiliate fees was primarily due to an increase of 5% from higher contractual rates, partially offset by a decrease of 4% from fewer subscribers.
The decrease in international ESPN affiliate fees was attributable to decreases of 8% from fewer subscribers driven by channel closures, and 7% from an unfavorable Foreign Exchange Impact, partially offset by an increase of 11% from higher contractual rates.
The decrease in Star affiliate fees was due to decreases of 5% from an unfavorable Foreign Exchange Impact and 1% from fewer subscribers.
Advertising revenue is as follows:
($ in millions)20222021% Change
Better (Worse)
ESPN
Domestic$3,424 $2,981 15  %
International173   150   15  %
3,597 3,131 15  %
Star (India)773   589 31  %
$4,370 $3,720 17  %
The increase in domestic ESPN advertising revenue was due to increases of 11% from higher impressions and 5% from higher rates. The increase in impressions reflected higher average viewership and, to a lesser extent, an increase in units delivered.
Higher international ESPN advertising revenue was primarily due to increases of 11% from higher average viewership and 7% from higher rates, partially offset by a decrease of 6% from an unfavorable Foreign Exchange Impact.
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Growth in Star advertising revenue was due to an increase of 37% from higher average viewership, partially offset by decreases of 3% from an unfavorable Foreign Exchange Impact and 3% from lower rates. The increase in average viewership reflected the airing of more cricket matches in fiscal 2022. Fiscal 2022 included the ICC T20 World Cup, more Board of Control for Cricket in India (BCCI) matches and the ACC Asia Cup, partially offset by fewer IPL matches compared to fiscal 2021. The ICC T20 World Cup and the ACC Asia Cup were not held in fiscal 2021. The increase in BCCI matches in fiscal 2022 was driven by COVID-19-related cancellations in fiscal 2021.
The increase in subscription fees was due to ESPN+ subscriber growth.
The increase in other revenue was due to higher sub-licensing fees and higher fees received for programming ESPN on ABC, partially offset by lower UFC pay-per-view fees due to lower average buys per event. The increase in sub-licensing fees was due to fees from ICC T20 World Cup matches in fiscal 2022 and higher fees from BCCI cricket matches.
The following table presents additional information about ESPN+.
(in millions)October 1, 2022October 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)20222021% Change
Better (Worse)
Programming and production costs
ESPN
Domestic$(10,003) $(9,370) (7) %
International(998)  (1,094)  9  %
(11,001)(10,464)(5) %
Star (India)(1,284)(766)(68) %
(12,285)(11,230)(9) %
Other operating expenses(799)(756)(6) %
$(13,084)$(11,986)(9) %
The increase in domestic ESPN programming and production costs was due to new NHL programming, higher rights costs for NFL and CFP and an increase in production costs reflecting the return of ESPN-hosted events, which were canceled in fiscal 2021 due to COVID-19, and more ESPN films in fiscal 2022. These increases were partially offset by lower rights costs for MLB and NBA programming. Higher NFL programming costs were due to airing four additional regular season games in fiscal 2022 compared to fiscal 2021 and contractual rate increases. The increase in CFP rights costs was due to higher contractual rates. Lower MLB programming costs were due to airing 29 games of the 2022 regular season under our new contract and one 2021 season playoff game in fiscal 2022 compared to 92 games of the 2021 regular season in fiscal 2021. The decrease in NBA programming costs was due to the comparison to airing four games of the 2020 NBA Finals in the first quarter of fiscal 2021 due to COVID-19, partially offset by contractual rate increases. Fiscal 2021 also included the 2021 NBA Finals and fiscal 2022 included the 2022 NBA finals.
The decrease in international programming and production costs was due to channel closures in fiscal 2021, the impact of shifting exclusive soccer matches from Sports to Star+ in fiscal 2022 and a favorable Foreign Exchange Impact, partially offset by higher production costs.
The increase in Star programming and production costs was due to more cricket matches in fiscal 2022 and higher average costs per match for BCCI and IPL cricket matches.
Selling, general, administrative and other costs increased $210 million, to $1,441 million from $1,231 million, driven by higher marketing costs.
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Operating Income
Operating income increased 1%, to $2,710 million from $2,690 million due to an increase at ESPN, partially offset by a decrease at Star.
The following table provides supplemental revenue and operating income (loss) detail for Sports:
($ in millions)20222021% Change
Better (Worse)
Supplemental revenue detail
ESPN
Domestic$14,636   $13,623   7  %
International1,434   1,390   3  %
16,070   15,013   7  %
Star (India)1,200   947   27  %
$17,270   $15,960   8  %
Supplemental operating income (loss) detail
ESPN
Domestic$2,814   $2,610   8  %
International78   (14)  nm
2,892   2,596   11  %
Star (India)(237)  43   nm
Equity in the income of investees55   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)20222021% Change
Better (Worse)
TFCF acquisition amortization(1)
$(399)  $(404)  1  %
Restructuring and impairment charges(1)  (15)  93  %
(1)Represents amortization of intangible assets.
Experiences
Operating results for Experiences are as follows:
($ in millions)20222021% Change
Better (Worse)
Revenues
Theme park admissions$8,602   $3,848   >100  %
Resorts and vacations6,410   2,701   >100  %
Parks & Experiences merchandise, food and beverage6,579   3,299   99  %
Merchandise licensing and retail4,609   4,650   (1) %
Parks licensing and other1,885   1,463   29  %
Total revenues28,085   15,961   76  %
Operating expenses(14,936)  (10,799)  (38) %
Selling, general, administrative and other(3,403)  (2,886)  (18) %
Depreciation and amortization(2,451)  (2,377)  (3) %
Equity in the loss of investees(10)  (19)  47  %
Operating Income (loss)$7,285   $(120)  nm
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COVID-19
Revenues at Experiences benefited from fewer closures and operating capacity restrictions in fiscal 2022 compared to fiscal 2021 as a result of COVID-19. The following table summarizes the approximate number of weeks of operations in fiscal 2022 and fiscal 2021:
Weeks of Operation
20222021
Walt Disney World Resort52   52   
Disneyland Resort52   22   
Disneyland Paris52   19   
Hong Kong Disneyland Resort37   40   
Shanghai Disney Resort37   52   
Revenues
The increase in theme park admissions revenue was due to attendance growth and higher average per capita ticket revenue. Higher attendance reflected increases at Disneyland Resort, Walt Disney World Resort and, to a lesser extent, Disneyland Paris, partially offset by a decrease at Shanghai Disney Resort. Growth in average per capita ticket revenue was due to the introduction of Genie+ and Lightning Lane at our domestic parks in the first quarter of fiscal 2022 and higher average ticket prices at Walt Disney World Resort and Disneyland Paris, partially offset by lower average ticket prices at Disneyland Resort and Shanghai Disney Resort.
Growth in resorts and vacations revenue was primarily due to increases of 51% from higher occupied hotel room nights, 32% from an increase in passenger cruise days and 17% from higher average daily hotel room rates.
Parks & Experiences merchandise, food and beverage revenue growth was due to increases of 82% from higher volumes and 9% from higher average guest spending.
Merchandise licensing and retail revenue was comparable to the prior year, as a decrease of 8% from retail was offset by an increase of 8% from licensing. The decrease in retail revenues was due to the closure of a substantial number of Disney-branded retail stores in North America and Europe in the second half of fiscal 2021. The revenue growth at licensing was primarily due to higher sales of merchandise based on Mickey and Friends, Star Wars, Encanto, Spider-Man and Disney Princesses, partially offset by a decrease in revenues from merchandise based on Frozen.
The increase in parks licensing and other revenue was primarily due to higher sponsorship revenues and an increase in royalties from Tokyo Disney Resort.
In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our theme parks and resorts, and we believe these metrics are useful to investors in analyzing the business:
 Domestic
International(1)
Total
 202220212022202120222021
Parks
Increase (decrease)
Attendance>100  %(17) %54  %(4) %87  %(14) %
Per Capita Guest Spending13  %17  %24  %(3) %18  %11  %
Hotels
Occupancy82  %42  %56  %21  %76  %37  %
Available Room Nights (in thousands)10,07310,4513,1793,17913,25213,630
Change in Per Room Guest Spending(1)
19  %1  %(7) %22  %15  %4  %
(1)In fiscal 2023, the Company revised its method of allocating revenue on the sales of Disneyland Paris vacation packages between hotel room revenue and admissions revenue. The new method resulted in a decrease in the percentage of revenue allocated to hotel rooms. If we had applied the new method in fiscal 2022, the impact would have been a decrease of approximately $50 million. There is no impact to fiscal 2021 due to this change.
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Costs and Expenses
Operating expenses are as follows:
($ in millions)20222021% 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)20222021% Change
Better (Worse)
Supplemental revenue detail
Parks & Experiences
Domestic$20,131   $9,353   >100  %
International3,297   1,859   77  %
Consumer Products4,657   4,749   (2) %
$28,085   $15,961   76  %
Supplemental operating income (loss) detail
Parks & Experiences
Domestic$5,332   $(1,139)  nm
International(237)  (1,074)  78  %
Consumer Products2,190   2,093   5  %
$7,285   $(120)  nm
Items Excluded from Segment Operating Income Related to Experiences
The following table presents supplemental information for items related to Experiences that are excluded from segment operating income:
($ in millions)20222021% Change
Better (Worse)
Restructuring and impairment charges(1)
$—   $(327)  100  %
TFCF acquisition amortization(8)  (8)  —  %
(1)Fiscal 2021 included asset impairments and severance costs related to the closure of a substantial number of our Disney-branded retail stores in North America and Europe and severance costs related to other workforce reductions. The prior year includes severance costs related to workforce reductions.
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CORPORATE AND UNALLOCATED SHARED EXPENSES
Corporate and unallocated shared expenses are as follows:
% Change
Better (Worse)
(in millions)20212020% Change
Better (Worse)
($ in millions)($ in millions)2023202220212023
vs.
2022		2022
vs.
2021
Corporate and unallocated shared expensesCorporate and unallocated shared expenses$(928)$(817)(14) %Corporate and unallocated shared expenses$(1,147)$(1,159)$(928)1  %(25) %
TheFrom fiscal 2022 to fiscal 2023, the decrease in corporate and unallocated shared expenses was driven by lower compensation and human resource-related costs, partially offset by increases in rent expense and technology costs. From fiscal 2021 to fiscal 2022, the increase in corporate and unallocated shared expenses was due todriven by higher compensation and human resource-related costs.
RESTRUCTURING ACTIVITIES
See Note 1918 to the Consolidated Financial Statements for information regarding the Company’s restructuring activities in connection with the acquisition and integration of TFCF and at the DPEP segment.
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LIQUIDITY AND CAPITAL RESOURCES
The change in cash, cash equivalents and restricted cash is as follows:
(in millions)20212020
($ in millions)($ in millions)202320222021
Cash provided by operations - continuing operationsCash provided by operations - continuing operations$5,566  $7,616  Cash provided by operations - continuing operations$9,866  $6,002  $5,566  
Cash used in investing activities - continuing operationsCash used in investing activities - continuing operations(3,171) (3,850) Cash used in investing activities - continuing operations(4,641) (5,008) (3,171) 
Cash provided by (used in) financing activities - continuing operations(4,385) 8,480  
Cash provided by operations - discontinued operations1  2  
Cash provided by investing activities - discontinued operations8  213  
Cash used in financing activities - continuing operationsCash used in financing activities - continuing operations(2,724) (4,729) (4,385) 
Cash (used in) provided by discontinued operationsCash (used in) provided by discontinued operations—  (4) 9  
Impact of exchange rates on cash, cash equivalents and restricted cashImpact of exchange rates on cash, cash equivalents and restricted cash30  38  Impact of exchange rates on cash, cash equivalents and restricted cash73  (603) 30  
Change in cash, cash equivalents and restricted cashChange in cash, cash equivalents and restricted cash$(1,951) $12,499  Change in cash, cash equivalents and restricted cash$2,574  $(4,342) $(1,951) 
Operating Activities
Continuing operations
Cash provided by operating activities of $5.6$9.9 billion for fiscal 2021 decreased 27%2023 increased 64% or $2.0$3.9 billion compared to $7.6$6.0 billion in fiscal 20202022 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 DMEDEntertainment and, to a lesser extent, a partial payment for the Content License Early Termination. The increase in operating cash flow at Experiences was due to higher operating cash receipts driven by higher revenue, partially offset by an increase in operating cash disbursements due to higher operating expenses. The decrease in operating cash flow at Entertainment was due to higher operating cash disbursements and higher income taxspending on film and interest payments,episodic content, partially offset by higher operating cash flow at DPEP and lower payments for severance. The decrease at DMED was due to higher spending on film and television productions. The increase at DPEP was due to lowerreceipts. Higher operating cash disbursements were driven by increased operating expenses while higher operating cash receipts were due to the pay-down of liabilities in the prior year as a result of closures/reduced capacities and lower volumes in the current year.revenue growth.
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Depreciation expense is as follows:
(in millions)20212020
Disney Media and Entertainment Distribution$613$638
Disney Parks, Experiences and Products
($ in millions)($ in millions)202320222021
EntertainmentEntertainment$669$560$513
SportsSports7390100
ExperiencesExperiences
DomesticDomestic1,5511,634Domestic2,0111,6801,551
InternationalInternational718694International669662718
Total Disney Parks, Experiences and Products2,2692,328
Total ExperiencesTotal Experiences2,6802,3422,269
CorporateCorporate186174Corporate204191186
Total depreciation expenseTotal depreciation expense$3,068$3,140Total depreciation expense$3,626$3,183$3,068
Amortization of intangible assets is as follows:
(in millions)20212020
Disney Media and Entertainment Distribution$178$175
Disney Parks, Experiences and Products108109
TFCF and Hulu1,7571,921
Total amortization of intangible assets$2,043$2,205
($ in millions)202320222021
Entertainment$87$164$174
Sports——4
Experiences109109108
TFCF and Hulu1,5471,7071,757
Total amortization of intangible assets$1,743$1,980$2,043
Produced and licensed content costs
The DMED segment incursEntertainment and Sports segments incur costs to produce and license film, episodic, televisionsports and other content. Production costs include spend on content internally produced at our studios such as live-action and animated films, episodic series, specials, shorts and theatrical stage plays. Production costs also include original content commissioned from third partythird-party studios. Programming costs include content rights licensed from third parties for use on the Company’s Linear Networkssports and general entertainment networks and DTC streaming services. Programming assets are generally recorded when the programming becomes available to us with a corresponding increase in programming liabilities.
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The Company’s production and programming activity for fiscal 20212023, 2022 and 20202021 are as follows:
(in millions)20212020
($ in millions)($ in millions)202320222021
Beginning balances:Beginning balances:Beginning balances:
Production and programming assetsProduction and programming assets$27,193  $27,407  Production and programming assets$37,667  $31,732  $27,193  
Programming liabilitiesProgramming liabilities(4,099) (4,061) Programming liabilities(3,940) (4,113) (4,099) 
23,094  23,346  33,727  27,619  23,094  
Spending:Spending:Spending:
Licensed programming and rightsLicensed programming and rights12,412  12,077  Licensed programming and rights14,851  13,316  12,412  
Produced contentProduced content12,848  8,104  Produced content12,323  16,611  12,848  
25,260  20,181  27,174  29,927  25,260  
Amortization:Amortization:Amortization:
Licensed programming and rightsLicensed programming and rights(12,784) (11,241) Licensed programming and rights(13,405) (13,432) (12,784) 
Produced contentProduced content(8,175) (9,337) Produced content(11,861) (10,224) (8,175) 
(20,959) (20,578) (25,266) (23,656) (20,959) 
Change in production and programming costsChange in production and programming costs4,301  (397) Change in production and programming costs1,908  6,271  4,301  
Content ImpairmentContent Impairment(2,266) —  —  
Other non-cash activityOther non-cash activity224  145  Other non-cash activity(568) (163) 224  
Ending balances:Ending balances:Ending balances:
Production and programming assetsProduction and programming assets31,732  27,193  Production and programming assets36,593  37,667  31,732  
Programming liabilitiesProgramming liabilities(4,113) (4,099) Programming liabilities(3,792) (3,940) (4,113) 
$27,619  $23,094  $32,801  $33,727  $27,619  
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The Company currently expects its fiscal 20222024 spend on produced and licensed content includingto be approximately $25 billion, with sports rights expected to be as much as approximately $33 billion, or approximately $8 billion more than fiscal 2021 spendaccount for over 40% of $25 billion. The increase is driven by higher spend to support our DTC expansion and generally assumes no significant disruptions to production due to COVID-19.spend. See Note 1514 to the Consolidated Financial Statements for information regarding the Company’s contractual commitments to acquire sports and broadcast programming.
Commitments and guarantees
The Company has various commitments and guarantees, such as long-term leases, purchase commitments and other executory contracts, that are disclosed in the footnotes to the financial statements. See Notes 1514 and 1615 to the Consolidated Financial Statements for further information regarding these commitments.
Legal and Tax Matters
As disclosed in Notes 109 and 1514 to the Consolidated Financial Statements, the Company has exposure for certain tax and legal matters.
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 20212023, 2022 and 20202021 are as follows:
(in millions)20212020
Disney Media and Entertainment Distribution$862 $783 
Disney Parks, Experiences and Products
Domestic1,597 2,145 
International675 759 
Total Disney Parks, Experiences and Products2,272  2,904  
Corporate444 335 
$3,578  $4,022  
($ in millions)202320222021
Entertainment$1,032 $802 $838 
Sports15 8 24 
Experiences
Domestic2,203 2,680 1,597 
International822 767 675 
Total Experiences3,025  3,447  2,272  
Corporate897 686 444 
$4,969  $4,943  $3,578  
Capital expenditures at the DMED segmentEntertainment primarily reflect investments in technology and in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities.
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The increase in fiscal 2023 compared to fiscal 2022 was driven by higher technology spending to support our streaming services.
Capital expenditures at the DPEP segmentExperiences are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and systems infrastructure. The decrease in capital expenditures at our domestic parks and resorts in fiscal 20212023 compared to fiscal 20202022 was driven by the temporary suspension of certaindue to lower spending on cruise ship fleet expansion. The increase in capital projects since the onset of COVID-19 although spending increasedexpenditures in the latter part of fiscal 20212022 compared to fiscal 2020.2021 was due to cruise ship fleet expansion.
Capital expenditures at Corporate primarily reflect investments in facilities, information technology infrastructure and equipment. The increaseincreases in fiscal 20212023 compared to fiscal 2020 was2022 and in fiscal 2022 compared to fiscal 2021 were both due to higher spending on facilities.
The Company currently expects its fiscal 20222024 capital expenditures will beto total approximately $6.1$6 billion compared to fiscal 20212023 capital expenditures of $3.6$5 billion. The increase in capital expenditures is primarily due to higher spending on cruise ship fleet expansion, Corporate facilities and production facilities and technology at the DMED segment.
Other Investing Activities
Cash provided by other investing activities of $407 millionExperiences, in fiscal 2021 and $172 millionpart due to continued investment in fiscal 2020 reflects proceeds from the sales of investments.our Disney Cruise Line business.
Financing Activities
Continuing operationsFinancing activities for fiscal 2023, 2022 and 2021 are as follows:
Cash used in financing activities was $4.4 billion in fiscal 2021 compared to cash provided by financing activities
($ in millions)202320222021
Change in borrowings$(1,783)$(4,017)$(3,699)
Activities related to noncontrolling and redeemable noncontrolling interests(707)(507)(874)
Cash used in other financing activities, net(1)
(234)(205)188 
Cash used in financing activities - continuing operations$(2,724) $(4,729) $(4,385) 
(1) Primarily consists of $8.5 billion in fiscal 2020. Cash used in financing activities in fiscal 2021 was due to a reduction in borrowings and the purchase of a redeemable non-controlling interest, partially offset by proceeds from the issuance of stock options. The decrease in cash provided by financing activities in fiscal 2021 compared to fiscal 2020 reflected a reduction in net borrowings of $3.7 billion in fiscal 2021 compared to proceeds from net borrowings of $11.2 billion in fiscal 2020. Additionally, we paid a cash dividend of $1.6 billion in fiscal 2020 compared to no dividend in fiscal 2021.equity award activity.
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Borrowings activities and other
During the year ended October 2, 2021,September 30, 2023, the Company’s borrowing activity was as follows:
(in millions)October 3, 2020BorrowingsPaymentsOther
Activity		October 2, 2021
($ in millions)($ in millions)October 1, 2022BorrowingsPaymentsOther
Activity		September 30, 2023
Commercial paper with original maturities less than three months(1)
Commercial paper with original maturities less than three months(1)
$—  $—  $—  $—  $—  
Commercial paper with original maturities less than three months(1)
$50  $238  $—  $1  $289  
Commercial paper with original maturities greater than three monthsCommercial paper with original maturities greater than three months2,023  2,221  (2,247) (5) 1,992  Commercial paper with original maturities greater than three months1,612  3,603  (4,032) 4  1,187  
U.S. dollar denominated notes(2)
U.S. dollar denominated notes(2)
52,736  —  (3,510) (136) 49,090  
U.S. dollar denominated notes(2)
45,091  —  (1,450) (137) 43,504  
Asia Theme Parks borrowings(3)Asia Theme Parks borrowings(3)1,303  35  (129) 122  1,331  Asia Theme Parks borrowings(3)1,425  83  (225) 25  1,308  
Foreign currency denominated debt and other(3)(4)
Foreign currency denominated debt and other(3)(4)
2,566  29  (98) (504) 1,993  
Foreign currency denominated debt and other(3)(4)
191  —  —  (48) 143  
$58,628  $2,285  $(5,984) $(523) $54,406  $48,369  $3,924  $(5,707) $(155) $46,431  
(1)Borrowings and reductions of borrowings are reported net.
(2)The other activity is primarily due to the amortization of purchase priceaccounting adjustments on debt assumed in the TFCF acquisition and debt issuance fees.
(3)See Note 6 to the Consolidated Financial Statements for information regarding commitments to fund the Asia Theme Parks.
(4)The other activity is due to market value adjustments for debt with qualifying hedges.
See Note 98 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 maturing in March 2022, March 2023 and March 2025, and incremental term debt issuances to retire or refinance other borrowings before or as they come due.
SeeIn 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 4 to2 of the Consolidated Financial Statements for a summary of the Company’s put/call agreement with NBCU.additional information).
See Note 7 to the Consolidated Financial Statements for information regarding commitments to fund Hong Kong Disneyland Resort and Shanghai Disney Resort.
See Note 12 to the Consolidated Financial Statements for a summary of the Company’s dividends in fiscal 2020 and 2019. The Company did not declare or pay a dividend in fiscal 2021. The Company did notor repurchase any of its shares in fiscal 2021, 2020 or 2019.2023, 2022 and 2021.
The Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its control, including COVID-19, which has had an adverse impact on the Company’s operating cash flows. We have taken a number of measures to mitigate the impact on the Company’s financial position. See Significant Developments for the impact COVID-19 has had on our operations and mitigating measures we have taken.
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control. We believe that the Company’s financial condition remainsis 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, andcontractual obligations, upcoming debt maturities as well as future capital expenditures related to the expansion of existing businesses and development of new projects, although certain of these activities have been scaled back or suspended in light of COVID-19. Depending on the unknowable duration and severity of the future impacts of COVID-19 and its variants,projects. In addition, the Company may take additional mitigating actions in the futurecould undertake other measures to ensure sufficient liquidity, such as continuing to not declare dividends (the Company did not pay a dividend with respect to fiscal 2020 operations and has not declared or paid a dividend with respect to fiscal 2021 operations);dividends; raising financing; reducing or not making certain payments, such as some contributions to our pension and postretirement medical plans; raising additional financing; further suspending capital spending; reducing film and televisionepisodic content investments; or implementing additional furloughs or reductions in force. The impacts on our operating cash flows are subject to uncertainty and may require us to rely more heavily on external funding sources, such as debt and other types of financing.
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 October 2, 2021,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 BBB+A- and A-2 (Stable)(Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively. The Company’s bank facilities contain only one financial covenant, relating to interest coverage whichof three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs. On September 30, 2023, the Company met on October 2, 2021,this covenant by a significant margin. The Company’s bank facilities also specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We believe that the application of the following accounting policies, which are important to our financial position and results of operations, require significant judgments and estimates on the part of management. For a summary of our significant accounting policies, including the accounting policies discussed below, see Note 2 to the Consolidated Financial Statements.
Produced and Acquired/Licensed Content Costs
We amortize and test for impairment capitalized film and television production costs based on whether the content is predominantly monetized individually or as a group. See Note 2 to the Consolidated Financial Statements for further discussion.
Production costs that are classified as individual are amortized based upon the ratio of the current period’s revenues to the estimated remaining total revenues (Ultimate Revenues).
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With respect to produced films intended for theatrical release, the most sensitive factor affecting our estimate of Ultimate Revenues is theatrical performance. Revenues derived from other markets subsequent to the theatrical release are generally highly correlated with theatrical performance. Theatrical performance varies primarily based upon the public interest and demand for a particular film, the popularity of competing films at the time of release and the level of marketing effort. Upon a film’s release and determination of the theatrical performance, the Company’s estimates of revenues from succeeding windows and markets, which may include imputed license fees for content that is used on our DTC streaming services, are revised based on historical relationships and an analysis of current market trends.
With respect to capitalized television production costs that are classified as individual, the most sensitive factor affecting estimates of Ultimate Revenues is program ratings of the content on our licensees’ platforms. Program ratings, which are an indication of market acceptance, directly affect the program’s ability to generate advertising and subscriber revenues and are correlated with the license fees we can charge for the content in subsequent windows and for subsequent seasons.
Ultimate Revenues are reassessed each reporting period and the impact of any changes on amortization of production cost is accounted for as if the change occurred at the beginning of the current fiscal year. If our estimate of Ultimate Revenues decreases, amortization of costs may be accelerated or result in an impairment. Conversely, if our estimate of Ultimate Revenues increases, cost amortization may be slowed.
Production costs classified as individual are tested for impairment at the individual title level by comparing that title’s unamortized costs to the present value of discounted cash flows directly attributable to the title. To the extent the title’s unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess.
Produced content costs that are part of a group and acquired/licensed content costs are amortized based on projected usage, typically resulting in an accelerated or straight-line amortization pattern. The determination of projected usage requires judgment and is reviewed on a regular basis for changes. Adjustments to projected usage are applied prospectively in the period of the change. Historical viewing patterns are the most significant input into determining the projected usage, and significant judgment is required in using historical viewing patterns to derive projected usage. If projected usage changes we may need to accelerate or slow the recognition of amortization expense.
Cost of content that is predominantly monetized as a group is tested for impairment by comparing the present value of the discounted cash flows of the group to the aggregate unamortized costs of the group. The group is established by identifying the lowest level for which cash flows are independent of the cash flows of other produced and licensed content. If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group. If there are no plans to continue to use an individual film or television program that is part of a group, the unamortized cost of the individual title is written down to its estimated fair value. Licensed content is included as part of the group within which it is monetized for purposes of impairment testing.
The amortization of multi-year sports rights is based on projections of revenues for each season relative to projections of total revenues over the contract period (estimated relative value). Projected revenues include advertising revenue and an allocation of affiliate revenue. If the annual contractual payments related to each season approximate each season’s estimated relative value, we expense the related contractual payments during the applicable season. If estimated relative values by year were to change significantly, amortization of our sports rights costs may be accelerated or slowed.
Revenue Recognition
The Company has revenue recognition policies for its various operating segments that are appropriate to the circumstances of each business. Refer to Note 2 to the Consolidated Financial Statements for our revenue recognition policies.
Pension and Postretirement Medical Plan Actuarial Assumptions
The Company’s pension and postretirement medical benefit obligations and related costs are calculated using a number of actuarial assumptions. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and/or liability measurement, which we evaluate annually. Other assumptions include the healthcare cost trend rate and employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increase.
The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date. A lower discount rate increases the present value of benefit obligations and increases pension and postretirement medical expense. The guideline for setting this rate is a high-quality long-term corporate bond rate. We increased our discount rate to 5.94% at the end of fiscal 2023 from 5.44% at the end of fiscal 2022 to reflect market interest rate conditions at our fiscal 2023 year-end measurement date. The Company’s discount rate was determined by considering yield curves constructed of a large population of high-quality corporate bonds and reflects the matching of the plans’ liability cash flows to the yield curves. A one percentage point decrease in the assumed discount rate would increase total benefit expense for fiscal 2024 by approximately $200 million and would increase the projected benefit obligation at September 30, 2023 by approximately $2.0 billion. A one
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percentage point increase in the assumed discount rate would decrease total benefit expense and the projected benefit obligation by approximately $45 million and $1.8 billion, respectively.
To determine the expected long-term rate of return on the plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. Our expected return on plan assets is 7.00%. A lower expected rate of return on plan assets will increase pension and postretirement medical expense. A one percentage point change in the long-term asset return assumption would impact fiscal 2024 annual expense by approximately $170 million.
Goodwill, Other Intangible Assets, Long-Lived Assets and Investments
The Company is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and if current events or circumstances require, on an interim basis. The Company performs its annual test of goodwill and indefinite-lived intangible assets for impairment in its fiscal fourth quarter.
Goodwill is allocated to various reporting units, which are an operating segment or one level below the operating segment. To test goodwill for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of a reporting unit exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows of the reporting unit.
The quantitative assessment compares the fair value of each goodwill reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the amount of goodwill allocated to the reporting unit.
In fiscal 2023, the Company bypassed the qualitative test and performed a quantitative assessment of goodwill for impairment, under both the previous segment reporting structure and the new segment reporting structure. There were no goodwill impairments under the previous reporting structure. The change in reporting structure requires judgment to identify new reporting units, allocate goodwill to these reporting units (based on relative fair values) and assign other recorded assets and liabilities to these reporting units.
To determine the fair value of our reporting units, we generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate. The discounted cash flow analyses are sensitive to our estimated projected future cash flows as well as the discount rates used to calculate their present value. Our future cash flows are based on internal forecasts for each reporting unit, which consider projected inflation and other economic indicators, as well as industry growth projections. Discount rates for each reporting unit are determined based on the inherent risks of each reporting unit’s underlying operations. We believe our estimates are consistent with how a marketplace participant would value our reporting units.
Since our prior annual impairment assessment performed in the fourth quarter of fiscal 2022, the fair values of our media and entertainment businesses have generally declined as a result of higher discount rates and lower projections for certain revenue streams.
Based on our projections, the carrying amounts of our entertainment and international sports linear networks reporting units exceeded their fair values and we recorded non-cash goodwill impairment charges of approximately $0.7 billion. The entertainment linear networks reporting unit goodwill after impairment is approximately $8 billion and the international sports linear networks reporting unit goodwill is fully impaired.
In addition, the fair value of our entertainment DTC services reporting unit exceeded its carrying amount by less than 10%. Goodwill of the entertainment DTC services reporting unit is approximately $45 billion.
Significant judgments and assumptions in the discounted cash flow model relate to future revenues and certain operating expenses, terminal growth rates and discount rates. Changes to these significant assumptions, market trends, or macroeconomic events could produce test results in the future that differ, and we could be required to record additional impairment charges.
For our entertainment linear networks reporting unit, a 25 basis point increase in the discount rate or a 1% reduction in projected cash flows used to determine fair value would result in an incremental impairment charge of approximately $0.3 billion.
For our entertainment DTC services reporting unit, a 25 basis point increase in the discount rate used to determine fair value would result in an impairment of $0.5 billion, and a 1% reduction in projected cash flows would result in a decrease in the excess fair value over carrying amount by approximately $0.9 billion.
To test other indefinite-lived intangible assets for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of each of its indefinite-lived intangible assets exceeds its fair
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value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows.
The quantitative assessment compares the fair value of an indefinite-lived intangible asset to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess. Fair values of indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate.
The Company tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to hold the asset for sale. The impairment test for assets held for use requires a comparison of the estimated undiscounted future cash flows expected to be generated over the useful life of the significant assets of an asset group to the carrying amount of the asset group. An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the asset group and the carrying amount of the asset group. For assets held for sale, to the extent the carrying amount is greater than the asset’s fair value less costs to sell, an impairment loss is recognized for the difference. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, estimates of future cash flows and the discount rate used to determine fair values.
The Company has investments in equity securities. For equity securities that do not have a readily determinable fair value, we consider forecasted financial performance of the investee companies, as well as volatility inherent in the external markets for these investments. If these forecasts are not met, impairment charges may be recorded.
The Company tested its indefinite-lived intangible assets, long-lived assets and investments for impairment and recorded non-cash impairment charges of $2.3 billion, $0.2 billion and $0.3 billion in fiscal 2023, 2022 and 2021, respectively. The fiscal 2023 charges primarily related to content impairments resulting from a strategic change in our approach to content curation. See Note 18 to the Consolidated Financial Statements for additional information. The fiscal 2022 charges primarily related to exiting our businesses in Russia. The fiscal 2021 charges primarily related to the closure of an animation studio and a substantial number of our Disney-branded retail stores in North America and Europe.
Allowance for Credit 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. If our estimate of uncollectible accounts is too low, costs and expenses may increase in future periods, and if it is too high, costs and expenses may decrease in future periods. See Note 2 to the Consolidated Financial Statements for additional discussion.
Contingencies and Litigation
We are currently involved in certain legal proceedings and, as required, have accrued estimates of the probable and estimable losses for the resolution of these proceedings. These estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and have been developed in consultation with outside counsel as appropriate. From time to time, we are also involved in other contingent matters for which we accrue estimates for a probable and estimable loss. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to legal proceedings or our assumptions regarding other contingent matters. See Note 14 to the Consolidated Financial Statements for more detailed information on litigation exposure.
Income Tax
As a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. From time to time, these audits result in proposed assessments. Our determinations regarding the recognition of income tax benefits are made in consultation with outside tax and legal counsel, where appropriate, and are based upon the technical merits of our tax positions in consideration of applicable tax statutes and related interpretations and precedents and upon the expected outcome of proceedings (or negotiations) with taxing and legal authorities. The tax benefits ultimately realized by the Company may differ from those recognized in our future financial statements based on a number of factors, including the Company’s decision to
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settle rather than litigate a matter, relevant legal precedent related to similar matters and the Company’s success in supporting its filing positions with taxing authorities. See Note 9 to the Consolidated Financial Statements for additional discussion.
New Accounting Pronouncements
See Note 19 to the Consolidated Financial Statements for information regarding new accounting pronouncements.
DTC PRODUCT DESCRIPTIONS, KEY DEFINITIONS AND SUPPLEMENTAL INFORMATION
Product Offerings
In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or together as part of various multi-product offerings. Hulu Live TV + SVOD includes Disney+ and ESPN+. Disney+ is available in more than 150 countries and territories outside the U.S. and Canada. In India and certain other Southeast Asian countries, the service is branded Disney+ Hotstar. In certain Latin American countries, we offer Disney+ as well as Star+, a general entertainment SVOD service, which is available on a standalone basis or together with Disney+ (Combo+). Depending on the market, our services can be purchased on our websites or through third-party platforms/apps or are available via wholesale arrangements.
Paid Subscribers
Paid subscribers reflect subscribers for which we recognized subscription revenue. Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method. Subscribers to multi-product offerings in the U.S. are counted as a paid subscriber for each service included in the multi-product offering and subscribers to Hulu Live TV + SVOD are counted as one paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and ESPN+ services. In Latin America, if a subscriber has either the standalone Disney+ or Star+ service or subscribes to Combo+, the subscriber is counted as one Disney+ paid subscriber. Subscribers include those who receive a service through wholesale arrangements including those for which the service is distributed to each subscriber of an existing content distribution tier. When we aggregate the total number of paid subscribers across our DTC streaming services, we refer to them as paid subscriptions.
International Disney+ (excluding Disney+ Hotstar)
International Disney+ (excluding Disney+ Hotstar) includes the Disney+ service outside the U.S. and Canada and the Star+ service in Latin America.
Average Monthly Revenue Per Paid Subscriber
Hulu and ESPN+ average monthly revenue per paid subscriber is calculated based on the average of the monthly average paid subscribers for each month in the period. The monthly average paid subscribers is calculated as the sum of the beginning of the month and end of the month paid subscriber count, divided by two. Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period. Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses) and premium and feature add-on revenue but excludes Premier Access and Pay-Per-View revenue. The average revenue per paid subscriber is net of discounts on offerings that carry more than one service. Revenue is allocated to each service based on the relative retail or wholesale price of each service on a standalone basis. Hulu Live TV + SVOD revenue is allocated to the SVOD services based on the wholesale price of the Hulu SVOD Only, Disney+ and ESPN+ multi-product offering. In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third-party platforms.
Supplemental information about paid subscribers(1):
(in millions)September 30,
2023		October 1,
2022		October 2,
2021
Domestic (U.S. and Canada) standalone55.560.465.4
Domestic (U.S. and Canada) multi-product(1)
22.619.411.4
78.179.776.9
International standalone (excluding Disney+ Hotstar)(2)
55.349.234.8
International multi-product(3)
10.87.21.2
66.156.536.0
Total(4)
144.2136.2112.9

(1)At September 30, 2023, there were 20.3 million and 2.3 million subscribers to three-service and two-service multi-product offerings, respectively. At October 1, 2022, there were 18.7 million and 0.7 million subscribers to three-
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service and two-service multi-product offerings, respectively. At October 2, 2021, there were 11.4 million subscribers to three-service offerings and no subscribers to two-service offerings.
(2)Disney+ Hotstar is not included in any of the Company’s multi-product offerings.
(3)Consists of subscribers to Combo+.
(4)Total may not equal the sum of the column due to rounding.
SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATIONPension and Postretirement Medical Plan Actuarial Assumptions
On March 20, 2019,The Company’s pension and postretirement medical benefit obligations and related costs are calculated using a number of actuarial assumptions. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and/or liability measurement, which we evaluate annually. Other assumptions include the healthcare cost trend rate and employee demographic factors such as partretirement patterns, mortality, turnover and rate of compensation increase.
The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date. A lower discount rate increases the present value of benefit obligations and increases pension and postretirement medical expense. The guideline for setting this rate is a high-quality long-term corporate bond rate. We increased our discount rate to 5.94% at the end of fiscal 2023 from 5.44% at the end of fiscal 2022 to reflect market interest rate conditions at our fiscal 2023 year-end measurement date. The Company’s discount rate was determined by considering yield curves constructed of a large population of high-quality corporate bonds and reflects the matching of the acquisition of TFCF, The Walt Disney Company (“TWDC”) became the ultimate parent of TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company) (“Legacy Disney”). Legacy Disney and TWDC are collectively referred to as “Obligor Group”, and individually, as a “Guarantor”. Concurrent with the close of the TFCF acquisition, $16.8 billion of TFCF’s assumed public debt (which then constituted 96% of such debt) was exchanged for senior notes of TWDC (the “exchange notes”) issued pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an Indenture, dated as of March 20, 2019, between TWDC, Legacy Disney, as guarantor, and Citibank, N.A., as trustee (the “TWDC Indenture”) and guaranteed by Legacy Disney. On November 26, 2019, $14.0 billion of the outstanding exchange notes were exchanged for new senior notes of TWDC registered under the Securities Act, issued pursuantplans’ liability cash flows to the TWDC Indenture and guaranteed by Legacy Disney. In addition, contemporaneously with the closing of the March 20, 2019 exchange offer, TWDC entered into a guarantee of the registered debt securities issued by Legacy Disney under the Indenture dated as of September 24, 2001 between Legacy Disney and Wells Fargo Bank, National Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee).
Other subsidiaries of the Company do not guarantee the registered debt securities of either TWDC or Legacy Disney (such subsidiaries are referred to as the “non-Guarantors”). The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at October 2, 2021 was as follows:
TWDCLegacy Disney
(in millions)Par ValueCarrying ValuePar ValueCarrying Value
Registered debt with unconditional guarantee$37,338  $39,162  $10,587  $10,671  
The guarantees by TWDC and Legacy Disney are full and unconditional and cover all payment obligations arising under the guaranteed registered debt securities. The guarantees may be released and discharged upon (i) as a general matter, the indebtedness for borrowed money of the consolidated subsidiaries of TWDC in aggregate constituting no more than 10% of all consolidated indebtedness for borrowed money of TWDC and its subsidiaries (subject to certain exclusions), (ii) upon the sale, transfer or disposition of all or substantially all of the equity interests or all or substantially all, or substantially as an entirety, the assets of Legacy Disney to a third party, and (iii) other customary events constituting a discharge of a guarantor’s obligations. In addition,yield curves. A one percentage point decrease in the case of Legacy Disney’s guarantee of registered debt securities issuedassumed discount rate would increase total benefit expense for fiscal 2024 by TWDC, Legacy Disney may be releasedapproximately $200 million and discharged from its guaranteewould increase the projected benefit obligation at any time Legacy Disney is not a borrower, issuer or guarantor under certain material bank facilities or any debt securities.
Operations are conducted almost entirely through the Company’s subsidiaries. Accordingly, the Obligor Group’s cash flow and ability to service its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Obligor Group, whetherSeptember 30, 2023 by dividends, loans or otherwise. Holders of the guaranteed registered debt securities have a direct claim only against the Obligor Group.approximately $2.0 billion. A one
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Set forthpercentage point increase in the assumed discount rate would decrease total benefit expense and the projected benefit obligation by approximately $45 million and $1.8 billion, respectively.
To determine the expected long-term rate of return on the plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. Our expected return on plan assets is 7.00%. A lower expected rate of return on plan assets will increase pension and postretirement medical expense. A one percentage point change in the long-term asset return assumption would impact fiscal 2024 annual expense by approximately $170 million.
Goodwill, Other Intangible Assets, Long-Lived Assets and Investments
The Company is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and if current events or circumstances require, on an interim basis. The Company performs its annual test of goodwill and indefinite-lived intangible assets for impairment in its fiscal fourth quarter.
Goodwill is allocated to various reporting units, which are an operating segment or one level below are summarized financial informationthe operating segment. To test goodwill for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of a reporting unit exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows of the reporting unit.
The quantitative assessment compares the fair value of each goodwill reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the Obligor Groupexcess up to the amount of goodwill allocated to the reporting unit.
In fiscal 2023, the Company bypassed the qualitative test and performed a quantitative assessment of goodwill for impairment, under both the previous segment reporting structure and the new segment reporting structure. There were no goodwill impairments under the previous reporting structure. The change in reporting structure requires judgment to identify new reporting units, allocate goodwill to these reporting units (based on relative fair values) and assign other recorded assets and liabilities to these reporting units.
To determine the fair value of our reporting units, we generally use a combined basis after eliminationpresent value technique (discounted cash flows) corroborated by market multiples when available and as appropriate. The discounted cash flow analyses are sensitive to our estimated projected future cash flows as well as the discount rates used to calculate their present value. Our future cash flows are based on internal forecasts for each reporting unit, which consider projected inflation and other economic indicators, as well as industry growth projections. Discount rates for each reporting unit are determined based on the inherent risks of (i) intercompany transactions and balances between TWDC and Legacy Disney and (ii) equityeach 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 earnings fromfourth 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
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value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows.
The quantitative assessment compares the fair value of an indefinite-lived intangible asset to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess. Fair values of indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate.
The Company tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to hold the asset for sale. The impairment test for assets held for use requires a comparison of the estimated undiscounted future cash flows expected to be generated over the useful life of the significant assets of an asset group to the carrying amount of the asset group. An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the asset group and the carrying amount of the asset group. For assets held for sale, to the extent the carrying amount is greater than the asset’s fair value less costs to sell, an impairment loss is recognized for the difference. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, estimates of future cash flows and the discount rate used to determine fair values.
The Company has investments in equity securities. For equity securities that do not have a readily determinable fair value, we consider forecasted financial performance of the investee companies, as well as volatility inherent in the external markets for these investments. If these forecasts are not met, impairment charges may be recorded.
The Company tested its indefinite-lived intangible assets, long-lived assets and investments for impairment and recorded non-cash impairment charges of $2.3 billion, $0.2 billion and $0.3 billion in any subsidiary that isfiscal 2023, 2022 and 2021, respectively. The fiscal 2023 charges primarily related to content impairments resulting from a non-Guarantor. This summarized financial information has been prepared and presented pursuantstrategic change in our approach to the Securities and Exchange Commission Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with U.S. GAAP.
Results of operations (in millions)2021
Revenues$— 
Costs and expenses— 
Net income (loss) from continuing operations(1,847)
Net income (loss)(1,847)
Net income (loss) attributable to TWDC shareholders(1,847)
Balance Sheet (in millions)October 2, 2021October 3, 2020
Current assets$9,506 $12,899 
Noncurrent assets1,689 2,076 
Current liabilities6,878 6,155 
Noncurrent liabilities (excluding intercompany to non-Guarantors)51,439 57,809 
Intercompany payables to non-Guarantors147,629 146,748 
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We believe that the application of the following accounting policies, which are important to our financial position and results of operations, require significant judgments and estimates on the part of management. For a summary of our significant accounting policies, including the accounting policies discussed below, seecontent curation. See Note 218 to the Consolidated Financial Statements.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.
Produced and Acquired/Licensed Content CostsAllowance for Credit Losses
We amortizeevaluate our allowance for credit losses and test for impairment capitalized film and television production costsestimate collectability of accounts receivable based on whetherhistorical bad debt experience, our assessment of the contentfinancial condition of individual companies with which we do business, current market conditions, and reasonable and supportable forecasts of future economic conditions. In times of economic turmoil, including COVID-19, our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods. If our estimate of uncollectible accounts is predominantly monetized individually or as a group.too low, costs and expenses may increase in future periods, and if it is too high, costs and expenses may decrease in future periods. See Note 2 to the Consolidated Financial Statements for furtheradditional discussion.
Production costs thatContingencies and Litigation
We are classifiedcurrently involved in certain legal proceedings and, as individual are amortized based upon the ratiorequired, have accrued estimates of the current period’s revenues toprobable and estimable losses for the estimated remaining total revenues (Ultimate Revenues).
With respect to produced films intended for theatrical release, the most sensitive factor affecting our estimateresolution of Ultimate Revenues is theatrical performance. Revenues derived from other markets subsequent to the theatrical releasethese proceedings. These estimates are generally highly correlated with theatrical performance. Theatrical performance varies primarily based upon the public interest and demand for a particular film, the popularity of competing films at the time of release and the level of marketing effort. Upon a film’s release and determination of the theatrical performance, the Company’s estimates of revenues from succeeding windows and markets, which may include imputed license fees for content that is used on our DTC streaming services, are revised based on historical relationships and an analysis of current market trends.
With respectpotential results, assuming a combination of litigation and settlement strategies and have been developed in consultation with outside counsel as appropriate. From time to capitalized television production coststime, we are also involved in other contingent matters for which we accrue estimates for a probable and estimable loss. It is possible, however, that are classified as individual,future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the most sensitive factors affecting estimateseffectiveness of Ultimate Revenues are program ratings of the content on our licensees’ platforms. Program ratings, which are an indication of market acceptance, directly affect the program’s ability to generate advertising and subscriber revenues and are correlated with the license fees we can charge for the content in subsequent windows and for subsequent seasons.
Ultimate Revenues are reassessed each reporting period and the impact of any changes on amortization of production cost is accounted for as if the change occurred at the beginning of the current fiscal year. If our estimate of Ultimate Revenues decreases, amortization of costs may be accelerated or result in an impairment. Conversely, if our estimate of Ultimate Revenues increases, cost amortization may be slowed.
Produced content costs that are part of a group and acquired/licensed content costs are amortized based on projected usage typically resulting in an accelerated or straight-line amortization pattern. The determination of projected usage requires judgement and is reviewed periodically for changes. If projected usage changes we may need to accelerate or slow the recognition of amortization expense.
The amortization of multi-year sports rights is based on our projections of revenues over the contract period, which include advertising revenue and an allocation of affiliate revenue (relative value). If the annual contractual paymentsstrategies related to each season approximate each season’s estimated relative value, we expense the related contractual payments during the applicable season. If estimated relative values by year were to change significantly, amortization oflegal proceedings or our sports rights costs may be accelerated or slowed.
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Revenue Recognition
The Company has revenue recognition policies for its various operating segments that are appropriate to the circumstances of each business. Refer toassumptions regarding other contingent matters. See Note 214 to the Consolidated Financial Statements for more detailed information on litigation exposure.
Income Tax
As a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. From time to time, these audits result in proposed assessments. Our determinations regarding the recognition of income tax benefits are made in consultation with outside tax and legal counsel, where appropriate, and are based upon the technical merits of our tax positions in consideration of applicable tax statutes and related interpretations and precedents and upon the expected outcome of proceedings (or negotiations) with taxing and legal authorities. The tax benefits ultimately realized by the Company may differ from those recognized in our future financial statements based on a number of factors, including the Company’s decision to
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settle rather than litigate a matter, relevant legal precedent related to similar matters and the Company’s success in supporting its filing positions with taxing authorities. See Note 9 to the Consolidated Financial Statements for additional discussion.
New Accounting Pronouncements
See Note 19 to the Consolidated Financial Statements for information regarding new accounting pronouncements.
DTC PRODUCT DESCRIPTIONS, KEY DEFINITIONS AND SUPPLEMENTAL INFORMATION
Product Offerings
In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or together as part of various multi-product offerings. Hulu Live TV + SVOD includes Disney+ and ESPN+. Disney+ is available in more than 150 countries and territories outside the U.S. and Canada. In India and certain other Southeast Asian countries, the service is branded Disney+ Hotstar. In certain Latin American countries, we offer Disney+ as well as Star+, a general entertainment SVOD service, which is available on a standalone basis or together with Disney+ (Combo+). Depending on the market, our services can be purchased on our websites or through third-party platforms/apps or are available via wholesale arrangements.
Paid Subscribers
Paid subscribers reflect subscribers for which we recognized subscription revenue. Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method. Subscribers to multi-product offerings in the U.S. are counted as a paid subscriber for each service included in the multi-product offering and subscribers to Hulu Live TV + SVOD are counted as one paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and ESPN+ services. In Latin America, if a subscriber has either the standalone Disney+ or Star+ service or subscribes to Combo+, the subscriber is counted as one Disney+ paid subscriber. Subscribers include those who receive a service through wholesale arrangements including those for which the service is distributed to each subscriber of an existing content distribution tier. When we aggregate the total number of paid subscribers across our DTC streaming services, we refer to them as paid subscriptions.
International Disney+ (excluding Disney+ Hotstar)
International Disney+ (excluding Disney+ Hotstar) includes the Disney+ service outside the U.S. and Canada and the Star+ service in Latin America.
Average Monthly Revenue Per Paid Subscriber
Hulu and ESPN+ average monthly revenue recognition policies.per paid subscriber is calculated based on the average of the monthly average paid subscribers for each month in the period. The monthly average paid subscribers is calculated as the sum of the beginning of the month and end of the month paid subscriber count, divided by two. Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period. Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses) and premium and feature add-on revenue but excludes Premier Access and Pay-Per-View revenue. The average revenue per paid subscriber is net of discounts on offerings that carry more than one service. Revenue is allocated to each service based on the relative retail or wholesale price of each service on a standalone basis. Hulu Live TV + SVOD revenue is allocated to the SVOD services based on the wholesale price of the Hulu SVOD Only, Disney+ and ESPN+ multi-product offering. In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third-party platforms.
Supplemental information about paid subscribers(1):
(in millions)September 30,
2023		October 1,
2022		October 2,
2021
Domestic (U.S. and Canada) standalone55.560.465.4
Domestic (U.S. and Canada) multi-product(1)
22.619.411.4
78.179.776.9
International standalone (excluding Disney+ Hotstar)(2)
55.349.234.8
International multi-product(3)
10.87.21.2
66.156.536.0
Total(4)
144.2136.2112.9

(1)At September 30, 2023, there were 20.3 million and 2.3 million subscribers to three-service and two-service multi-product offerings, respectively. At October 1, 2022, there were 18.7 million and 0.7 million subscribers to three-
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service and two-service multi-product offerings, respectively. At October 2, 2021, there were 11.4 million subscribers to three-service offerings and no subscribers to two-service offerings.
(2)Disney+ Hotstar is not included in any of the Company’s multi-product offerings.
(3)Consists of subscribers to Combo+.
(4)Total may not equal the sum of the column due to rounding.
Pension and Postretirement Medical Plan Actuarial Assumptions
The Company’s pension and postretirement medical benefit obligations and related costs are calculated using a number of actuarial assumptions. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and/or liability measurement, which we evaluate annually. Other assumptions include the healthcare cost trend rate and employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increase.
The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date. A lower discount rate increases the present value of benefit obligations and increases pension and postretirement medical expense. The guideline for setting this rate is a high-quality long-term corporate bond rate. We increased our discount rate to 2.88%5.94% at the end of fiscal 20212023 from 2.82%5.44% at the end of fiscal 20202022 to reflect market interest rate conditions at our fiscal 20212023 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 20222024 by approximately $341$200 million and would increase the projected benefit obligation at October 2, 2021September 30, 2023 by approximately $4.0$2.0 billion. A one
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percentage point increase in the assumed discount rate would decrease total benefit expense and the projected benefit obligation by approximately $292$45 million and $3.4$1.8 billion, respectively.
To determine the expected long-term rate of return on the plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. Our expected return on plan assets is 7.00%. A lower expected rate of return on plan assets will increase pension and postretirement medical expense. A one percentage point change in the long-term asset return assumption would impact fiscal 20222024 annual expense by approximately $175$170 million.
Goodwill, Other Intangible Assets, Long-Lived Assets and Investments
The Company is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and if current events or circumstances require, on an interim basis. The Company performs its annual test of goodwill and indefinite-lived intangible assets for impairment in its fiscal fourth quarter.
Goodwill is allocated to various reporting units, which are an operating segment or one level below the operating segment. To test goodwill for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of a reporting unit exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows of the reporting unit.
The quantitative assessment compares the fair value of each goodwill reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the amount of goodwill allocated to the reporting unit.
In fiscal 2021,2023, the Company bypassed the qualitative test and performed a quantitative assessment of goodwill for impairment.
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 impairment test for goodwillchange in reporting structure requires judgment related to the identification ofidentify new reporting units, the assignment ofallocate goodwill to these reporting units (based on relative fair values) and assign other recorded assets and liabilities to reporting units including goodwill, and the determination of fair value of thethese reporting units.
To determine the fair value of our reporting units, we apply what we believe to be the most appropriate valuation methodology for each of our reporting units. We generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate. The discounted cash flow analyses are sensitive to our estimates ofestimated projected future revenue growth and margins for these businessescash flows as well as the discount rates used to calculate thetheir present value ofvalue. Our future cash flows. In timesflows 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 adverse economic conditions in the global economy, the Company’s long-term cash flow projections are subject to a greater degree of uncertainty than usual.each reporting unit’s underlying operations. We believe our estimates are consistent with how a marketplace participant would value our reporting units. If we had established different
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 utilized different valuation methodologies or assumptions, the impairmentmacroeconomic events could produce test results couldin 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 its 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
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value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
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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.
The quantitative assessment compares the fair value of an indefinite-lived intangible asset to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess. Fair values of indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate.
The Company tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to hold the asset for sale. The impairment test for assets held for use requires a comparison of the estimated undiscounted future cash flows expected to be generated over the useful life of the significant assets of an asset group to the carrying amount of the asset group. An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the asset group and the carrying amount of the asset group. For assets held for sale, to the extent the carrying amount is greater than the asset’s fair value less costs to sell, an impairment loss is recognized for the difference. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, estimates of future cash flows and the discount rate used to determine fair values.
The Company has investments in equity securities. For equity securities that do not have a readily determinable fair value, we consider forecasted financial performance of the investee companies, as well as volatility inherent in the external markets for these investments. If these forecasts are not met, impairment charges may be recorded.
The Company tested its indefinite-lived intangible assets, long-lived assets and investments for impairment and recorded non-cash impairment charges of $0.3$2.3 billion, $0.2 billion and $5.2$0.3 billion in fiscal 2023, 2022 and 2021, and 2020, respectively.
The fiscal 2023 charges primarily related to content impairments resulting from a strategic change in our approach to content curation. See Note 18 to the Consolidated Financial Statements for additional information. The fiscal 2022 charges primarily related to exiting our businesses in Russia. The fiscal 2021 charges primarily related to the closure of an animation studio and a substantial number of our Disney-branded retail stores in North America and Europe.
The fiscal 2020 impairment charges primarily related to impairments of MVPD agreement intangible assets ($1.9 billion) and goodwill ($3.1 billion) at the International Channels’ business. See Note 19 to the Consolidated Financial Statements for additional discussion of these impairment charges.
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. If our estimate of uncollectible accounts is too low, costs and expenses may increase in future periods, and if it is too high, costs and expenses may decrease in future periods. See Note 32 to the Consolidated Financial Statements for additional discussion.
Contingencies and Litigation
We are currently involved in certain legal proceedings and, as required, have accrued estimates of the probable and estimable losses for the resolution of these proceedings. These estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and have been developed in consultation with outside counsel as appropriate. From time to time, we are also involved in other contingent matters for which we accrue estimates for a probable and estimable loss. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to legal proceedings or our assumptions regarding other contingent matters. See Note 1514 to the Consolidated Financial Statements for more detailed information on litigation exposure.
Income Tax
As a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. From time to time, these audits result in proposed assessments. Our determinations regarding the recognition of income tax benefits are made in consultation with outside tax and legal counsel, where appropriate, and are based upon the technical merits of our tax positions in consideration of applicable tax statutes and related interpretations and precedents and upon the expected outcome of proceedings (or negotiations) with taxing and legal authorities. The tax benefits ultimately realized by the Company may differ from those recognized in our future financial statements based on a number of factors, including the Company’s decision to
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settle rather than litigate a matter, relevant legal precedent related to similar matters and the Company’s success in supporting its filing positions with taxing authorities.
Impacts of COVID-19 on Accounting Policies and Estimates
In light of the currently unknown ultimate duration and severity of COVID-19, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply our significant accounting policies and make changes to these estimates and judgements over time. This could result in meaningful impacts to our financial statements in future periods. A more detailed discussion of the impact of COVID-19 on the Accounting Policies and Estimates follows.
Produced and Acquired/Licensed Content Costs
Certain of our completed or in progress film and television productions have had their initial release dates delayed. The duration of the delay, market conditions when we release the content, or a change in our release strategy (e.g. bypassing certain distribution windows) could have an impact on Ultimate Revenues, which may accelerate amortization or result in an impairment of capitalized film and television production costs.
Given the ongoing uncertainty around live sporting events continuing uninterrupted, the amount and timing of revenues derived from the broadcast of these events may differ from the projections of revenues that support our amortization pattern of the rights costs we pay for these events. Such changes in revenues could result in an acceleration or slowing of the amortization of our sports rights costs.
Revenue Recognition
Certain of our affiliate contracts contain commitments with respect to the content to be aired on our television networks (e.g. live sports or original content). If there are delays or cancellations of live sporting events or disruptions to film and television content production activities, we may need to assess the impact on our contractual obligations and adjust the revenue that we recognize related to these contracts.
Goodwill, Other Intangible Assets, Long-Lived Assets and Investments
Given the ongoing impacts of COVID-19 across our businesses, the projected cash flows that we use to assess the fair value of our businesses and assets for purposes of impairment testing are subject to greater uncertainty than normal. If in the future we reduce our estimate of cash flow projections, we may need to impair some of these assets.
Prior to the Company’s reorganization in October 2020, the former Direct-to-Consumer & International segment included an International Channels reporting unit, which was comprised of the Company’s international television networks. Our international television networks primarily derive revenues from affiliate fees charged to MVPDs for the right to deliver our programming under multi-year licensing agreements and the sales of advertising time/space on the networks.
In the third quarter of fiscal 2020, we assessed the International Channels’ long-lived assets and goodwill for impairment and recorded impairments of $1.9 billion primarily related to MVPD agreement intangible assets and $3.1 billion related to goodwill.
As of October 2, 2021, the remaining balance of our international MVPD agreement intangible assets was $2.2 billion, primarily related to our channel businesses in Latin America and India.
See Note 199 to the Consolidated Financial Statements for discussion of the impairment tests performed in the third quarter of fiscal 2020.
Risk Management Contracts
The Company employs a variety of financial instruments (derivatives) including interest rate and cross-currency swap agreements and forward and option contracts to manage its exposure to fluctuations in interest rates, foreign currency exchange rates and commodity prices.
As a result of the impact of COVID-19 on our businesses, our projected cash flows or projected usage of commodities are subject to a greater degree of uncertainty, which may cause us to recognize gains or losses on our hedging instruments in different periods than the hedged transaction.additional discussion.
New Accounting Pronouncements
See Note 2019 to the Consolidated Financial Statements for information regarding new accounting pronouncements.
FORWARD-LOOKING STATEMENTSDTC PRODUCT DESCRIPTIONS, KEY DEFINITIONS AND SUPPLEMENTAL INFORMATION
Product Offerings
In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or together as part of various multi-product offerings. Hulu Live TV + SVOD includes Disney+ and ESPN+. Disney+ is available in more than 150 countries and territories outside the U.S. and Canada. In India and certain other Southeast Asian countries, the service is branded Disney+ Hotstar. In certain Latin American countries, we offer Disney+ as well as Star+, a general entertainment SVOD service, which is available on a standalone basis or together with Disney+ (Combo+). Depending on the market, our services can be purchased on our websites or through third-party platforms/apps or are available via wholesale arrangements.
Paid Subscribers
Paid subscribers reflect subscribers for which we recognized subscription revenue. Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method. Subscribers to multi-product offerings in the U.S. are counted as a paid subscriber for each service included in the multi-product offering and subscribers to Hulu Live TV + SVOD are counted as one paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and ESPN+ services. In Latin America, if a subscriber has either the standalone Disney+ or Star+ service or subscribes to Combo+, the subscriber is counted as one Disney+ paid subscriber. Subscribers include those who receive a service through wholesale arrangements including those for which the service is distributed to each subscriber of an existing content distribution tier. When we aggregate the total number of paid subscribers across our DTC streaming services, we refer to them as paid subscriptions.
International Disney+ (excluding Disney+ Hotstar)
International Disney+ (excluding Disney+ Hotstar) includes the Disney+ service outside the U.S. and Canada and the Star+ service in Latin America.
Average Monthly Revenue Per Paid Subscriber
Hulu and ESPN+ average monthly revenue per paid subscriber is calculated based on the average of the monthly average paid subscribers for each month in the period. The monthly average paid subscribers is calculated as the sum of the beginning of the month and end of the month paid subscriber count, divided by two. Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period. Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses) and premium and feature add-on revenue but excludes Premier Access and Pay-Per-View revenue. The average revenue per paid subscriber is net of discounts on offerings that carry more than one service. Revenue is allocated to each service based on the relative retail or wholesale price of each service on a standalone basis. Hulu Live TV + SVOD revenue is allocated to the SVOD services based on the wholesale price of the Hulu SVOD Only, Disney+ and ESPN+ multi-product offering. In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third-party platforms.
Supplemental information about paid subscribers(1):
(in millions)September 30,
2023		October 1,
2022		October 2,
2021
Domestic (U.S. and Canada) standalone55.560.465.4
Domestic (U.S. and Canada) multi-product(1)
22.619.411.4
78.179.776.9
International standalone (excluding Disney+ Hotstar)(2)
55.349.234.8
International multi-product(3)
10.87.21.2
66.156.536.0
Total(4)
144.2136.2112.9

(1)At September 30, 2023, there were 20.3 million and 2.3 million subscribers to three-service and two-service multi-product offerings, respectively. At October 1, 2022, there were 18.7 million and 0.7 million subscribers to three-
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service and two-service multi-product offerings, respectively. At October 2, 2021, there were 11.4 million subscribers to three-service offerings and no subscribers to two-service offerings.
(2)Disney+ Hotstar is not included in any of the Company’s multi-product offerings.
(3)Consists of subscribers to Combo+.
(4)Total may not equal the sum of the column due to rounding.
SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
On March 20, 2019, as part of the acquisition of TFCF, The Walt Disney Company (“TWDC”) became the ultimate parent of TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company) (“Legacy Disney”). Legacy Disney and TWDC are collectively referred to as “Obligor Group”, and individually, as a “Guarantor”. Concurrent with the close of the TFCF acquisition, $16.8 billion of TFCF’s assumed public debt (which then constituted 96% of such debt) was exchanged for senior notes of TWDC (the “exchange notes”) issued pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an Indenture, dated as of March 20, 2019, between TWDC, Legacy Disney, as guarantor, and Citibank, N.A., as trustee (the “TWDC Indenture”) and guaranteed by Legacy Disney. On November 26, 2019, $14.0 billion of the outstanding exchange notes were exchanged for new senior notes of TWDC registered under the Securities Act, issued pursuant to the TWDC Indenture and guaranteed by Legacy Disney. In addition, contemporaneously with the closing of the March 20, 2019 exchange offer, TWDC entered into a guarantee of the registered debt securities issued by Legacy Disney under the Indenture dated as of September 24, 2001 between Legacy Disney and Wells Fargo Bank, National Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee).
Other subsidiaries of the Company do not guarantee the registered debt securities of either TWDC or Legacy Disney (such subsidiaries are referred to as the “non-Guarantors”). The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at September 30, 2023 was as follows:
TWDCLegacy Disney
($ in millions)Par ValueCarrying ValuePar ValueCarrying Value
Registered debt with unconditional guarantee$35,163  $35,393  $8,121  $7,880  
The Private Securities Litigation Reform Act of 1995 providesguarantees by TWDC and Legacy Disney are full and unconditional and cover all payment obligations arising under the guaranteed registered debt securities. The guarantees may be released and discharged upon (i) as a safe harborgeneral matter, the indebtedness for “forward-looking statements” made by or on behalfborrowed money of the Company. Weconsolidated subsidiaries of TWDC in aggregate constituting no more than 10% of all consolidated indebtedness for borrowed money of TWDC and its subsidiaries (subject to certain exclusions), (ii) upon the sale, transfer or disposition of all or substantially all of the equity interests or all or substantially all, or substantially as an entirety, the assets of Legacy Disney to a third party, and (iii) other customary events constituting a discharge of a guarantor’s obligations. In addition, in the case of Legacy Disney’s guarantee of registered debt securities issued by TWDC, Legacy Disney may be released and discharged from its guarantee at any time Legacy Disney is not a borrower, issuer or guarantor under certain material bank facilities or any debt securities.
Operations are conducted almost entirely through the Company’s subsidiaries. Accordingly, the Obligor Group’s cash flow and ability to time make writtenservice its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans or oral statementsotherwise. Holders of the guaranteed registered debt securities have a direct claim only against the Obligor Group.
Set forth below are summarized financial information for the Obligor Group on a combined basis after elimination of (i) intercompany transactions and balances between TWDC and Legacy Disney and (ii) equity in the earnings from and investments in any subsidiary that are “forward-looking,” including statements contained in this reportis a non-Guarantor. This summarized financial information has been prepared and other filings withpresented pursuant to the Securities and Exchange Commission Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in reports to ouraccordance with U.S. GAAP.
Results of operations ($ in millions)2023
Revenues$— 
Costs and expenses— 
Net income (loss) from continuing operations(2,160)
Net income (loss)(2,160)
Net income (loss) attributable to TWDC shareholders(2,160)
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shareholders. Such statements may, for example, express expectations, projections, estimates, plans or future impacts; actions that we may take (or not take); developments beyond our control, including changes in domestic or global economic conditions; or other statements that are not historical in nature. All forward-looking statements are made on the basis of management’s views and assumptions regarding future events and business performance as of the time the statements are made and the Company does not undertake any obligation to update its disclosure relating to forward-looking matters. Actual results may differ materially from those expressed or implied due to a variety of important factors, many of which are beyond our control. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in our filings with the SEC, the most significant factors affecting these expectations, which may be revised or supplemented in subsequent reports we file with the SEC, are set forth under Item 1A – Risk Factors of this Report on Form 10-K as well as in this Item 7 - Management’s Discussion and Analysis and Item 1 - Business.
Balance Sheet ($ in millions)September 30, 2023October 1, 2022
Current assets$8,544 $5,665 
Noncurrent assets2,927 1,948 
Current liabilities5,746 3,741 
Noncurrent liabilities (excluding intercompany to non-Guarantors)43,307 46,218 
Intercompany payables to non-Guarantors154,018 148,958 
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to the impact of interest rate changes, foreign currency fluctuations, commodity fluctuations and changes in the market values of its investments.
Policies and Procedures
In the normal course of business, we employ established policies and procedures to manage the Company’s exposure to changes in interest rates, foreign currencies and commodities using a variety of financial instruments.
Our objectives in managing exposure to interest rate changes are to limit the impact of interest rate volatility on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we primarily use interest rate swaps to manage net exposure to interest rate changes related to the Company’s portfolio of borrowings. By policy, the Company targets fixed-rate debt as a percentage of its net debt between minimum and maximum percentages.
Our objective in managing exposure to foreign currency fluctuations is to reduce volatility of earnings and cash flow in order to allow management to focus on core business issues and challenges. Accordingly, the Company enters into various contracts that change in value as foreign exchange rates change to protect the U.S. dollar equivalent value of its existing foreign currency assets, liabilities, commitments and forecasted foreign currency revenues and expenses. The Company utilizes option strategies and forward contracts that provide for the purchase or sale of foreign currencies to hedge probable, but not firmly committed, transactions. The Company also uses forward and option contracts to hedge foreign currency assets and liabilities. The principal foreign currencies hedged are the euro, Japanese yen, British pound, Chinese yuan and Canadian dollar. Cross-currency swaps are used to effectively convert foreign currency denominated borrowings to U.S. dollar denominated borrowings. By policy, the Company maintains hedge coverage between minimum and maximum percentages of its forecasted foreign exchange exposures generally for periods not to exceed four years. The gains and losses on these contracts are intended to offset changes in the U.S. dollar equivalent value of the related exposures. The economic or political conditions in a countrycertain countries have reduced and in the future could further reduce our ability to hedge exposure to currency fluctuations in, the country or our ability to repatriate revenuecash from, the country.those countries.
Our objectives in managing exposure to commodity fluctuations are to use commodity derivatives to reduce volatility of earnings and cash flows arising from commodity price changes. The amounts hedged using commodity swap contracts are based on forecasted levels of consumption of certain commodities, such as fuel, oil and gasoline.
Our objectives in managing exposures to market-based fluctuations in certain retirement liabilities are to use total return swap contracts to reduce the volatility of earnings arising from changes in these retirement liabilities. The amounts hedged using total return swap contracts are based on estimated liability balances.
It is the Company’s policy to enter into foreign currency and interest rate derivative transactions and other financial instruments only to the extent considered necessary to meet its objectives as stated above. The Company does not enter into these transactions or any other hedging transactions for speculative purposes.
See Note 17 of the Consolidated Financial Statements for additional information.
Value at Risk (VAR)
The Company utilizes a VAR model to estimate the maximum potential one-day loss in the fair value of its interest rate, foreign exchange, commodities and market sensitive equity financial instruments. The VAR model estimates were made assuming normal market conditions and a 95% confidence level. Various modeling techniques can be used in a VAR computation. The Company’s computations are based on the interrelationships between movements in various interest rates, currencies, commodities and equity prices (a variance/co-variance technique). These interrelationships were determined by observing interest rate, foreign currency, commodity and equity market changes over the preceding quarter for the calculation of VAR amounts at each fiscal quarter end. The model includes all of the Company’s debt as well as all interest rate and foreign exchange derivative contracts, commodities and market sensitive equity investments. Forecasted transactions, firm commitments and accounts receivable and payable denominated in foreign currencies, which certain of these instruments are intended to hedge, were excluded from the model.
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The VAR model is a risk analysis tool and does not purport to represent actual losses in fair value that will be incurred by the Company, nor does it consider the potential effect of favorable changes in market factors.
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VAR on a combined basis increaseddecreased to $364$284 million at September 30, 2023 from $395 million at October 2, 2021 from $323 million at October 3, 2020.1, 2022 due to reduced interest rate volatility and lower sensitivity of our debt portfolio to movement of interest rates.

The estimated maximum potential one-day loss in fair value, calculated using the VAR model, is as follows (unaudited, in millions):
Fiscal 2021Interest Rate
Sensitive
Financial
Instruments		Currency
Sensitive
Financial
Instruments		Equity 
Sensitive
Financial
Instruments		Commodity Sensitive Financial InstrumentsCombined
Portfolio
Year end fiscal 2021 VAR$357$44$37$1$364
Fiscal 2023Fiscal 2023Interest Rate
Sensitive
Financial
Instruments		Currency
Sensitive
Financial
Instruments		Equity 
Sensitive
Financial
Instruments		Commodity Sensitive Financial InstrumentsCombined
Portfolio
Year end fiscal 2023 VARYear end fiscal 2023 VAR$258$45$4$4$284
Average VARAverage VAR34234481345Average VAR33658134360
Highest VARHighest VAR38044651372Highest VAR40376235425
Lowest VARLowest VAR29023371296Lowest VAR2584544284
Year end fiscal 2020 VAR30429811323
Year end fiscal 2022 VARYear end fiscal 2022 VAR37671204395
The VAR for Hong Kong Disneyland Resort and Shanghai Disney Resort is immaterial as of October 2, 2021September 30, 2023 and accordingly has been excluded from the above table.
ITEM 8. Financial Statements and Supplementary Data
See Index to Financial Statements and Supplemental Data on page 6377.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of Directors as appropriate to allow timely decisions regarding required disclosure.
Based on their evaluation as of October 2, 2021,September 30, 2023, the principal executive officer and principal financial officer of the Company have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective.
Management’s Report on Internal Control Over Financial Reporting
Management’s report set forth on page 6478 is incorporated herein by reference.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting during the fourth quarter of the fiscal year ended October 2, 2021September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. Other Information
None.None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarterly period covered by this report.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
Information regarding Section 16(a) compliance, the Audit Committee, the Company’s code of ethics, background of the directors and director nominations appearing under the captions “Delinquent Section 16(a) Reports,” “The Board of Directors,” “Committees,” “Governing Documents,” “Director Selection Process”“Committees” and “Election of Directors”“Corporate Governance Documents” in the Company’s Proxy Statement for the 20222024 annual meeting of Shareholders is hereby incorporated by reference.
Information regarding executive officers is included in Part I of this Form 10-K as permitted by General Instruction G(3).
ITEM 11. Executive Compensation
Information appearing under the captions “Director Compensation,” and “Executive Compensation” (other than the “Compensation Committee Report,” which is deemed furnished herein by reference, and the “Letter from the Compensation Committee”) in the 20222024 Proxy Statement is hereby incorporated by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information setting forth the security ownership of certain beneficial owners and management appearing under the caption “Stock Ownership” and information appearing under the caption “Equity Compensation Plans” in the 20222024 Proxy Statement is hereby incorporated by reference.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
Information regarding certain related transactions appearing under the captions “Certain Relationships and Related Person Transactions” and information regarding director independence appearing under the caption “Director Independence” in the 20222024 Proxy Statement is hereby incorporated by reference.
ITEM 14. Principal Accounting Fees and Services
Information appearing under the captions “Auditor Fees and Services” and “Policy for Approval of Audit and Permitted Non-Audit Services” in the 20222024 Proxy Statement is hereby incorporated by reference.
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PART IV
ITEM 15. Exhibits and Financial Statement Schedules
(1)Financial Statements and Schedules
See Index to Financial Statements and Supplemental Data on page 6377.
(2)Exhibits
The documents set forth below are filed herewith or incorporated herein by reference to the location indicated.
ExhibitLocation
1.1Underwriting Agreement, dated March 19, 2020, among The Walt Disney Company, TWDC Enterprises 18 Corp. and BofA Securities, Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, as representatives of the several underwriters named therein
1.2Underwriting Agreement, dated March 26, 2020, among The Walt Disney Company, TWDC Enterprises 18 Corp. and Merrill Lynch Canada Inc., HSBC Securities (Canada) Inc. and RBC Dominion Securities Inc.
1.3Underwriting Agreement, dated May 11, 2020, among The Walt Disney Company, TWDC Enterprises 18 Corp. and BNP Paribas Securities Corp., Credit
Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC, as representatives of the several underwriters named therein.
3.1Restated Certificate of Incorporation of The Walt Disney Company, effective as of March 19, 2019
3.2Certificate of Amendment to the Restated Certificate of Incorporation of The Walt Disney Company, effective as of March 20, 2019
3.3Amended and Restated Bylaws of The Walt Disney Company, effective as of March 20, 2019
3.4Amended and Restated Certificate of Incorporation of TWDC Enterprises 18 Corp., effective as of March 20, 2019
3.5Amended and Restated Bylaws of TWDC Enterprises 18 Corp., effective as of March 20, 2019
3.6Certificate of Elimination of Series B Convertible Preferred Stock of The Walt Disney Company, as filed with the Secretary of State of the State of Delaware on November 28, 2018
4.1Senior Debt Securities Indenture, dated as of September 24, 2001, between TWDC Enterprises 18 Corp. and Wells Fargo Bank, N.A., as Trustee
4.2First Supplemental Indenture, dated as of March 20, 2019, among The Walt Disney Company, TWDC Enterprises 18 Corp. and Wells Fargo Bank, N.A., as Trustee
4.3Indenture, dated as of March 20, 2019, by and among The Walt Disney Company, as issuer, and TWDC Enterprises 18 Corp., as guarantor, and Citibank, N.A., as trustee
4.4Other long-term borrowing instruments are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Company undertakes to furnish copies of such instruments to the Commission upon request
4.5Description of Registrant’s Securities
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ExhibitLocation
10.1Employment Agreement dated as of February 24, 2020 between the Company and Robert Chapek †
10.2Amendment dated July 15, 2022 to the Employment Agreement dated February 24, 2020, between the Company and Robert Chapek †
10.3Amended and Restated Employment Agreement, dated as of October 6, 2011, between the Company and Robert A. Iger †
10.310.4Amendment dated July 1, 2013 to Amended and Restated Employment Agreement, dated as of October 6, 2011, between the Company and Robert A. Iger †
10.410.5Amendment dated October 2, 2014 to Amended and Restated Employment Agreement, dated as of October 6, 2011, between the Company and Robert A. Iger †
10.510.6Amendment dated March 22, 2017 to Amended and Restated Employment Agreement, dated as of October 6, 2011, between the Company and Robert A. Iger †
10.6

Amendment dated December 13, 2017 to Amended and Restated Employment Agreement, dated as of October 6, 2011, between the Company and Robert A. Iger †
Exhibit 10.2 to the Current Report on Form 8-K of Legacy Disney filed December 14, 2017
10.7Amendment to Amended and Restated Employment Agreement, Dated as of October 6, 2011, as amended, between the Company and Robert A. Iger, dated November 30, 2018 †
Exhibit 10.1 to the Current Report on Form 8-K of Legacy Disney filed December 3, 2018
10.8Amendment to Amended and Restated Employment Agreement, Dated as of October 6, 2011, as amended, between the Company and Robert A. Iger, dated March 4, 2019 †
Exhibit 10.1 to the Current Report on Form 8-K of Legacy Disney filed March 4, 2019
10.9Amendment to Amended and Restated Employment Agreement, Dated as of October 6, 2011 and as previously amended, between the Company and Robert A. Iger, dated February 24, 2020 †
Exhibit 10.1 to the Current Report on Form 8-K of the Company filed February 25, 2020
10.10Employment Agreement, dated as of September 27, 2013 between the Company and Alan N. Braverman †
Exhibit 10.1 to the Current Report on Form 8-K of Legacy Disney filed October 2, 2013
10.11Amendment dated February 4, 2015 to the Employment Agreement dated as of September 27, 2013 between the Company and Alan N. Braverman †
Exhibit 10.2 to the Current Report on Form 8-K of Legacy Disney filed February 5, 2015
10.12Amendment dated August 15, 2017 to the Employment Agreement dated as of September 27, 2013 between the Company and Alan N. Braverman †
Exhibit 10.2 to the Current Report on Form 8-K of Legacy Disney filed August 17, 2017
10.13Amendment dated December 3, 2018 to the Employment Agreement, dated as of September 27, 2013, as amended, between the Company and Alan N. Braverman †
Exhibit 10.1 to the Current Report on Form 8-K of Legacy Disney filed December 4, 2018
10.14Amendment dated October 8, 2019 to the Employment Agreement, dated as of September 27, 2013, as amended, between the Company and Alan N. Braverman †
Exhibit 10.1 to the Current Report on Form 8-K of the Company filed October 11, 2019
10.15Employment Agreement dated August 15, 2017 and effective between the Company and Jayne Parker †
Exhibit 10.1 to the Current Report on Form 8-K of Legacy Disney filed August 17, 2017
10.16Employment Agreement dated as of July 1, 2015 between the Company and Christine M. McCarthy †
Exhibit 10.1 to the Current Report on Form 8-K of Legacy Disney filed June 30, 2015
10.17Amendment dated August 15, 2017 to the Employment Agreement dated as of July 1, 2015 between the Company and Christine M. McCarthy †
Exhibit 10.4 to the Current Report on Form 8-K of Legacy Disney filed August 17, 2017
10.18Amendment dated December 2, 2020 to Amended Employment Agreement dated as of July 1, 2015 between the Company and Christine M. McCarthy †
Exhibit 10.1 to the Current Report on Form 8-K of the Company filed December 7, 2020
10.19Employment Agreement, dated as of September 27, 2018 between the Company and Zenia Mucha †
Exhibit 10.4 to the Form 10-Q of Legacy Disney for the quarter ended December 29, 2018
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ExhibitLocation
10.20Employment Agreement, dated as of July 1, 2021 between the Company and Paul J. Richardson †
10.21Voluntary Non-Qualified Deferred Compensation
Plan †
10.22Description of Directors Compensation
10.23Form of Indemnification Agreement for certain officers and directors †Annex C to the Proxy Statement for the 1987 annual meeting of DEI
10.24Form of Assignment and Assumption of Indemnification Agreement for certain officers and directors †

10.251995 Stock Option Plan for Non-Employee Directors
10.26Amended and Restated 2002 Executive Performance Plan †
10.27Management Incentive Bonus Program †
10.28Amended and Restated 1997 Non-Employee Directors Stock and Deferred Compensation Plan
10.29Amended and Restated The Walt Disney Company/Pixar 2004 Equity Incentive Plan †
10.30Amended and Restated 2011 Stock Incentive Plan †
10.31Disney Key Employees Retirement Savings Plan †
10.32Amendments dated April 30, 2015 to the Amended and Restated The Walt Disney Productions and Associated Companies Key Employees Deferred Compensation and Retirement Plan, Amended and Restated Benefit Equalization Plan of ABC, Inc. and Disney Key Employees Retirement Savings Plan †
10.33Second Amendment to the Disney Key Employees Retirement Savings Plan †
10.34Group Personal Excess Liability Insurance Plan †
10.35Form of Non-Qualified Stock Option Award Agreement †
10.36Form of Restricted Stock Unit Award Agreement (Time-Based Vesting) †
10.37Form of Performance-Based Stock Unit Award Agreement (Section 162(m) Vesting Requirement) †
10.38Form of Performance- Based Restricted Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/ROIC Tests) †
10.39Form of Performance-Based Restricted Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/ROIC Tests/Section 162(m) Vesting Requirements) †
10.40Form of Restricted Stock Unit Award Agreement (Time-Based Vesting) †
10.41Form of Performance-Based Stock Unit Award Agreement (Section 162(m) Vesting Requirement) †
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ExhibitLocation
10.42Form of Performance-Based Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/EPS Growth Tests/
Section 162(m) Vesting Requirement) †
10.43Form of Performance-Based Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/EPS Growth Tests) †
10.44Form of Non-Qualified Stock Option Award Agreement †
10.45Performance-Based Stock Unit Award (Four-Year Vesting subject to Total Shareholder Return Test/Section 162(m) Vesting Requirements) for Robert A. Iger dated as of December 13, 2017 †
10.46Performance-Based Stock Unit Award (Four-Year Vesting subject to Total Shareholder Return Test) as Amended and Restated November 30, 2018 by and between the Company and Robert A. Iger †
10.47Performance-Based Stock Unit Award (Section 162(m) Vesting Requirement) for Robert A. Iger dated as of December 13, 2017 †
10.48Form of Performance-Based Restricted Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/ROIC Tests) †
10.49Twenty-First Century Fox, Inc. 2013 Long-Term Incentive Plan †
10.50Five-Year Credit Agreement dated as of March 9, 2018
10.51First Amendment dated as of December 19, 2018 to the Five-Year Credit Agreement dated as of March 9, 2018
10.52Five-Year Credit Agreement dated as of March 6, 2020
10.53364-Day Credit Agreement dated as of March 5, 2021
21Subsidiaries of the Company
22List of Guarantor Subsidiaries
23Consent of PricewaterhouseCoopers LLP
31(a)Rule 13a-14(a) Certification of Chief Executive Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
31(b)Rule 13a-14(a) Certification of Chief Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
32(a)Section 1350 Certification of Chief Executive Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002**
32(b)Section 1350 Certification of Chief Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002**
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ExhibitLocation
10.7Amendment dated December 13, 2017 to Amended and Restated Employment Agreement, dated as of October 6, 2011, between the Company and Robert A. Iger †
10.8Amendment to Amended and Restated Employment Agreement, Dated as of October 6, 2011, as amended, between the Company and Robert A. Iger, dated November 30, 2018 †
10.9Amendment to Amended and Restated Employment Agreement, Dated as of October 6, 2011, as amended, between the Company and Robert A. Iger, dated March 4, 2019 †
10.10Amendment to Amended and Restated Employment Agreement, Dated as of October 6, 2011 and as previously amended, between the Company and Robert A. Iger, dated February 24, 2020 †
10.11Employment Agreement Dated as of November 20, 2022, between the Company and Robert A. Iger †
10.12Amendment dated July 12, 2023 to Employment Agreement dated as of November 20, 2022, between the Company and Robert A. Iger †
10.13Employment Agreement dated as of July 1, 2015 between the Company and Christine M. McCarthy †
10.14Amendment dated August 15, 2017 to the Employment Agreement dated as of July 1, 2015 between the Company and Christine M. McCarthy †
10.15Amendment dated December 2, 2020 to Amended Employment Agreement dated as of July 1, 2015 between the Company and Christine M. McCarthy †
10.16Amendment dated December 21, 2021 to Amended Employment Agreement dated as of July 1, 2015 between the Company and Christine M. McCarthy †
10.17Assignment of Employment Agreement dated January 19, 2022 between the Company and Christine M. McCarthy †
10.18Amendment dated June 15, 2023 to Amended Employment Agreement dated as of July 1, 2015 between the Company and Christine M. McCarthy, as previously assigned †
10.19Employment Agreement, dated as of December 21, 2021 between the Company and Horacio E. Gutierrez †
10.20Assignment of Employment Agreement dated January 31, 2022 between the Company and Horacio E. Gutierrez †
10.21Amendment dated July 21, 2022 to the Employment Agreement dated December 21, 2021, between Disney Corporate Services Co., LLC and Horacio E. Gutierrez and to the Indemnification Agreement dated December 21, 2021, between the Company and Horacio E. Gutierrez †
10.22Amendment dated April 21, 2023 to the Employment Agreement dated December 21, 2021, between Disney Corporate Services Co., LLC and Horacio E. Gutierrez and to the Indemnification Agreement dated December 21, 2021, between the Company and Horacio E. Gutierrez †
10.23Employment Agreement, dated June 29, 2022, between the Company and Kristina K. Schake †
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ExhibitLocation
10.24Amendment dated April 18, 2023 to Employment Agreement, dated June 29, 2022 between the Company and Kristina K. Schake †
10.25Employment Agreement dated as of March 10, 2023, by and between the Company and Sonia L. Coleman †
10.26Voluntary Non-Qualified Deferred Compensation
Plan †
10.27Description of Directors Compensation
10.28Form of Indemnification Agreement for certain officers and directors †
10.29Form of Assignment and Assumption of Indemnification Agreement for certain officers and directors †

10.301995 Stock Option Plan for Non-Employee Directors
10.31Amended and Restated 2002 Executive Performance Plan †
10.32Management Incentive Bonus Program †
10.33Amended and Restated 1997 Non-Employee Directors Stock and Deferred Compensation Plan
10.34Amended and Restated The Walt Disney Company/Pixar 2004 Equity Incentive Plan †
10.35Amended and Restated 2011 Stock Incentive Plan †
10.36Disney Key Employees Retirement Savings Plan †
10.37Amendments dated April 30, 2015 to the Amended and Restated The Walt Disney Productions and Associated Companies Key Employees Deferred Compensation and Retirement Plan, Amended and Restated Benefit Equalization Plan of ABC, Inc. and Disney Key Employees Retirement Savings Plan †
10.38Second Amendment to the Disney Key Employees Retirement Savings Plan †
10.39Third Amendment to the Disney Key Employees Retirement Savings Plan †
10.40Group Personal Excess Liability Insurance Plan †
10.41Form of Non-Qualified Stock Option Award Agreement †
10.42Form of Non-Qualified Stock Option Award Agreement †
10.43Form of Restricted Stock Unit Award Agreement (Time-Based Vesting) †
10.44Form of Performance-Based Stock Unit Award Agreement (Section 162(m) Vesting Requirement) †
10.45Form of Performance-Based Restricted Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/ROIC Tests) †
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ExhibitLocation
10.46Form of Performance-Based Restricted Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/ROIC Tests) †
10.47Form of Performance-Based Restricted Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/ROIC Tests/Section 162(m) Vesting Requirements) †
10.48Form of Restricted Stock Unit Award Agreement (Time-Based Vesting) †
10.49Form of Performance-Based Stock Unit Award Agreement (Section 162(m) Vesting Requirement) †
10.50Form of Non-Qualified Stock Option Award Agreement †
10.51Form of Non-Qualified Stock Option Award Agreement †
10.52Form of Restricted Stock Unit Award Agreement (Time-Based Vesting) †
10.53Performance-Based Restricted Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/ROIC tests) for Robert A. Iger dated as of December 14, 2021 †
10.54Non-Qualified Stock Option Award Agreement for Robert A. Iger dated as of December 14, 2021 †
10.55Form of Performance-Based Restricted Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/ROIC Tests) †
10.56Form of Performance-Based Restricted Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/ROIC Tests) †
10.57Form of Performance-Based Restricted Stock Unit Award Agreement (Three-Year/Two-Year Vesting subject to Total Shareholder Return/ROIC Tests) †
10.58Form of Stock Option Awards Agreement †
10.59Form of Stock Option Awards Agreement †
10.60Form of Stock Option Awards Agreement †
10.61Form of Stock Option Awards Agreement †
10.62Form of Stock Option Awards Agreement †
10.63Twenty-First Century Fox, Inc. 2013 Long-Term Incentive Plan †
10.64Five-Year Credit Agreement dated as of March 6, 2020
10.65First Amendment dated as of March 4, 2022 to the Five-Year Credit Agreement dated as of March 6, 2020
10.66Five-Year Credit Agreement dated as of March 4, 2022
10.67364-Day Credit Agreement dated as of March 3, 2023
10.68Support Agreement, dated as of September 30, 2022, by and among Third Point LLC and certain of its affiliates and The Walt Disney Company
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ExhibitLocation
21Subsidiaries of the Company
22List of Guarantor Subsidiaries
23Consent of PricewaterhouseCoopers LLP
31(a)Rule 13a-14(a) Certification of Chief Executive Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
31(b)Rule 13a-14(a) Certification of Interim Chief Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
32(a)Section 1350 Certification of Chief Executive Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002**
32(b)Section 1350 Certification of Interim Chief Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002**
97The Walt Disney Company Clawback Policy
101The following materials from the Company’s Annual Report on Form 10-K for the year ended October 2, 2021September 30, 2023 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Operations,Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Equity and (vi) related notesFiled herewith
104Cover Page Interactive Data File (embedded within the Inline XBRL document)Filed herewith

*Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the SEC upon request.
**A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.
†Management contract or compensatory plan or arrangement.
ITEM 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
   THE WALT DISNEY COMPANY
  (Registrant)
Date:November 24, 202121, 2023 By: /s/    ROBERT A. CHAPEKIGER
  (Robert A. Chapek,Iger
  Chief Executive Officer and Director)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SignatureTitleDate
Principal Executive Officer
/s/    ROBERT A. CHAPEKIGERChief Executive Officer and DirectorNovember 24, 202121, 2023
(Robert A. Chapek)Iger)
Principal Financial and Accounting Officers
/s/    CHRISTINE M. MCCARTHYKEVIN A. LANSBERRYSenior Executive Vice President
and
Interim Chief Financial Officer
(Principal Financial Officer)
November 24, 202121, 2023
(Christine M. McCarthy)Kevin A. Lansberry)
/s/    BRENT A. WOODFORDExecutive Vice President-Controllership, Financial Planning and TaxNovember 24, 202121, 2023
(Brent A. Woodford)
Directors
/s/    SUSAN E. ARNOLDDirectorNovember 24, 2021
(Susan E. Arnold)
/s/    MARY T. BARRADirectorNovember 24, 202121, 2023
(Mary T. Barra)
/s/    SAFRA A. CATZDirectorNovember 24, 202121, 2023
(Safra A. Catz)
/s/    AMY L. CHANGDirectorNovember 24, 202121, 2023
(Amy L. Chang)
/s/    FRANCIS A. DESOUZADirectorNovember 24, 202121, 2023
(Francis A. deSouza)
/s/    CAROLYN N. EVERSONDirectorNovember 21, 2023
(Carolyn N. Everson)
/s/    MICHAEL B.G. FROMANDirectorNovember 24, 202121, 2023
(Michael B.G. Froman)
/s/    ROBERT A. IGERExecutive Chairman, Chairman of the Board and DirectorNovember 24, 2021
(Robert A. Iger)
/s/    MARIA ELENA LAGOMASINODirectorNovember 24, 202121, 2023
(Maria Elena Lagomasino)
/s/    CALVIN R. MCDONALDDirectorNovember 24, 202121, 2023
(Calvin R. McDonald)
/s/    MARK G. PARKERChairman of the Board and DirectorNovember 24, 202121, 2023
(Mark G. Parker)
/s/    DERICA W. RICEDirectorNovember 24, 202121, 2023
(Derica W. Rice)
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THE WALT DISNEY COMPANY AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
 
 Page
Management’s Report on Internal Control Over Financial Reporting
6478
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238)
6579
Consolidated Financial Statements of The Walt Disney Company and Subsidiaries
Consolidated Statements of OperationsIncome for the Years Ended September 30, 2023, October 1, 2022 and October 2, 2021 October 3, 2020 and September 28, 2019
6781
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended September 30, 2023, October 1, 2022 and October 2, 2021 October 3, 2020 and September 28, 2019
6882
Consolidated Balance Sheets as of October 2, 2021September 30, 2023 and October 3, 20201, 2022
6983
Consolidated Statements of Cash Flows for the Years Ended September 30, 2023, October 1, 2022 and October 2, 2021 October 3, 2020 and September 28, 2019
7084
Consolidated Statements of Shareholders’ Equity for the Years Ended September 30, 2023, October 1, 2022 and October 2, 2021 October 3, 2020 and September 28, 2019
7185
Notes to Consolidated Financial Statements
7286

All schedules are omitted for the reason that they are not applicable or the required information is included in the financial statements or notes.
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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on our evaluation under the framework in Internal Control - Integrated Framework, management concluded that our internal control over financial reporting was effective as of October 2, 2021.September 30, 2023.
The effectiveness of our internal control over financial reporting as of October 2, 2021September 30, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included herein.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of The Walt Disney Company
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of The Walt Disney Company and its subsidiaries (the “Company”) as of October 2, 2021September 30, 2023 and October 3, 2020,1, 2022, and the related consolidated statements of operations,income, of comprehensive income, (loss),of shareholders’ equity and of cash flows for each of the three years in the period ended October 2, 2021,September 30, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of October 2, 2021,September 30, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 2, 2021September 30, 2023 and October 3, 2020,1, 2022, and the results of its operations and its cash flows for each of the three years in the period ended October 2, 2021September 30, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 2, 2021,September 30, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in fiscal year 2020.
Basis for Opinions
The Company’sCompany's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Overover Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’sCompany's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging,
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subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Amortization of Production CostsAnnual Goodwill Impairment Assessment – Entertainment Linear Networks and Direct-to-Consumer (DTC) Services Reporting Units
As described in NoteNotes 2 and 818 to the consolidated financial statements, the Company’s consolidated goodwill balance was $77.1 billion as of September 30, 2023, of which a significant portion relates to the entertainment linear networks and disclosed by management, capitalized filmDTC services reporting units. Management performs the annual test of goodwill for impairment in the fiscal fourth quarter, and television production costs are amortized basedif current events or circumstances require, on whetheran interim basis. Management bypassed the contentqualitative test and performed a quantitative assessment of goodwill for impairment. 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 predominantly monetized individually or as a group. Production costsrecognized for content that is predominantly monetized individually is amortized based upon the ratioexcess up to the amount of goodwill allocated to the reporting unit. To determine the fair value of the current period’sCompany’s reporting units, management generally uses a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate. Significant judgments and assumptions in the discounted cash flow model relate to future revenues and certain operating expenses, terminal growth rates, and discount rates. Based on management’s projections, the carrying amounts of the entertainment and international sports linear networks reporting units exceeded their fair values, and management recorded non-cash goodwill impairment charges of approximately $0.7 billion, of which a significant portion relates to the estimated remaining total revenues (Ultimate Revenues). For film productions, Ultimate Revenues include revenues from all sources, which may include imputed license fees for content that is used by the Company’s DTC streaming services, that will be earned within ten years from the date of the initial release for theatrical films. For episodic television series, Ultimate Revenues include revenues that will be earned within ten years, including imputed license fees for content that is used on the Company’s DTC streaming services, from delivery of the first episode, or if still in production, five years from delivery of the most recent episode, if later. Production costs that are predominantly monetized as a group are amortized based on projected usage (which may be, for example, derived from historical viewership patterns), typically resulting in an accelerated or straight-line amortization pattern. For the year ended October 2, 2021, the Company recognized $8,175 million of amortization of produced content costs, which is primarily included in “Cost of services” in the consolidated statements of operations.entertainment linear networks reporting unit.
The principal considerations for our determination that performing procedures relating to amortizationthe annual goodwill impairment assessment of production coststhe entertainment linear networks and DTC services reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the entertainment linear networks and DTC services reporting units; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to future revenues and certain operating expenses, terminal growth rates, and discount rates; and (iii) the audit evidence used ineffort involved the amortization calculation for production costs monetized individuallyuse of professionals with specialized skill and as a group, and management’s estimates of Ultimate Revenues and projected usage.knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to amortization of production costs,management’s goodwill impairment assessment, including controls over the estimationvaluation of Ultimate Revenuesthe Company’s entertainment linear networks and projected usage.DTC services reporting units. These procedures also included, among others, for the entertainment linear networks and DTC services reporting units (i) testing management’s process for determiningdeveloping the amortization of production costs,fair value estimates; (ii) evaluating whether ultimate revenues for certain content titles were reasonable considering information such as past performance of comparable titles, future firm commitments to license programs, and current market trends, (iii) evaluating the accelerated amortization pattern for content predominately monetized as a group, and (iv) testing the completeness and accuracy of the underlying data used in the amortization calculation fordiscounted cash flow models; and (iii) evaluating the reasonableness of the significant assumptions used by management related to future revenues and certain titlesoperating expenses, terminal growth rates, and for historical viewership datadiscount rates. Evaluating management’s assumptions related to future revenues and certain operating expenses, and terminal growth rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the entertainment linear networks and DTC services reporting units; (ii) the consistency with external market and industry data; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to calculateassist in evaluating the estimatereasonableness of projected usage for certain groups.the discount rate assumptions.

/s/ PricewaterhouseCoopers LLP
Los Angeles, California
November 24, 202121, 2023
We have served as the Company’s auditor since 1938.
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CONSOLIDATED STATEMENTS OF OPERATIONSINCOME
(in millions, except per share data)
 
202120202019202320222021
Revenues:Revenues:Revenues:
ServicesServices$61,768  $59,265  $60,579  Services$79,562  $74,200  $61,768  
ProductsProducts5,650  6,123  9,028  Products9,336  8,522  5,650  
Total revenuesTotal revenues67,418  65,388  69,607  Total revenues88,898  82,722  67,418  
Costs and expenses:Costs and expenses:Costs and expenses:
Cost of services (exclusive of depreciation and amortization)Cost of services (exclusive of depreciation and amortization)(41,129) (39,406) (36,493) Cost of services (exclusive of depreciation and amortization)(53,139) (48,962) (41,129) 
Cost of products (exclusive of depreciation and amortization)Cost of products (exclusive of depreciation and amortization)(4,002) (4,474) (5,568) Cost of products (exclusive of depreciation and amortization)(6,062) (5,439) (4,002) 
Selling, general, administrative and otherSelling, general, administrative and other(13,517) (12,369) (11,549) Selling, general, administrative and other(15,336) (16,388) (13,517) 
Depreciation and amortizationDepreciation and amortization(5,111) (5,345) (4,167) Depreciation and amortization(5,369) (5,163) (5,111) 
Total costs and expensesTotal costs and expenses(63,759) (61,594) (57,777) Total costs and expenses(79,906) (75,952) (63,759) 
Restructuring and impairment chargesRestructuring and impairment charges(654) (5,735) (1,183) Restructuring and impairment charges(3,892) (237) (654) 
Other income, net201  1,038  4,357  
Other income (expense), netOther income (expense), net96  (667) 201  
Interest expense, netInterest expense, net(1,406) (1,491) (978) Interest expense, net(1,209) (1,397) (1,406) 
Equity in the income (loss) of investees761  651  (103) 
Income (loss) from continuing operations before income taxes2,561  (1,743) 13,923  
Equity in the income of investeesEquity in the income of investees782  816  761  
Income from continuing operations before income taxesIncome from continuing operations before income taxes4,769  5,285  2,561  
Income taxes on continuing operationsIncome taxes on continuing operations(25) (699) (3,026) Income taxes on continuing operations(1,379) (1,732) (25) 
Net income (loss) from continuing operations2,536  (2,442) 10,897  
Income (loss) from discontinued operations, net of income tax benefit (expense) of $9, $10 and ($39), respectively(29) (32) 687  
Net income (loss)2,507  (2,474) 11,584  
Net income from continuing operationsNet income from continuing operations3,390  3,553  2,536  
Loss from discontinued operations, net of income tax benefit of $0, $14 and $9, respectivelyLoss from discontinued operations, net of income tax benefit of $0, $14 and $9, respectively—  (48) (29) 
Net incomeNet income3,390  3,505  2,507  
Net income from continuing operations attributable to noncontrolling and redeemable noncontrolling interestsNet income from continuing operations attributable to noncontrolling and redeemable noncontrolling interests(512) (390) (472) Net income from continuing operations attributable to noncontrolling and redeemable noncontrolling interests(1,036) (360) (512) 
Net income from discontinued operations attributable to noncontrolling interests—  —  (58) 
Net income (loss) attributable to The Walt Disney Company (Disney)$1,995  $(2,864) $11,054  
Net income attributable to The Walt Disney Company (Disney)Net income attributable to The Walt Disney Company (Disney)$2,354  $3,145  $1,995  
Earnings (loss) per share attributable to Disney(1):
Earnings (loss) per share attributable to Disney(1):
Earnings (loss) per share attributable to Disney(1):
DilutedDilutedDiluted
Continuing operationsContinuing operations$1.11  $(1.57) $6.26  Continuing operations$1.29  $1.75  $1.11  
Discontinued operationsDiscontinued operations(0.02) (0.02) 0.38  Discontinued operations—  (0.03) (0.02) 
$1.09  $(1.58) $6.64  $1.29  $1.72  $1.09  
BasicBasicBasic
Continuing operationsContinuing operations$1.11  $(1.57) $6.30  Continuing operations$1.29  $1.75  $1.11  
Discontinued operationsDiscontinued operations(0.02) (0.02) 0.38  Discontinued operations—  (0.03) (0.02) 
$1.10  $(1.58) $6.68  $1.29  $1.73  $1.10  
Weighted average number of common and common equivalent shares outstanding:Weighted average number of common and common equivalent shares outstanding:Weighted average number of common and common equivalent shares outstanding:
DilutedDiluted1,828  1,808  1,666  Diluted1,830  1,827  1,828  
BasicBasic1,816  1,808  1,656  Basic1,828  1,822  1,816  
(1)Total may not equal the sum of the column due to rounding.
See Notes to Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
 
202120202019202320222021
Net income (loss)$2,507  $(2,474) $11,584  
Net incomeNet income$3,390  $3,505  $2,507  
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Market value adjustments, primarily for hedgesMarket value adjustments, primarily for hedges41  (251) (37) Market value adjustments, primarily for hedges(430) 735  41  
Pension and postretirement medical plan adjustmentsPension and postretirement medical plan adjustments1,850  (1,476) (2,446) Pension and postretirement medical plan adjustments1,214  2,503  1,850  
Foreign currency translation and otherForeign currency translation and other77  115  (396) Foreign currency translation and other10  (1,060) 77  
Other comprehensive income (loss)1,968  (1,612) (2,879) 
Comprehensive income (loss)4,475  (4,086) 8,705  
Other comprehensive incomeOther comprehensive income794  2,178  1,968  
Comprehensive incomeComprehensive income4,184  5,683  4,475  
Net income from continuing operations attributable to noncontrolling interestsNet income from continuing operations attributable to noncontrolling interests(512) (390) (530) Net income from continuing operations attributable to noncontrolling interests(1,036) (360) (512) 
Other comprehensive income (loss) attributable to noncontrolling interestsOther comprehensive income (loss) attributable to noncontrolling interests(86) (93) 65  Other comprehensive income (loss) attributable to noncontrolling interests33  143  (86) 
Comprehensive income (loss) attributable to Disney$3,877  $(4,569) $8,240  
Comprehensive income attributable to DisneyComprehensive income attributable to Disney$3,181  $5,466  $3,877  
See Notes to Consolidated Financial Statements
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CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
October 2,
2021		October 3,
2020		September 30,
2023		October 1,
2022
ASSETSASSETSASSETS
Current assetsCurrent assetsCurrent assets
Cash and cash equivalentsCash and cash equivalents$15,959  $17,914  Cash and cash equivalents$14,182  $11,615  
Receivables, netReceivables, net13,367  12,708  Receivables, net12,330  12,652  
InventoriesInventories1,331  1,583  Inventories1,963  1,742  
Content advancesContent advances2,183  2,171  Content advances3,002  1,890  
Other current assetsOther current assets817  875  Other current assets1,286  1,199  
Total current assetsTotal current assets33,657  35,251  Total current assets32,763  29,098  
Produced and licensed content costsProduced and licensed content costs29,549  25,022  Produced and licensed content costs33,591  35,777  
InvestmentsInvestments3,935  3,903  Investments3,080  3,218  
Parks, resorts and other propertyParks, resorts and other propertyParks, resorts and other property
Attractions, buildings and equipmentAttractions, buildings and equipment64,892  62,111  Attractions, buildings and equipment70,090  66,998  
Accumulated depreciationAccumulated depreciation(37,920) (35,517) Accumulated depreciation(42,610) (39,356) 
26,972  26,594  27,480  27,642  
Projects in progressProjects in progress4,521  4,449  Projects in progress6,285  4,814  
LandLand1,131  1,035  Land1,176  1,140  
32,624  32,078  34,941  33,596  
Intangible assets, netIntangible assets, net17,115  19,173  Intangible assets, net13,061  14,837  
GoodwillGoodwill78,071  77,689  Goodwill77,067  77,897  
Other assetsOther assets8,658  8,433  Other assets11,076  9,208  
Total assetsTotal assets$203,609  $201,549  Total assets$205,579  $203,631  
LIABILITIES AND EQUITYLIABILITIES AND EQUITYLIABILITIES AND EQUITY
Current liabilitiesCurrent liabilitiesCurrent liabilities
Accounts payable and other accrued liabilitiesAccounts payable and other accrued liabilities$20,894  $16,801  Accounts payable and other accrued liabilities$20,671  $20,213  
Current portion of borrowingsCurrent portion of borrowings5,866  5,711  Current portion of borrowings4,330  3,070  
Deferred revenue and otherDeferred revenue and other4,317  4,116  Deferred revenue and other6,138  5,790  
Total current liabilitiesTotal current liabilities31,077  26,628  Total current liabilities31,139  29,073  
BorrowingsBorrowings48,540  52,917  Borrowings42,101  45,299  
Deferred income taxesDeferred income taxes7,246  7,288  Deferred income taxes7,258  8,363  
Other long-term liabilitiesOther long-term liabilities14,522  17,204  Other long-term liabilities12,069  12,518  
Commitments and contingencies (Note 15)00
Commitments and contingencies (Note 14)Commitments and contingencies (Note 14)
Redeemable noncontrolling interestsRedeemable noncontrolling interests9,213  9,249  Redeemable noncontrolling interests9,055  9,499  
EquityEquityEquity
Preferred stockPreferred stock—  —  Preferred stock—  —  
Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.8 billion sharesCommon stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.8 billion shares55,471  54,497  Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.8 billion shares57,383  56,398  
Retained earningsRetained earnings40,429  38,315  Retained earnings46,093  43,636  
Accumulated other comprehensive lossAccumulated other comprehensive loss(6,440) (8,322) Accumulated other comprehensive loss(3,292) (4,119) 
Treasury stock, at cost, 19 million sharesTreasury stock, at cost, 19 million shares(907) (907) Treasury stock, at cost, 19 million shares(907) (907) 
Total Disney Shareholders’ equityTotal Disney Shareholders’ equity88,553  83,583  Total Disney Shareholders’ equity99,277  95,008  
Noncontrolling interestsNoncontrolling interests4,458  4,680  Noncontrolling interests4,680  3,871  
Total equityTotal equity93,011  88,263  Total equity103,957  98,879  
Total liabilities and equityTotal liabilities and equity$203,609  $201,549  Total liabilities and equity$205,579  $203,631  
See Notes to Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
 
202120202019202320222021
OPERATING ACTIVITIESOPERATING ACTIVITIESOPERATING ACTIVITIES
Net income (loss) from continuing operations$2,536  $(2,442) $10,897  
Net income from continuing operationsNet income from continuing operations$3,390  $3,553  $2,536  
Depreciation and amortizationDepreciation and amortization5,111  5,345  4,167  Depreciation and amortization5,369  5,163  5,111  
Goodwill and intangible asset impairments—  4,953  —  
Net gain on investments, acquisitions and dispositions(332) (920) (4,733) 
Impairments of produced and licensed content costs and goodwillImpairments of produced and licensed content costs and goodwill2,987  —  —  
Net (gain)/loss on investmentsNet (gain)/loss on investments(166) 714  (332) 
Deferred income taxesDeferred income taxes(1,241) (392) 117  Deferred income taxes(1,346) 200  (1,241) 
Equity in the (income) loss of investees(761) (651) 103  
Equity in the income of investeesEquity in the income of investees(782) (816) (761) 
Cash distributions received from equity investeesCash distributions received from equity investees754  774  754  Cash distributions received from equity investees720  779  754  
Net change in produced and licensed content costs and advancesNet change in produced and licensed content costs and advances(4,301) 397  (542) Net change in produced and licensed content costs and advances(1,908) (6,271) (4,301) 
Net change in operating lease right of use assets / liabilities46  31  —  
Equity-based compensationEquity-based compensation600  525  711  Equity-based compensation1,143  977  600  
Pension and postretirement medical amortization816  547 278  
Pension and postretirement medical cost amortizationPension and postretirement medical cost amortization4  620 816  
Other, netOther, net144  94  (124) Other, net278  595  190  
Changes in operating assets and liabilities, net of business acquisitions:
Changes in operating assets and liabilitiesChanges in operating assets and liabilities
ReceivablesReceivables(357) 1,943  55  Receivables358  605  (357) 
InventoriesInventories252  14  (223) Inventories(183) (420) 252  
Other assetsOther assets171  (157) 932  Other assets(201) (707) 171  
Accounts payable and other liabilitiesAccounts payable and other liabilities2,410  (2,293) 191  Accounts payable and other liabilities(1,142) 964  2,410  
Income taxesIncome taxes(282) (152) (6,599) Income taxes1,345  46  (282) 
Cash provided by operations - continuing operationsCash provided by operations - continuing operations5,566  7,616  5,984  Cash provided by operations - continuing operations9,866  6,002  5,566  
INVESTING ACTIVITIESINVESTING ACTIVITIESINVESTING ACTIVITIES
Investments in parks, resorts and other propertyInvestments in parks, resorts and other property(3,578) (4,022) (4,876) Investments in parks, resorts and other property(4,969) (4,943) (3,578) 
Proceeds from sales of investmentsProceeds from sales of investments458  52  337  
Acquisitions—  —  (9,901) 
Other407  172  (319) 
Other, netOther, net(130) (117) 70  
Cash used in investing activities - continuing operationsCash used in investing activities - continuing operations(3,171) (3,850) (15,096) Cash used in investing activities - continuing operations(4,641) (5,008) (3,171) 
FINANCING ACTIVITIESFINANCING ACTIVITIESFINANCING ACTIVITIES
Commercial paper borrowings (payments), net(26) (3,354) 4,318  
Commercial paper payments, netCommercial paper payments, net(191) (334) (26) 
BorrowingsBorrowings64  18,120  38,240  Borrowings83  333  64  
Reduction of borrowingsReduction of borrowings(3,737) (3,533) (38,881) Reduction of borrowings(1,675) (4,016) (3,737) 
Dividends—  (1,587) (2,895) 
Proceeds from exercise of stock optionsProceeds from exercise of stock options435  305  318  Proceeds from exercise of stock options52  127  435  
Contributions from / sales of noncontrolling interestsContributions from / sales of noncontrolling interests91  94  737  Contributions from / sales of noncontrolling interests735  74  91  
Acquisition of noncontrolling and redeemable noncontrolling interests(350) —  (1,430) 
Other(862) (1,565) (871) 
Cash provided by (used in) financing activities - continuing operations(4,385) 8,480  (464) 
Acquisition of redeemable noncontrolling interestsAcquisition of redeemable noncontrolling interests(900) —  (350) 
Other, netOther, net(828) (913) (862) 
Cash used in financing activities - continuing operationsCash used in financing activities - continuing operations(2,724) (4,729) (4,385) 
CASH FLOWS FROM DISCONTINUED OPERATIONSCASH FLOWS FROM DISCONTINUED OPERATIONSCASH FLOWS FROM DISCONTINUED OPERATIONS
Cash provided by operations - discontinued operationsCash provided by operations - discontinued operations1  2  622  Cash provided by operations - discontinued operations—  8  1  
Cash provided by investing activities - discontinued operationsCash provided by investing activities - discontinued operations8  213  10,978  Cash provided by investing activities - discontinued operations—  —  8  
Cash used in financing activities - discontinued operationsCash used in financing activities - discontinued operations—  —  (626) Cash used in financing activities - discontinued operations—  (12) —  
Cash provided by discontinued operations9  215  10,974  
Cash (used in) provided by discontinued operationsCash (used in) provided by discontinued operations—  (4) 9  
Impact of exchange rates on cash, cash equivalents and restricted cashImpact of exchange rates on cash, cash equivalents and restricted cash30  38  (98) Impact of exchange rates on cash, cash equivalents and restricted cash73  (603) 30  
Change in cash, cash equivalents and restricted cashChange in cash, cash equivalents and restricted cash(1,951) 12,499  1,300  Change in cash, cash equivalents and restricted cash2,574  (4,342) (1,951) 
Cash, cash equivalents and restricted cash, beginning of yearCash, cash equivalents and restricted cash, beginning of year17,954  5,455  4,155  Cash, cash equivalents and restricted cash, beginning of year11,661  16,003  17,954  
Cash, cash equivalents and restricted cash, end of yearCash, cash equivalents and restricted cash, end of year$16,003  $17,954  $5,455  Cash, cash equivalents and restricted cash, end of year$14,235  $11,661  $16,003  
Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:
Interest paidInterest paid$1,892  $1,559  $1,142  Interest paid$2,110  $1,685  $1,892  
Income taxes paidIncome taxes paid$1,638  $738  $9,259  Income taxes paid$1,193  $1,097  $1,638  
See Notes to Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions)
 
Equity Attributable to Disney   Equity Attributable to Disney  
SharesCommon
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income
(Loss)		Treasury
Stock		Total
Disney
Equity
Non-controlling
Interests(1)
Total EquitySharesCommon
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income
(Loss)		Treasury
Stock		Total
Disney
Equity
Non-controlling
Interests(1)
Total Equity
Balance at September 29, 20181,488 $36,779  $82,679  $(3,097) $(67,588) $48,773  $4,059  $52,832  
Balance at October 3, 2020Balance at October 3, 20201,810 $54,497  $38,315  $(8,322) $(907) $83,583  $4,680  $88,263  
Comprehensive incomeComprehensive income— —  11,054  (2,814) —  8,240  371  8,611  Comprehensive income— —  1,995  1,882  —  3,877  284  4,161  
Equity compensation activity7 912  —  —  —  912  —  912  
Dividends— 18  (2,913) —  —  (2,895) —  (2,895) 
Contributions— —  —  —  —  —  737  737  
Acquisition of TFCF307 33,774  —  —  —  33,774  10,408  44,182  
Adoption of new accounting guidance:
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income— —  691  (691) —  —  —  —  
Intra-Entity Transfers of Assets Other Than Inventory— —  192  —  —  192  —  192  
Revenues from Contracts with Customers— —  (116) —  —  (116) —  (116) 
Other— —  22  (15) —  7  —  7  
Retirement of treasury stock— (17,563) (49,118) —  66,681  —  —  —  
Reclassification to redeemable noncontrolling interest— —  —  —  —  —  (7,770) (7,770) 
Redemption of noncontrolling interest— —  —  —  —  —  (1,430) (1,430) 
Sales of the RSNs— —  —  —  —  —  (744) (744) 
Distributions and other— (13) 3  —  —  (10) (619) (629) 
Balance at September 28, 20191,802 $53,907  $42,494  $(6,617) $(907) $88,877  $5,012  $93,889  
Comprehensive income— —  (2,864) (1,705) —  (4,569) 198  (4,371) 
Equity compensation activity8 590  —  —  —  590  —  590  
Dividends— 9  (1,596) —  —  (1,587) —  (1,587) 
Contributions— —  —  —  —  —  94  94  
Adoption of new lease accounting guidance— —  197  —  —  197  —  197  
Distributions and other— (9) 84  —  —  75  (624) (549) 
Balance at October 3, 20201,810 $54,497  $38,315  $(8,322) $(907) $83,583  $4,680  $88,263  
Comprehensive income (loss)— —  1,995  1,882  —  3,877  284  4,161  
Equity compensation activityEquity compensation activity8 904  —  —  —  904  —  904  Equity compensation activity8 904  —  —  —  904  —  904  
ContributionsContributions— —  —  —  —  —  89  89  Contributions— —  —  —  —  —  89  89  
Cumulative effect of accounting changeCumulative effect of accounting change— —  109  —  —  109  —  109  Cumulative effect of accounting change— —  109  —  —  109  —  109  
Distributions and otherDistributions and other— 70  10  —  —  80  (595) (515) Distributions and other— 70  10  —  —  80  (595) (515) 
Balance at October 2, 2021Balance at October 2, 20211,818 $55,471  $40,429  $(6,440) $(907) $88,553  $4,458  $93,011  Balance at October 2, 20211,818 $55,471  $40,429  $(6,440) $(907) $88,553  $4,458  $93,011  
Comprehensive income (loss)Comprehensive income (loss)— —  3,145  2,321  —  5,466  (68) 5,398  
Equity compensation activityEquity compensation activity6 925  —  —  —  925  —  925  
ContributionsContributions— —  —  —  —  —  74  74  
Distributions and otherDistributions and other— 2  62  —  —  64  (593) (529) 
Balance at October 1, 2022Balance at October 1, 20221,824 $56,398  $43,636  $(4,119) $(907) $95,008  $3,871  $98,879  
Comprehensive incomeComprehensive income— —  2,354  827  —  3,181  549  3,730  
Equity compensation activityEquity compensation activity6 1,056  —  —  —  1,056  —  1,056  
ContributionsContributions— —  —  —  —  —  806  806  
Distributions and otherDistributions and other— (71) 103  —  —  32  (546) (514) 
Balance at September 30, 2023Balance at September 30, 20231,830 $57,383  $46,093  $(3,292) $(907) $99,277  $4,680  $103,957  
(1)Excludes redeemable noncontrolling interest.
See Notes to Consolidated Financial Statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except where noted and per share amounts)
1Description of the Business and Segment Information
The Walt Disney Company, together with the subsidiaries through which businesses are conducted (the Company), is a diversified worldwide entertainment company with operations in the Disney Mediathree segments: Entertainment, Sports and Entertainment Distribution (DMED) and Disney Parks, Experiences and Products (DPEP) segments (see additional information below on the recast of fiscal 2020 and 2019 segment information as a result of the media and entertainment reorganization). On March 20, 2019, the Company acquired Twenty-First Century Fox, Inc., a diversified global media and entertainment company, which was subsequently renamed TFCF Corporation (TFCF). As a result of the acquisition, the Company’s ownership in Hulu LLC (Hulu) increased from 30% to 60% (currently 67%). The acquired TFCF operations and Hulu have been consolidated since the acquisition (See Note 4).Experiences.
The terms “Company”, “we”, “our” and “us” are used in this report to refer collectively to the parent company and the subsidiaries through which various businesses are conducted. The term “TWDC” is used to refer to the parent company.
Impact of COVID-19
Since early 2020, the world has been, and continues to be, impacted by the novel coronavirus (COVID-19) and its variants. COVID-19 and measures to prevent its spread has impacted our segments in a number of ways, most significantly at the DPEP segment where our theme parks were closed and cruise ship sailings and guided tours were suspended. These operations resumed, generally at reduced capacity, at various points since May 2020. We have delayed, or in some cases, shortened or cancelled theatrical releases, and stage play performances were suspended as of March 2020. Stage play operations resumed, generally at reduced capacity, in the first quarter of fiscal 2021. Theaters have been subject to capacity limitations and shifting government mandates or guidance regarding COVID-19. We experienced significant disruptions in the production and availability of content, including the delay of key live sports programming during fiscal 2020 and fiscal 2021, as well as the suspension of most film and television production in March 2020. Although film and television production generally resumed beginning in the fourth quarter of 2020, we continue to see disruption of production activities depending on local circumstances. Fewer theatrical releases and production delays have limited the availability of film content to be sold in distribution windows subsequent to the theatrical release.
The impact of these disruptions and the extent of their adverse impact on our financial and operating results will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unknowable duration and severity of the impacts of COVID-19 and its variants, and among other things, the impact of governmental actions imposed in response to COVID-19 and individuals’ and companies’ risk tolerance regarding health matters going forward. We have incurred and will continue to incur additional costs to address government regulations and the safety of our employees, guests and talent.Segment Restructuring
In fiscal 2020,2023, the Company recorded goodwillreorganized into three business segments: Entertainment, Sports and intangible asset impairments totaling $5.0 billion, in part dueExperiences (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 (DMED) segment has been reorganized into the Entertainment and Sports segments
•A portion of Consumer Products (a business within the Experiences segment) revenues is recognized at the Entertainment segment, which is meant to reflect royalties on merchandise licensing revenues generated on IP created by the negative impact COVID-19 has had on the International Channels business (see Note 19).Entertainment segment
DESCRIPTION OF THE BUSINESS
Disney Media and Entertainment Distribution
The DMEDEntertainment segment generally encompasses the Company’s non-sports focused global film, television and episodic televisiondirect-to-consumer (DTC) video streaming content production and distribution activities.
activities. Content is distributed by a single organization across threeThe significant lines of business: Linear Networks, Direct-to-Consumer and Content Sales/Licensing and is generally created by three production/content licensing groups: Studios, Generalbusiness within Entertainment and Sports. The distribution organization has full accountability for the financial results of the entire media and entertainment business.
The operations of DMED’s significant lines of business are as follows:
•Linear Networks
◦Domestic Channels:Domestic: ABC Television NetworkNetwork; Disney, Freeform, FX and National Geographic (owned 73% by the Company) branded television channels; and eight owned ABC television stations (Broadcasting), and Disney, ESPN (80% interest), Freeform, FX and National Geographic (73% interest) branded domestic television networks (Cable)
◦International Channels:International: Disney, ESPN, Fox (which will be rebranded in fiscal 2024 primarily to FX or Star), FX, National Geographic (owned 73% by the Company) and Star branded general entertainment television networks outside of the U.S.
◦A 50% equity investment in A+E Television Networks (A+E), which operates a variety of cable channels including A&E, HISTORY and Lifetime
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•Direct-to-Consumer
◦Disney+: a global DTC service that primarily offers general entertainment and family programming. In certain Latin American countries, we offer Disney+ as well as Star+, a general entertainment service that also has sports programming
◦Disney+ Hotstar, ESPN+ (68% effective interest), Hotstar: a DTC service primarily in India that offers general entertainment, family and sports programming
◦Hulu (owned 67% by the Company): a U.S. DTC service that offers general entertainment and Star+ direct-to-consumer (DTC) streaming servicesfamily programming and a digital over-the-top service that includes live linear streams of cable networks and the major broadcast networks
•Content Sales/Licensing
◦SaleSale/licensing of film and televisionepisodic content to third-party television and subscription video-on-demand (TV/SVOD)VOD) services
◦Theatrical distribution
◦Home entertainment distribution (DVD,distribution: DVD and Blu-ray discs, and electronic home video licenses)
◦Music distributionlicenses and video-on-demand (VOD) rentals
◦Staging and licensing of live entertainment events on Broadway and around the world (Stage Plays)
DMED◦Intersegment allocation of revenues from the Experiences segment, which is meant to reflect royalties on consumer products merchandise licensing revenues generated on intellectual property (“IP”) created by the Entertainment segment
◦Music distribution
◦Post-production services by Industrial Light & Magic and Skywalker Sound
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Entertainment also includes the following activities that are reported with Content Sales/Licensing:
•Post-production servicesNational Geographic magazine and online business (owned 73% by Industrial Light & Magic and Skywalker Soundthe Company)
•A 30% ownership interest in Tata SkyPlay Limited, which operates a direct-to-home satellite distribution platform in India
The significant revenues of DMEDEntertainment are as follows:
•Affiliate fees - Fees charged by our Linear Networks to multi-channel video programming distributors (i.e. cable, satellite, telecommunications and digital over-the-top (e.g. YouTube TV) service providers) (MVPDs) and television stations affiliated with the ABC Network for the right to deliver our programming to their customers
•Advertising - Sales of advertising time/space on ourcustomers. Linear Networks and Direct-to-Consumeralso generates revenues from fees charged to television stations affiliated with ABC Network.
•Subscription fees - Fees charged to customers/subscribers for our DTC streaming services
•Advertising - Sales of advertising time/space
•TV/SVODVOD distribution - Licensing fees and other revenue for the right to use our film and television productions and revenue from fees charged to customers to view our sports programming (“pay-per-view”) and streaming access to films that are also playing in theaters (“Premier Access”). TV/SVOD distribution revenue is primarily reported in Content Sales/Licensing, except for pay-per-view and Premier Access revenue, which is reported in Direct-to-Consumerepisodic content
•Theatrical distribution - Rentals from licensing our film productionsfilms to theaters
•Home entertainment distribution - SaleSales and rentals of our film and televisionepisodic content to retailers and through distributors in home video formats
•Other content sales/licensing revenue - Revenues from licensing our music, ticket sales from stage play performances, and fees from licensing our intellectual properties (“IP”)IP for use in stage plays,
•Other revenue - Fees from sub-licensing sales of sports programming rights (reported in Linear Networks) and post-production services (reported with Content Sales/Licensing)and the allocation of consumer products merchandise licensing revenues
The significant expenses of DMEDEntertainment are as follows:
•Operating expenses, consistconsisting primarily of programming and production costs, technicaltechnology support costs, operating labor, distribution costs and costs of sales. Programming and production costs include amortization of acquired licensed programming rights (including sports rights), amortizationthe following:
◦Amortization of capitalized production costs (including participations
◦Amortization of the costs of licensed programming rights
◦Subscriber-based fees for programming our Hulu Live service, including fees paid by Hulu to the Sports segment and residuals) and productionother Entertainment segment businesses for the right to air their linear networks on Hulu Live
◦Production costs related to live programming such as news and sports. Programming and production costs are generally allocated across the DMED businesses based on the estimated relative value of the distribution windows. These costs are largely incurred across three content creation groups, as follows:(primarily news)
◦Studios - Primarily capitalized production costs related to feature films produced under the Walt Disney Pictures, Twentieth Century Studios, Marvel, Lucasfilm, PixarAmortization of participations and Searchlight Pictures bannersresidual obligations
◦General Entertainment - Primarily acquisition of rightsFees paid to the Sports segment to program ESPN on ABC and internal production of episodic television programs and news content. Internalcertain sports content is generally produced by the following television studios: ABC Signature; 20th Television; Disney Television Animation, FX Productions and various studios for which we commission productions for our branded channels and DTC streaming services
◦Sports - Primarily acquisition of professional and college sports programming rights and related production costson Star+
•Selling, general and administrative costs, including marketing costs
•Depreciation and amortization
Disney Parks, Experiences and ProductsSports
The operations of DPEP’sSports segment generally encompasses the Company’s sports-focused global television and DTC video streaming content production and distribution activities.
The significant lines of business within Sports are as follows:
•ESPN (generally owned 80% by the Company)
◦Domestic:
▪Eight ESPN branded television channels
▪ESPN on ABC (sports programmed on the ABC Network by ESPN)
▪ESPN+ DTC video streaming service
◦International: ESPN-branded channels outside of the U.S.
•Star: Star-branded sports channels in India
The significant revenues of Sports are as follows:
•Affiliate fees
•Advertising
•Subscription fees
•Other revenue - Fees from the following activities: pay-per-view events on ESPN+, sub-licensing of sports rights, programming ESPN on ABC and licensing the ESPN brand
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The significant expenses of Sports are as follows:
•Operating expenses, consisting 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.
•Selling, general and administrative costs, including marketing costs
•Depreciation and amortization
Experiences
The significant lines of business within Experiences are as follows:
•Parks & Experiences:
◦Domestic:
▪Theme parks and resorts, which include: resorts:
•Walt Disney World Resort in Florida; Florida
•Disneyland Resort in California; California
▪Experiences
•Disney Cruise Line
•Disney Vacation Club
•National Geographic Expeditions (owned 73% by the Company) and Adventures by Disney
•Aulani, a Disney Resort & Spa in Hawaii
◦International:
▪Theme parks and resorts:
•Disneyland Paris; Paris
•Hong Kong Disneyland Resort (48% ownership interest); interest and consolidated in our financial results)
•Shanghai Disney Resort (43% ownership interest), all of which areinterest and consolidated in our results. Additionally,financial results)
•In addition, the Company licenses ourits IP to a third party to operate Tokyo Disney Resort
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◦Disney Cruise Line, Disney Vacation Club, National Geographic Expeditions (73% ownership interest), Adventures by Disney and Aulani, a Disney Resort & Spa in Hawaii
•Consumer Products:
◦Licensing of our trade names, characters, visual, literary and other IP to various manufacturers, game developers, publishers and retailers throughout the world, for use on merchandise, published materials and games
◦Sale of branded merchandise through online, retail online and wholesale businesses, and development and publishing of books, comic books and magazines (except National Geographic magazine, which is reported in DMED)Entertainment)
The significant revenues of DPEPExperiences are as follows:
•Theme park admissions - Sales of tickets for admission to our theme parks
•Parks & Experiences merchandise, food and beverage - Sales of merchandise, foodfor premium access to certain attractions (e.g. Genie+ and beverages at our theme parks and resorts and cruise shipsLightning Lane)
•Resorts and vacations - Sales of room nights at hotels, sales of cruise and other vacations and sales and rentals of vacation club properties
•Parks & Experiences merchandise, food and beverage - Sales of merchandise, food and beverages at our theme parks and resorts and cruise ships
•Merchandise licensing and retail:
◦Merchandise licensing - Royalties from licensing our IP for use on consumer goods
◦Retail - Sales of merchandise at The Disney Store and through internet shopping sites generally(generally branded shopDisney,shopDisney) and at The Disney Store, as well as to wholesalers (including books, comic books and magazines)
•Parks licensing and other - Revenues from sponsorships and co-branding opportunities, and real estate rent and sales. In addition, we earnsales and royalties earned on Tokyo Disney Resort revenues
The significant expenses of DPEPExperiences are as follows:
•Operating expenses, consistconsisting primarily of operating labor, costs of goods sold, infrastructure costs, supplies, commissions and entertainment offerings. Infrastructure costs include information systems expense,technology support costs, repairs and maintenance, property taxes, utilities and fuel, retail occupancy costs, insurance and transportation
•Selling, general and administrative costs, including marketing costs
•Depreciation and amortization
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SEGMENT INFORMATION
Our operating segments report separate financial information, which is evaluated regularly by the Chief Executive Officer in order to decide how to allocate resources and to assess performance.
Segment operating results reflect earnings before corporate and unallocated shared expenses, restructuring and impairment charges, net other income, net interest expense, income taxes and noncontrolling interests. Segment operating income generally includes equity in the income of investees and excludes impairments of certain equity investments and acquisition accounting amortization of TFCF Corporation (TFCF) and Hulu assets (i.e. intangible assets and the fair value step-up for film and televisionepisodic costs) recognized in connection with the TFCF acquisition in fiscal 2019 (TFCF and Hulu acquisition amortization). Corporate and unallocated shared expenses principally consist of corporate functions, executive management and certain unallocated administrative support functions.
Segment operating results include allocations of certain costs, including information technology, pension, legal and other shared services costs, which are allocated based on metrics designed to correlate with consumption.
In fiscal 2021, we changed the presentation of segment operating results as discussed below and have recast our fiscal 2020 and fiscal 2019 segment operating results to align with the fiscal 2021 presentation.
Media and Entertainment Reorganization
In October 2020, the Company reorganized its media and entertainment operations, which had been previously reported in three segments: Media Networks, Studio Entertainment and Direct-to-Consumer & International. As a result of the reorganization, the operations of the media and entertainment businesses are reported as one segment, DMED.
Intersegment Transfer Pricing
Under our previous segment structure, in certain instances production and distribution activities were in different segments. In these situations, for segment financial accounting purposes, the producer segment would recognize revenue based on an intersegment transfer price that included a “mark-up”. These transactions were reported “gross” (i.e. the segment producing the content reported revenue and the mark-up from intersegment transactions, and the required eliminations were reported on a separate “Eliminations” line when presenting a summary of our segment results). Under our new segment structure, the operating results of the production and distribution activities are reported in the same segment, and the fully loaded production cost is allocated across the distribution platforms which are utilizing the content.
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Elimination of Consumer Products Revenue Share
Under our legacy segment financial reporting, the Studio Entertainment segment received a revenue share related to the consumer products business, which is included in the DPEP segment. Under the new reporting structure, DMED does not receive a revenue share from DPEP related to the consumer products business.
Segment revenues and segment operating income are as follows:
202120202019
Revenues
Disney Media and Entertainment Distribution$50,866  $48,350  $42,821  
Disney Parks, Experiences and Products16,552  17,038  26,786  
Total consolidated revenues$67,418  $65,388  $69,607  
Segment operating income
Disney Media and Entertainment Distribution$7,295  $7,653  $7,528  
Disney Parks, Experiences and Products471  455  7,319  
Total segment operating income(1)
$7,766  $8,108  $14,847  
202320222021
Revenues
Entertainment
Third parties$40,258  $39,231  $36,155  
Intersegment377  338  334  
40,635  39,569  36,489  
Sports
Third parties16,091  16,429  15,302  
Intersegment1,020  841  658  
17,111  17,270  15,960  
Experiences32,549  28,085  15,961  
Eliminations(1,397) (1,179) (992) 
Total segment revenues$88,898  $83,745  $67,418  
Segment operating income (loss)
Entertainment$1,444  $2,126  $5,196  
Sports2,465  2,710  2,690  
Experiences8,954  7,285  (120) 
Total segment operating income(1)
$12,863  $12,121  $7,766  
(1)Equity in the income (loss) of investees is included in segment operating income as follows:
202120202019
Disney Media and Entertainment Distribution$795  $696  $463  
Disney Parks, Experiences and Products(19) (19) (13) 
Equity in the income of investees included in segment operating income776  677  450  
Impairment of equity investments—  —  (538) 
Amortization of TFCF intangible assets related to equity investees(15) (26) (15) 
Equity in the income (loss) of investees$761  $651  $(103) 
202320222021
Entertainment$685  $783  $744  
Sports55  55  51  
Experiences(2) (10) (19) 
Equity in the income of investees included in segment operating income738  828  776  
A+E Gain(1)
56  —  —  
Amortization of TFCF intangible assets related to equity investees(12) (12) (15) 
Equity in the income of investees$782  $816  $761  
(1)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 of this gain was $56 million (A+E gain).
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A reconciliation of segment revenues to total revenues is as follows:
 202320222021
Segment revenues$88,898 $83,745   $67,418 
Content License Early Termination(1)
—   (1,023)—   
Total revenues$88,898 $82,722 $67,418 
(1)In fiscal 2022, the Company early terminated certain license agreements with a customer for film and episodic content, which was delivered in previous years, in order for the Company to use the content primarily on our Entertainment Direct-to-Consumer services (Content License Early Termination). Because the content is functional IP, we had recognized substantially all of the consideration to be paid by the customer under the licenses as revenue in prior years when the content was delivered. Consequently, we have recorded the amounts to terminate the license agreements, net of remaining amounts of deferred revenue, as a reduction of revenue.
A reconciliation of segment operating income to income from continuing operations before income taxes is as follows:
202120202019
Segment operating income$7,766  $8,108  $14,847  
Corporate and unallocated shared expenses(928) (817) (987) 
Restructuring and impairment charges(654) (5,735) (1,183) 
Other income, net201  1,038  4,357  
Interest expense, net(1,406) (1,491) (978) 
TFCF and Hulu acquisition amortization(1)
(2,418) (2,846) (1,595) 
Impairment of equity investments(2)
—  —  (538) 
Income (loss) from continuing operations before income taxes$2,561  $(1,743) $13,923  
202320222021
Segment operating income$12,863  $12,121  $7,766  
Content License Early Termination— (1,023)— 
Corporate and unallocated shared expenses(1,147) (1,159) (928) 
Restructuring and impairment charges(1)
(3,836) (237) (654) 
Other income (expense), net96  (667) 201  
Interest expense, net(1,209) (1,397) (1,406) 
TFCF and Hulu acquisition amortization(2)
(1,998) (2,353) (2,418) 
Income from continuing operations before income taxes$4,769  $5,285  $2,561  
(1)For fiscal 2021, amortizationNet of intangible assets, fair value step-up on film and television costs and intangibles related to TFCF equity investees were $1,757 million, $646 million and $15 million, respectively. For fiscal 2020, amortization of intangible assets, fair value step-up on film and television costs and intangibles related to TFCF equity investees were $1,921 million, $899 million and $26 million, respectively. For fiscal 2019, amortization of intangible assets, fair value step-up on film and television costs and intangibles related to TFCF equity investees were $1,043 million, $537 million and $15 million, respectively.the A+E Gain.
(2)Impairment of equity investments for fiscal 2019 primarily reflects the impairments of Vice Group Holding Inc.TFCF and of an investment in a cable channel at A+E Television Networks ($353 million and $170 million, respectively).Hulu acquisition amortization is as follows:
202320222021
Amortization of intangible assets$1,547  $1,707  $1,757  
Step-up of film and episodic costs439 634 646 
Intangibles related to TFCF equity investees12 12 15 
$1,998 $2,353 $2,418 
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Capital expenditures, depreciation expense and amortization expense are as follows:
Capital expendituresCapital expenditures202120202019Capital expenditures202320222021
Disney Media and Entertainment Distribution$862  $783  $520  
Disney Parks, Experiences and Products
EntertainmentEntertainment$1,032  $802  $838  
SportsSports15  8  24  
ExperiencesExperiences
DomesticDomestic1,597  2,145  3,294  Domestic2,203  2,680  1,597  
InternationalInternational675  759  852  International822  767  675  
CorporateCorporate444  335  210  Corporate897  686  444  
Total capital expendituresTotal capital expenditures$3,578  $4,022  $4,876  Total capital expenditures$4,969  $4,943  $3,578  
Depreciation expenseDepreciation expenseDepreciation expense
Disney Media and Entertainment Distribution$613  $638  $479  
Disney Parks, Experiences and Products
EntertainmentEntertainment$669  $560  $513  
SportsSports73  90  100 
ExperiencesExperiences
DomesticDomestic1,551  1,634  1,474  Domestic2,011  1,680  1,551  
InternationalInternational718  694  724  International669  662  718  
Amounts included in segment operating incomeAmounts included in segment operating income2,269  2,328  2,198  Amounts included in segment operating income2,680  2,342  2,269  
CorporateCorporate186  174  167  Corporate204  191  186  
Total depreciation expenseTotal depreciation expense$3,068  $3,140  $2,844  Total depreciation expense$3,626  $3,183  $3,068  
Amortization of intangible assetsAmortization of intangible assetsAmortization of intangible assets
Disney Media and Entertainment Distribution$178  $175  $172  
Disney Parks, Experiences and Products108  109  108  
EntertainmentEntertainment$87  $164  $174  
SportsSports—  —  4  
ExperiencesExperiences109  109  108  
Amounts included in segment operating incomeAmounts included in segment operating income286  284  280  Amounts included in segment operating income196  273  286  
TFCF and HuluTFCF and Hulu1,757  1,921  1,043  TFCF and Hulu1,547  1,707  1,757  
Total amortization of intangible assetsTotal amortization of intangible assets$2,043  $2,205  $1,323  Total amortization of intangible assets$1,743  $1,980  $2,043  
Identifiable assets, including equity method investments(1) and intangible assets,(2) are as follows:
October 2, 2021October 3, 2020
Disney Media and Entertainment Distribution$144,675  $139,538  
Disney Parks, Experiences and Products41,763  42,320  
Corporate(2)
17,171  19,691  
Total consolidated assets$203,609  201,549  
September 30, 2023October 1, 2022
Entertainment$113,307  $117,184  
Sports25,402  24,988  
Experiences42,808  41,969  
Corporate (primarily fixed asset and cash and cash equivalents)24,062  19,490  
Total consolidated assets$205,579  203,631  
(1)Equity method investments included in identifiable assets by segment are as follows:
October 2, 2021October 3, 2020
Disney Media and Entertainment Distribution$2,578  $2,574  
Disney Parks, Experiences and Products2  3  
Corporate58  55  
$2,638  $2,632  
September 30, 2023October 1, 2022
Entertainment$2,433  $2,449  
Sports213  184  
Experiences—  2  
Corporate42  43  
$2,688  $2,678  
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(2)Intangible assets, which include character/franchise intangibles, copyrights, trademarks, MVPD agreements and FCC licenses (see Note 14)13), included in identifiable assets by segment are as follows:
October 2, 2021October 3, 2020
Disney Media and Entertainment Distribution$14,143  $16,087  
Disney Parks, Experiences and Products2,952  3,066  
Corporate20  20  
$17,115  $19,173  
(2)Primarily fixed assets and cash and cash equivalents.
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September 30, 2023October 1, 2022
Entertainment$8,556  $9,829  
Sports1,767  2,152  
Experiences2,718  2,836  
Corporate20  20  
$13,061  $14,837  
The following table presents our revenues and segment operating income by geographical markets:
202120202019202320222021
RevenuesRevenuesRevenues
AmericasAmericas$54,157  $51,992  $53,805  Americas$71,205  $68,218  $54,157  
EuropeEurope6,690  7,333  8,006  Europe9,533  8,680  6,690  
Asia PacificAsia Pacific6,571  6,063  7,796  Asia Pacific8,160  6,847  6,571  
$67,418  $65,388  $69,607  $88,898  $83,745  $67,418  
Content License Early TerminationContent License Early Termination(1,023) 
$82,722  
Segment operating incomeSegment operating incomeSegment operating income
AmericasAmericas$6,314  $5,819  $10,247  Americas$10,779  $11,099  $6,314  
EuropeEurope800  1,273  2,433  Europe856  586  800  
Asia PacificAsia Pacific652  1,016  2,167  Asia Pacific1,228  436  652  
$7,766  $8,108  $14,847  $12,863  $12,121  $7,766  
Long-lived assets(1) by geographical markets are as follows:
October 2, 2021October 3, 2020September 30, 2023October 1, 2022
AmericasAmericas$144,788  $141,674  Americas$148,567  $150,786  
EuropeEurope8,215  7,672  Europe9,895  8,739  
Asia PacificAsia Pacific12,012  12,235  Asia Pacific10,244  10,976  
$165,015  $161,581  $168,706  $170,501  
(1)Long-lived assets are total assets less: current assets, long-term receivables, deferred taxes, financial investments and the fair value of derivative instruments.
The changes in the carrying amount of goodwill are as follows:
DMEDExperiencesEntertainmentSportsTotal
Balance at Oct. 2, 2021$72,521  $5,550  $—  $—  $78,071  
Currency translation adjustments and other, net(174) —  —  —  (174) 
Balance at Oct. 1, 202272,347  5,550  —  —  77,897  
Segment recast(1)
(72,347) —  55,488  16,859  —  
Goodwill impairment(2)
—  —  (425) (296) (721) 
Currency translation adjustments and other, net—  —  (32) (77) (109) 
Balance at Sep. 30, 2023$—  $5,550  $55,031  $16,486  $77,067  
(1)Reflects the reallocation of goodwill as a result of the Company recasting its segments from the strategic reorganization during fiscal 2023.
(2)Reflects goodwill impairments at entertainment and international sports linear networks (See Note 18).
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2Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of The Walt Disney Company and its majority-owned or controlled subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
The Company enters into relationships with or makes investments in other entities that may be variable interest entities (VIE). A VIE is consolidated in the financial statements if the Company has the power to direct activities that most significantly impact the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant (as defined by ASC 810-10-25-38) to the VIE. Hong Kong Disneyland Resort and Shanghai Disney Resort (together, the Asia Theme Parks) are VIEs in which the Company has less than 50% equity ownership. Company subsidiaries (the Management Companies) have management agreements with the Asia Theme Parks, which provide the Management Companies, subject to certain protective rights of joint venture partners, with the ability to direct the day-to-day operating activities and the development of business strategies that we believe most significantly impact the economic performance of the Asia Theme Parks. In addition, the Management Companies receive management fees under these arrangements that we believe could be significant to the Asia Theme Parks. Therefore, the Company has consolidated the Asia Theme Parks in its financial statements.
Reporting Period
The Company’s fiscal year ends on the Saturday closest to September 30 and consists of fifty-two weeks with the exception that approximately every six years, we have a fifty-three week year. When a fifty-three week year occurs, the Company reports the additional week in the fourth quarter. Fiscal 20212023, 2022 and 20192021 were fifty-two week years. Fiscal 2020 was a fifty-three week year, which began on September 29, 2019 and ended on October 3, 2020.
Reclassifications
Certain reclassifications have been made in the fiscal 20202022 and fiscal 20192021 financial statements and notes to conform to the fiscal 20212023 presentation.
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Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results may differ from those estimates.
Revenues and Costs from Services and Products
The Company generates revenue from the sale of both services and tangible products and revenues and operating costs are classified under these two categories in the Consolidated Statements of Operations.Income. Certain costs related to both the sale of services and tangible products are not specifically allocated between the service or tangible product revenue streams but are instead attributed to the principal revenue stream. The cost of services and tangible products exclude depreciation and amortization.
Significant service revenues include:
•Affiliate fees
•Advertising revenues
•Subscription fees to our DTC streaming services
•Revenue from the licensing and distribution of film and television propertiesAdvertising revenues
•Admissions to our theme parks, charges for room nights at hotels and sales of cruise vacation packages
•Revenue from the licensing and distribution of film and television properties
•Royalties from licensing our IP for use on consumer goods, published materials and in multi-platform games
Significant operating costs related to the sale of services include:
•Programming and production costs
•Distribution costs
•Operating labor
•Facilities and infrastructure costs
Significant tangible product revenues include:
•The sale of food, beverage and merchandise at our retail locations
•The sale of DVDs and Blu-ray discs
•The sale of books, comic books and magazines
Significant operating costs related to the sale of tangible products include:
•Costs of goods sold
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•Operating labor
•Programming and production costs
•Distribution costs
•Operating labor
•Retail occupancy costs
Revenue Recognition
At the beginning of fiscal 2019, the Company adopted Financial Accounting Standards Board (FASB) guidance that replaced the existing accounting guidance for revenue recognition and recorded a net reduction of $116 million to opening fiscal 2019 retained earnings.
The Company’s revenue recognition policies are as follows:
•Affiliate fees are recognized as the programming is provided based on contractually specified per subscriber rates and the actual number of the affiliate’s customers receiving the programming.
For affiliate contracts with fixed license fees, the fees are recognized ratably over the contract term.
If an affiliate contract includes a minimum guaranteed license fee, the guaranteed license fee is recognized ratably over the guaranteed period and any fees earned in excess of the guarantee are recognized as earned once the minimum guarantee has been exceeded.
Affiliate agreements may also include a license to use the network programming for on demand viewing. As the fees charged under these contracts are generally based on a contractually specified per subscriber rate for the number of underlying subscribers of the affiliate, revenues are recognized as earned.
•Subscription fees are recognized ratably over the term of the subscription.
•Advertising sales are recognized as revenue, net of agency commissions, when commercials are aired. For contracts that contain a guaranteed number of impressions, revenues are recognized based on impressions delivered. When the
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guaranteed number of impressions is not met (“ratings shortfall”), revenues are not recognized for the ratings shortfall until the additional impressions are delivered.
•Theme park admissions are recognized when the tickets are used. Sales of annual passes are recognized ratably over the period for which the pass is available for use.
•Resorts and vacations sales are recognized as revenue as the services are provided to the guest. Sales of vacation club properties are recognized as revenue upon the later of when title transfers to the customer or when construction activity is deemed complete.
•Merchandise, food and beverage sales are recognized at the time of sale. Sales from our branded internet shopping sites and to wholesalers are recognized upon delivery. We estimate returns and customer incentives based upon historical return experience, current economic trends and projections of consumer demand for our products.
•Merchandise licensing fees are recognized as revenue as earned based on the contractual royalty rate applied to the licensee’s underlying product sales. For licenses with minimum guaranteed license fees, the excess of the minimum guaranteed amount over actual royalties earned (“shortfall”) is recognized straight-line over the remaining license period once an expected shortfall is probable.
•TV/SVODVOD distribution fixed license fees are recognized as revenue when the content is available for use by the licensee. License fees based on the underlying sales of the licensee are recognized as revenue as earned based on the contractual royalty rate applied to the licensee sales.
For TV/SVODVOD licenses that include multiple titles with a fixed license fee across all titles, each title is considered a separate performance obligation. The fixed license fee is allocated to each title at contract inception and the allocated license fee is recognized as revenue when the title is available for use by the licensee.
When the license contains a minimum guaranteed license fee across all titles, the license fees earned by titles in excess of their allocated amount are deferred until the minimum guaranteed license fee across all titles is exceeded. Once the minimum guaranteed license fee is exceeded, revenue is recognized as earned based on the licensee’s underlying sales.
TV/SVODVOD distribution contracts may limit the licensee’s use of a title to certain defined periods of time during the contract term. In these instances, each period of availability is generally considered a separate performance obligation. For these contracts, the fixed license fee is allocated to each period of availability at contract inception based on relative standalone selling price using management’s best estimate. Revenue is recognized at the start of each availability period when the content is made available for use by the licensee.
When the term of an existing agreement is renewed or extended, revenues are recognized when the licensed content becomes available under the renewal or extension.
•Theatrical distribution licensing fees are recognized as revenue based on the contractual royalty rate applied to the distributor’s underlying sales from exhibition of the film.
•Merchandise licensing fees are recognized as revenue as earned based on the contractual royalty rate applied to the licensee’s underlying product sales. For licenses with minimum guaranteed license fees, the excess of the minimum guaranteed amount over actual royalties earned (“shortfall”) is recognized straight-line over the remaining license period once an expected shortfall is probable.
•Home entertainment sales in physical formats are recognized as revenue on the later of the delivery date or the date that the product can be sold by retailers. We reduce home entertainment revenues for estimated future returns of merchandise and sales incentives based upon historical return experience, current economic trends and projections of consumer demand for our products. Sales of our films in electronic formats are recognized as revenue when the product is available for use by the consumer.
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•Taxes collected from customers and remitted to governmental authorities are excluded from revenue.
•Shipping and handling fees collected from customers are recorded as revenue and the related shipping expenses are recorded in cost of products upon delivery of the product to the consumer.
Allowance for Credit Losses
We evaluate our allowance for credit losses and estimate collectability of current and non-current 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 supportable forecasts of future economic conditions.
Advertising Expense
Advertising costs are expensed as incurred. Advertising expense for fiscal 2023, 2022 and 2021 2020 and 2019 was $5.5$6.4 billion, $4.7$7.2 billion and $4.3$5.5 billion, respectively. The increasedecrease in advertising expense for fiscal 20212023 compared to fiscal 20202022 was due to higherlower spend for our DTC streaming services. The increase in advertising expense for fiscal 20202022 compared to fiscal 20192021 was primarily due to the consolidation of TFCF and Hulu, partially offset by lower advertisinghigher spend for our DTC streaming services and an increase in theatrical home entertainment and parks and experiences businesses.marketing costs.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less.
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Cash and cash equivalents subject to contractual restrictions and not readily available are classified as restricted cash. The Company’s restricted cash balances are primarily made up of cash posted as collateral for certain derivative instruments.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheet to the total of the amounts in the Consolidated Statements of Cash Flows.
October 2, 2021October 3, 2020September 28, 2019September 30, 2023October 1, 2022October 2, 2021
Cash and cash equivalentsCash and cash equivalents$15,959$17,9145,418 Cash and cash equivalents$14,182$11,615$15,959
Restricted cash included in:Restricted cash included in:Restricted cash included in:
Other current assetsOther current assets3326Other current assets—33
Other assetsOther assets413711Other assets534341
Total cash, cash equivalents and restricted cash in the statement of cash flowsTotal cash, cash equivalents and restricted cash in the statement of cash flows$16,003$17,954$5,455Total cash, cash equivalents and restricted cash in the statement of cash flows$14,235$11,661$16,003
Investments
Investments in equity securities with a readily determinable fair value, not accounted for under the equity method, are recorded at that value with unrealized gains and losses included in earnings. For equity securities without a readily determinable fair value, the investment is recorded at cost, less any impairment, plus or minus adjustments related to observable transactions for the same or similar securities, with unrealized gains and losses included in earnings.
For equity method investments, the Company regularly reviews its investments to determine whether there is a decline in fair value below book value. If there is a decline that is other-than-temporary, the investment is written down to fair value.
Translation Policy
Generally, the U.S. dollar is the functional currency for our international film and televisionepisodic content distribution and licensing businesses and the branded International Channelsinternational channels and DTC streaming services. Generally, the local currency is the functional currency for the Asia Theme Parks, Disneyland Paris, the Star branded channels in India, international sports channels and international locations of The Disney Store.
For U.S. dollar functional currency locations, foreign currency assets and liabilities are remeasured into U.S. dollars at end-of-period exchange rates, except for non-monetary balance sheet accounts, which are remeasured at historical exchange rates. Revenue and expenses are remeasured at average exchange rates in effect during each period, except for those expenses related to the non-monetary balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in income.
For local currency functional locations, assets and liabilities are translated at end-of-period rates while revenues and expenses are translated at average rates in effect during the period. Equity is translated at historical rates and the resulting cumulative translation adjustments are included as a component of accumulated other comprehensive income (loss) (AOCI).
Inventories
Inventory primarily includes vacation timeshare units, merchandise, food, materials and supplies. Carrying amounts of vacation ownership units are recorded at the lower of cost or net realizable value. Carrying amounts of merchandise, food, materials and supplies inventories are generally determined on a moving average cost basis and are recorded at the lower of cost or net realizable value.
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Film and Television Content Costs
At the beginning of fiscal 2020, theThe Company adopted, on a prospective basis, new FASB guidance that updates the accounting for filmclassifies its capitalized produced and televisionacquired/licensed content costs. Therefore, reporting periods beginning after September 29, 2019 are presented under the new guidance, while prior periods continue to be reported in accordance with our historical accounting. The new guidance aligns the capitalization of production costs for episodic television content with the capitalization of production costs for theatrical content. Previously, theatrical content production costs could be fully capitalized while episodic television production costs were generally limited to the amount of contracted revenues. This change did not have a material impact on the Company’s financial statements for fiscal year 2020.
Capitalized content cost, whether produced or acquired/licensed rights are recognized as “Producedlong-term assets (“Produced and licensed content costs” in the Consolidated Balance Sheet. AdvancesSheet) and classifies advances for live programming rights made prior to the live event are reported in “Contentas short-term assets (“Content advances” in the Consolidated Balance Sheet. The new guidance introducedSheet). For produced content, we capitalize all direct costs incurred in the conceptphysical production of “predominant monetization strategy” to classifya film, as well as allocations of production overhead and capitalized interest. For licensed and acquired content, costs forwe capitalize the license fee or acquisition cost, respectively. For purposes of amortization and impairment, the capitalized content costs are classified based on their predominant monetization strategy as follows:
•Individual - lifetime value is predominantly derived from third-party revenues that are directly attributable to the specific film or television title (e.g. theatrical revenues or sales to third-party television programmers).
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•Group - lifetime value is predominantly derived from third-party revenues that are attributable only to a bundle of titles (e.g. subscription revenue for a DTC service or affiliate fees for a cable television network).
The determination of the predominant monetization strategy is made at commencement of production on a consolidated basis and is based on the means by which we derive third-party revenues from use of the content. Imputed title by title license fees that may be necessary for other purposes and are established as required byfor those purposes.
We generally classify content that is initially intended for use on our DTC streaming services or Linear Networks as group assets. ContentWe generally classify content initially intended for theatrical release or for sale to third-party licensees we generally classify as individual assets. Because the new accounting guidance is applied prospectively, the predominant monetization strategy for content released prior to the beginning of fiscal 2020 was determined based on the expected means of monetization over the remaining life of the content. Thus for example, film titles that were released theatrically and in home entertainment prior to fiscal year 2020 and are now distributed on Disney+ are generally considered group content.
The classification of content as individual or group only changes if there is a significant change to the title’s monetization strategy relative to its initial assessment (e.g. content that was initially intended for license to a third-partythird party is instead used on an owned DTC service). When there is a significant change in monetization strategy, the title’s capitalized content costs are tested for impairment.
Production costs for content that is predominantly monetized individually isare amortized based upon the ratio of the current period’s revenues to the estimated remaining total revenues (Ultimate Revenues). For film productions, Ultimate Revenues include revenues from all sources, which may include imputed license fees for content that is used on our DTC streaming services, that will be earned within ten years from the date of the initial release for theatrical films. For episodic television series that are classified as individual, Ultimate Revenues include revenues that will be earned within ten years, including imputed license fees for content that is used on our DTC streaming services, from delivery of the first episode, or if still in production, five years from delivery of the most recent episode, if later. Participations and residuals are expensed over the applicable product life cycle based upon the ratio of the current period’s revenues to the estimated remaining total revenues for each production.
Production costs that are predominantly monetized as a group are amortized based on projected usage, (which may be, for example, derived from historical viewership patterns), typicallygenerally resulting in an accelerated or straight-line amortization pattern. Adjustments to projected usage are applied prospectively in the period of the change. Participations and residuals are generally expensed in line with the pattern of usage.
Licensed rights to film and television content and other programs for broadcast on our Linear Networks, domestic ESPN television network, International Sports Channels or DTC streaming services are expensed on an accelerated or straight-line basis over their useful life or over the number of times the program is expected to be aired, as appropriate. We amortize rights costs for multi-year sports programming arrangements during the applicable seasons based on the estimated relative value of each year in the arrangement. If annual contractual payments related to each season approximate each season’s estimated relative value, we expense the related contractual payments during the applicable season.
Acquired film and television libraries are generally amortized on a straight-line basis over 20 years from the date of acquisition. Acquired film and television libraries include content that was initially released three years prior to its acquisition, except it excludes the prior seasons of episodic television programming still in production at the date of its acquisition.
Amortization of capitalized costs for produced and acquired content begins in the month the content is first released, while amortization of capitalized costs for licensed content commences when the license period begins and the content is first aired or available for use on our DTC services. Amortization of content assets is primarily included in “Cost of services” in the Consolidated Statements of Income.
The costs of produced and licensed film and television content are subject to regular recoverability assessments. ForProduction costs for content that is predominantly monetized individually are tested for impairment at the individual title level by comparing that title’s unamortized costs are compared to the estimated fair value. The fairpresent value is determined based on aof discounted cash flow analysis of the cash flows directly attributable to the title. To the extent the title’s unamortized costs exceed the fairpresent value of discounted cash flows, an impairment charge is recorded for the excess. ForCost of content that is predominantly monetized as a group the aggregate unamortized costs of the group are compared tois tested for impairment by comparing the present value of the discounted cash flows usingof the group to the aggregate unamortized costs of the group. The group is established by identifying the lowest level for which identifiable cash flows are independent of the cash flows of other produced and licensed content. If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded
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for the excess and allocated to individual titles based on the relative carrying value of each title in the group. If there are no plans to continue to use an individual film or television program that is part of a group, the unamortized cost of the individual title is written-off immediately.written down to its estimated fair value. Licensed content is included as part of the group within which it is monetized for purposes of assessing recoverability.impairment testing.
Content Production Incentives
The Company receives tax incentives from U.S. (state and local) and foreign government agencies to encourage the production of film, episodic and streaming content. The incentives are largely received as tax credits, which are recognized as a reduction to produced and licensed content costs when there is reasonable assurance of collection (presented as “Produced and licensed content costs” in the Consolidated Balance Sheets), resulting in a reduction to programming and production costs (presented as “Costs of services” in the Consolidated Statements of Income) over the asset’s amortization period.
Internal-Use Software Costs
The Company expenses costs incurred in the preliminary project stage of developing or acquiring internal use software, such as research and feasibility studies as well as costs incurred in the post-implementation/operational stage, such as maintenance and training. Capitalization of software development costs occurs only after the preliminary-project stage is complete, management authorizes the project and it is probable that the project will be completed and the software will be used for the function intended. As of October 2, 2021September 30, 2023 and October 3, 2020,1, 2022, capitalized software costs, net of accumulated depreciation,amortization, totaled $1,186 million$1.2 billion and $778 million,$1.1 billion, respectively. The capitalized costs are amortized on a straight-line basis over the estimated useful life of the software, generally up to 75 years.
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Parks, Resorts and Other Property
Parks, resorts and other property are carried at historical cost. Depreciation is computed on the straight-line method, generally over estimated useful lives as follows:
Attractions, buildings and improvements20 – 40 years
Furniture, fixtures and equipment3 – 25 years
Land improvements20 – 40 years
Leasehold improvementsLife of lease or asset life if less
Leases
At the beginning of fiscal 2020, theThe Company adopted new lease accounting guidance issued by the FASB. The most significant change requires lessees to record the present value of operating lease payments as right-of-use assets and lease liabilities on the balance sheet. We adopted the new guidance using the modified retrospective method at the beginning of fiscal year 2020, therefore reporting periods beginning after September 29, 2019 are presented under the new guidance, while prior periods continue to be reported in accordance with our historical accounting.
We determinedetermines whether a contract is a lease at contract inception or for a modified contract at the modification date. At inception or modification, the Company calculates the present value of operating lease payments using the Company’s incremental borrowing rate applicable to the lease, which is determined by estimating what it would cost the Company to borrow a collateralized amount equal to the total lease payments over the lease term based on the contractual terms of the lease and the location of the leased asset. Our leases may require us to make fixed rental payments, variable lease payments based on usage or sales and fixed non-lease costs relating to the leased asset. Variable lease payments are generally not included in the measurement of the right-of-use asset and lease liability. Fixed non-lease costs, for example common-area maintenance costs, are included in the measurement of the right-of-use asset and lease liability as the Company does not separate lease and non-lease components.
Goodwill, Other Intangible Assets and Long-Lived Assets
The Company is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and if current events or circumstances require, on an interim basis. The Company performs its annual test of goodwill and indefinite-lived intangible assets for impairment in its fiscal fourth quarter.
Goodwill is allocated to various reporting units, which are an operating segment or one level below the operating segment. To test goodwill for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of a reporting unit exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows of the reporting unit.
The quantitative assessment compares the fair value of each goodwill reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the amount of goodwill allocated to the reporting unit.
In fiscal 2021,2023, the Company bypassed the qualitative test and performed a quantitative assessment of goodwill for impairment.impairment (see Note 18).
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The impairment test for goodwill requires judgment related to the identification of reporting units, the assignment of assets and liabilities to reporting units including goodwill and the determination of fair value of the reporting units. To determine the fair value of our reporting units, we apply what we believe to be the most appropriate valuation methodology for each of our reporting units. We generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate. The discounted cash flow analyses are sensitive to our estimates ofestimated projected future revenue growth and margins for these businessescash flows as well as the discount rates used to calculate thetheir present value ofvalue. Our future cash flows. In timesflows 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 adverse economic conditions in the global economy, the Company’s long-term cash flow projections are subject to a greater degree of uncertainty than usual.each reporting unit’s underlying operations. We believe our estimates are consistent with how a marketplace participant would value our reporting units. If we had established different reporting units or utilized different valuation methodologies or assumptions, the impairment test results could differ, and we could be required to record impairment charges.differ.
To test its other indefinite-lived intangible assets for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of each of its indefinite-lived intangible assets exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
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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.
The quantitative assessment compares the fair value of an indefinite-lived intangible asset to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess. Fair values of indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate. The Company has determined that there are currently no legal, competitive, economic or other factors that materially limit the useful life of our FCC licenses and trademarks, which are our most significant indefinite-lived intangible assets.
Finite-lived intangible assets are generally amortized on a straight-line basis over periods upof 5 to 40 years. The costs to periodically renew our intangible assets are expensed as incurred.
The Company tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to hold the asset for sale. The impairment test for assets held for use requires a comparison of the estimated undiscounted future cash flows expected to be generated over the relevant useful life of the significant assets of an asset group to the carrying amount of the asset group. An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the group’s long lived-assetsasset group and the carrying amount of the group’s long-lived assets. The impairment is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts, but only to the extent the carrying amount of each asset is above its fair value.group. For assets held for sale, to the extent the carrying amount is greater than the asset’s fair value less costs to sell, an impairment loss is recognized for the difference.
The Company recorded non-cash impairment charges of $0.3$3.0 billion, $5.2$0.2 billion and $0.6$0.3 billion in fiscal 2023, 2022 and 2021, 2020respectively. The charges are recorded in “Restructuring and 2019, respectively.impairment charges” in the Consolidated Statements of Income.
The fiscal 2023 charges primarily related to content impairments resulting from a strategic change in our approach to content curation ($2.2 billion) and goodwill ($0.7 billion) at our entertainment and international sports linear networks reporting units (see Note 18).
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.
The fiscal 2020 impairment charges primarily related to impairments of MVPD agreement intangibles assets ($1.9 billion) and goodwill ($3.1 billion) at the International Channels business. See Note 19 to the Consolidated Financial Statements for additional discussion of these impairment charges.
The fiscal 2019 charges primarily related to impairments of investments accounted for under the equity method of accounting recorded in “Equity in the income (loss) of investees” in the Consolidated Statements of Operations.
The Company expects its aggregate annual amortization expense for finite-lived intangible assets for fiscal 20222024 through 20262028 to be as follows:
2022$2,005
20231,806
202420241,5672024$1,627
202520251,46920251,535
2026202697620261,042
20272027965
20282028898
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Financial Risk Management Contracts
In the normal course of business, the Company employs a variety of financial instruments (derivatives) including interest rate and cross-currency swap agreements and forward and option contracts to manage its exposure to fluctuations in interest rates, foreign currency exchange rates and commodity prices.
The Company formally documents all relationships between hedges and hedged items as well as its risk management objectives and strategies for undertaking various hedge transactions. The Company primarily enters into 2two types of derivatives: hedges of fair value exposure and hedges of cash flow exposure. Hedges of fair value exposure are entered into in order to hedge the fair value of a recognized asset, liability, or a firm commitment. Hedges of cash flow exposure are entered into in order to hedge a forecasted transaction (e.g. forecasted revenue) or the variability of cash flows to be paid or received, related to a recognized liability or asset (e.g. floating-rate debt).
The Company designates and assigns the derivatives as hedges of forecasted transactions, specific assets or specific liabilities. When hedged assets or liabilities are sold or extinguished or the forecasted transactions being hedged occurimpact earnings or are no longer expected to occur, the Company recognizes the gain or loss on the designated derivatives.
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The Company’s hedge positions are measured at fair value on the balance sheet. Realized gains and losses from hedges are classified in the income statement consistent with the accounting treatment of the items being hedged. The Company accrues the differential for interest rate swaps to be paid or received under the agreements as interest rates change as adjustments to interest expense over the lives of the swaps. Gains and losses on the termination of effective swap agreements, prior to their original maturity, are deferred and amortized to interest expense over the remaining term of the underlying hedged transactions.
The Company enters into derivatives that are not designated as hedges and do not qualify for hedge accounting. These derivatives are intended to offset certain economic exposures of the Company and are carried at fair value with changes in value recorded in earnings. Cash flows from hedging activities are classified in the Consolidated Statements of Cash Flows under the same category as the cash flows from the related assets, liabilities or forecasted transactions (see Notes 98 and 18)17).
Income Taxes
Deferred income tax assets and liabilities are recorded with respect to temporary differences in the accounting treatment of items for financial reporting purposes and for income tax purposes. Where, based on the weight of available evidence, it is more likely than not that some amount of recorded deferred tax assets will not be realized, a valuation allowance is established for the amount that, in management’s judgment, is sufficient to reduce the deferred tax asset to an amount that is more likely than not to be realized.
A tax position must meet a minimum probability threshold before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fiftyzero percent likely of being realized upon ultimate settlement.
Redeemable Noncontrolling Interests and Contributions from Noncontrolling Interest Holders
Hulu LLC
The Company consolidates the results of certain subsidiaries that are less than 100% owned and for which the noncontrolling interest shareholders have the rights to require the Company to purchase their interests in these subsidiaries. The most significant of these are Hulu and BAMTech LLC (BAMTech).
Hulu provides(Hulu), a DTC streaming services andservice provider, which is owned 67% by the Company and 33% by NBCU.NBC Universal (NBCU). In May 2019, the Company entered into a put/call agreement with NBCU that provided the Company with full operational control of Hulu. Under the agreement, beginning in January 2024, NBCU has the option to require the Company to purchase NBCU’s interest in Hulu (put right) and the Company has the option to require NBCU to sell its interest in Hulu to the Company (call right) at a redemption value based on NBCU’s equity ownership percentage of the greater of Hulu’s then equity fair value or a guaranteed floor value of $27.5 billion.
NBCU’s interest will generally not be allocated its portion In August 2023, certain provisions under the put/call agreement were amended, including the addition of a November 2023 exercise window for the put/call, which would require assessment of Hulu’s losses as the redeemable noncontrolling interest is required to be carried at a minimum value. The minimum value is equal to theequity fair value as of September 30, 2023. In November 2023, NBCU exercised its put right and the May 13, 2019 agreement date accretedCompany is obligated to pay NBCU the minimum value (approximately $9.2 billion based on the guaranteed floor value, less the unpaid capital call contributions payable by NBCU to the January 2024Company of $0.6 billion) within 30 days of exercise of the put. In accordance with the valuation procedures, Hulu’s equity fair value is not expected to be determined until sometime in calendar 2024. If Hulu’s equity fair value is determined to be higher than the guaranteed floor value, the Company would be required to pay NBCU’s share of the difference between the equity fair value and the guaranteed floor value at that time.
Determining the estimated redemption value. value requires management to make significant judgments. To the extent the fair value is deemed to exceed the guaranteed floor value, we would recognize NBCU’s share of the additional amount as a charge to “Net income from continuing operations attributable to noncontrolling interests” and thus reduce “Net income attributable to Disney” in the Consolidated Statements of Income.
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In addition, the Company will share 50% of its tax benefit from the purchase of NBCU’s interest in Hulu with NBCU, which payments are expected to be made primarily over a 15-year period.
At October 2, 2021,September 30, 2023, NBCU’s interest in Hulu is recorded in the Company’s financial statements at $8.4 billion.$9.1 billion, which is reported as “Redeemable noncontrolling interest” in the Consolidated Balance Sheet.
BAMTech provides streaming technology services to third parties and is owned 85% by the Company and 15% by the MLB. Prior to September 2021, BAMTech was owned 75% by the Company, 15% by MLB and 10% by the NHL. The NHL interest included a right to require the Company to purchase the NHL interest for $350 million in 2021. LLC
In August 2021, the NHL exercised its right andNovember 2022, the Company purchased the NHLMLB’s 15% redeemable noncontrolling interest for $350 million in September 2021.
MLB has the right to sell its interest to the Company and the Company has the right to buy MLB’s interest starting five years from and ending ten years afterBAMTech LLC (BAMTech), which holds the Company’s September 25, 2017 acquisition date of BAMTech at a redemption value equal to the greater of fair value or a guaranteed floor value ($563domestic DTC sports business, for $900 million accreting at 8% annually for eight years from the date of acquisition)(MLB buy-out).
The MLB interest is required to be carried at a minimum value equal to its acquisition date fair value accreted to its estimated redemption value through the applicable redemption date. Therefore, the MLB interest is generally not allocated its portion of BAMTech losses. As of October 2, 2021, the MLB MLB’s interest was recorded in the Company’s financial statements at $820 million.
Our estimate of the redemption value of noncontrolling interests requires management to make significant judgments with respect$828 million prior to the future value of the noncontrolling interests. We are accreting the noncontrolling interests of both BAMTech and Hulu to their guaranteed floor values. If our estimate of the future redemption value increased above either of the guaranteed floor values, we would change our rate of accretion, which would generallyMLB buy-out. The $72 million difference was recorded as an increase earnings recorded in “Net income from continuing operations attributable to noncontrolling interests and redeemable noncontrolling interests” and thus reduce “Net income (loss) attributable to The Walt Disney Company (Disney)” onin the Consolidated Statements of Operations.Income.
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During the fiscal year ended 2023, Hearst Corporation (Hearst) contributed $710 million to the domestic DTC sports business, in part to fund its 20% share of the MLB buy-out and in part to fund its share of the domestic DTC sports business’s operating cash requirements, which had been funded by the Company through intercompany loans.
Earnings Per Share
The Company presents both basic and diluted earnings per share (EPS) amounts. Basic EPS is calculated by dividing net income attributable to Disney by the weighted average number of common shares outstanding during the year. Diluted EPS is based upon the weighted average number of common and common equivalent shares outstanding during the year, which is calculated using the treasury-stock method for equity-based awards (Awards). Common equivalent shares are excluded from the computation in periods for which they have an anti-dilutive effect. Stock options for which the exercise price exceeds the average market price over the period are anti-dilutive and, accordingly, are excluded from the calculation.
A reconciliation of the weighted average number of common and common equivalent shares outstanding and the number of Awards excluded from the diluted earnings per share calculation, as they were anti-dilutive, are as follows:
202120202019
Weighted average number of common and common equivalent shares outstanding (basic)1,8161,8081,656
Weighted average dilutive impact of Awards(1)
12—10
Weighted average number of common and common equivalent shares outstanding (diluted)1,8281,8081,666
Awards excluded from diluted earnings per share4357
(1)Amounts exclude all potential common and common equivalent shares for periods when there is a net loss from continuing operations.
202320222021
Weighted average number of common and common equivalent shares outstanding (basic)1,8281,8221,816
Weighted average dilutive impact of Awards2512
Weighted average number of common and common equivalent shares outstanding (diluted)1,8301,8271,828
Awards excluded from diluted earnings per share24154
3Revenues
The following table presents our revenues by segment and major source:
2021202020192023
DMEDDPEPTotalDMEDDPEPTotalDMEDDPEPTotalEntertainmentSportsExperiencesEliminationsTotal
Affiliate feesAffiliate fees$17,760$—$17,760$17,929$—$17,929$15,948$—$15,948Affiliate fees$7,369$10,590$—$(1,084)$16,875
Subscription feesSubscription fees16,4201,517——17,937
AdvertisingAdvertising12,425412,42910,851410,85510,507610,513Advertising7,5943,9204—11,518
Subscription fees12,020—12,0207,645—7,6452,115—2,115
Theme park admissionsTheme park admissions—3,8483,848—4,0384,038—7,5407,540Theme park admissions——10,423—10,423
Resort and vacationsResort and vacations—2,7012,701—3,4023,402—6,2666,266Resort and vacations——7,949—7,949
Retail and wholesale sales of merchandise, food and beverageRetail and wholesale sales of merchandise, food and beverage—4,9574,957—4,9524,952—7,7167,716Retail and wholesale sales of merchandise, food and beverage——8,921—8,921
TV/SVOD distribution licensing5,266—5,2666,253—6,2535,555—5,555
Merchandise licensingMerchandise licensing619—2,509—3,128
TV/VOD distribution licensingTV/VOD distribution licensing2,645347——2,992
Theatrical distribution licensingTheatrical distribution licensing920—9202,134—2,1344,726—4,726Theatrical distribution licensing3,174———3,174
Merchandise licensing123,5863,598323,2103,242513,3293,380
Home entertainmentHome entertainment1,014—1,0141,802—1,8021,961—1,961Home entertainment931———931
OtherOther1,4491,4562,9051,7041,4323,1361,9581,9293,887Other1,8837372,743(313)5,050
Total revenues$50,866$16,552$67,418$48,350$17,038$65,388$42,821$26,786$69,607
$40,635$17,111$32,549$(1,397)$88,898
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2022
EntertainmentSportsExperiencesEliminations and OtherTotal
Affiliate fees$7,739$10,796$—$(1,010)$17,525
Subscription fees14,1781,113——15,291
Advertising8,6744,3704—13,048
Theme park admissions——8,602—8,602
Resort and vacations——6,410—6,410
Retail and wholesale sales of merchandise, food and beverage——7,838—7,838
Merchandise licensing620—3,349—3,969
TV/VOD distribution licensing3,551351—(1,023)2,879
Theatrical distribution licensing1,875———1,875
Home entertainment1,083———1,083
Other1,8496401,882(169)4,202
$39,569$17,270$28,085$(2,202)$82,722
2021
EntertainmentSportsExperiencesEliminationsTotal
Affiliate fees$8,043$10,609$—$(892)$17,760
Subscription fees11,295725——12,020
Advertising8,7053,7204—12,429
Theme park admissions——3,848—3,848
Resort and vacations——2,701—2,701
Retail and wholesale sales of merchandise, food and beverage——4,957—4,957
Merchandise licensing603—2,995—3,598
TV/VOD distribution licensing4,366429——4,795
Theatrical distribution licensing920———920
Home entertainment1,297———1,297
Other1,2604771,456(100)3,093
$36,489$15,960$15,961$(992)$67,418
The following table presents our revenues by segment and primary geographical markets:
2021202020192023
DMEDDPEPTotalDMEDDPEPTotalDMEDDPEPTotalEntertainmentSportsExperiencesEliminationsTotal
AmericasAmericas$41,754$12,403$54,157$39,163$12,829$51,992$33,602$20,203$53,805Americas$31,414$16,000$25,188$(1,397)$71,205
EuropeEurope5,0221,6686,6905,2402,0937,3334,7623,2448,006Europe5,4753703,688—9,533
Asia PacificAsia Pacific4,0902,4816,5713,9472,1166,0634,4573,3397,796Asia Pacific3,7467413,673—8,160
Total revenues$50,866$16,552$67,418$48,350$17,038$65,388$42,821$26,786$69,607
$40,635$17,111$32,549$(1,397)$88,898
2022
EntertainmentSportsExperiencesEliminationsTotal
Americas$30,841$15,666$22,890$(1,179)$68,218
Europe5,0983963,186—8,680
Asia Pacific3,6301,2082,009—6,847
$39,569$17,270$28,085$(1,179)83,745
Content License Early Termination(1,023)
$82,722
2021
EntertainmentSportsExperiencesEliminationsTotal
Americas28,469$14,533$12,147$(992)$54,157
Europe4,8363461,508—6,690
Asia Pacific3,1841,0812,306—6,571
$36,489$15,960$15,961$(992)$67,418
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Revenues recognized in the current and prior year from performance obligations satisfied (or partially satisfied) in previous reporting periods primarily relate to revenues earned on TV/SVOD licensee sales onVOD licenses for titles made available to the licensee in previous reporting periods. For fiscal 2021,2023, $1.30.9 billion was recognized related to performance obligations satisfied prior to October 3, 2020.1, 2022. For fiscal 2020, $1.42022, $1.1 billion was recognized related to performance obligations satisfied prior to September 30, 2019.October 2, 2021. For fiscal 2019, $1.22021, $1.3 billion was recognized related to performance obligations satisfied prior to September 30, 2018.October 3, 2020.
As of October 2, 2021,September 30, 2023, revenue for unsatisfied performance obligations expected to be recognized in the future is $1415 billion, which primarily relates to content and other IP to be delivered in the future under existing agreements with merchandise and co-branding licensees and sponsors, television station
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affiliates, DTC wholesalers, sports sublicensees and TV/SVOD licensees.advertisers. Of this amount, we expect to recognize approximately $6 billion in fiscal 2022,2024, $4 billion in fiscal 2023,2025, $2 billion in fiscal 20242026 and $23 billion thereafter. These amounts include only fixed consideration or minimum guarantees and do not include amounts related to (i) contracts with an original expected term of one year or less (such as most advertising contracts) or (ii) licenses of IP that are solely based on the sales of the licensee.
Payment terms vary by the type and location of our customers and the products or services offered. For certain products or services and customer types, we require payment before the products or services are provided to the customer; in other cases, after appropriate credit evaluations, payment is due in arrears. Advertising contracts, which are generally short term, are billed monthly with payments generally due within 30 days. Payments due under affiliate arrangements are calculated monthly and are generally due within 30 days of month end. Home entertainment terms generally require payment within 60 to 90 days of availability date to the customer. Licensing payment terms vary by contract but are generally collected in advance or over the license term.
When the timing of the Company’s revenue recognition is different from the timing of customer payments, the Company recognizes either a contract asset (customer payment is subsequent to revenue recognition and subject to the Company satisfying additional performance obligations) or deferred revenue (customer payment precedes the Company satisfying the performance obligations). Consideration due under contracts with payment in arrears is recognized as accounts receivable. Deferred revenues are recognized as (or when) the Company performs under the contract. The Company’s contract assets and activity for the current and prior-year periods were not material. Contract assets, accountsAccounts receivable and deferred revenues from contracts with customers are as follows:
October 2,
2021		October 3,
2020		September 30,
2023		October 1,
2022
Contract assets$155  $70  
Accounts ReceivableAccounts ReceivableAccounts Receivable
CurrentCurrent11,190  11,340  Current$10,279  $10,886  
Non-currentNon-current1,359  1,789  Non-current1,212  1,226  
Allowance for credit lossesAllowance for credit losses(194) (460) Allowance for credit losses(154) (179) 
Deferred revenuesDeferred revenuesDeferred revenues
CurrentCurrent4,067  3,688  Current5,568  5,531  
Non-currentNon-current581  513  Non-current977  927  
Contract assets primarily relate to certain multi-season TV/SVOD licensing contracts. Activity for fiscal 2021 and 2020 related to contract assets was not material. The allowance for credit losses decreased from $460 million at October 3, 2020 to $194 million at October 2, 2021 primarily due to the adoption of new accounting guidance on the measurement of credit losses (see Note 20).
For fiscal 2023, 2022 and 2021, the Company recognized revenues of $2.9$5.1 billion,, primarily related to content sales, including subscription revenue, $3.6 billion and licensing advances$2.9 billion, respectively, that was included in the deferred revenue balance at October 1, 2022, October 2, 2021 and October 3, 2020. For fiscal 2020, the Company recognized revenues of $3.4 billion primarily relatedrespectively. Amounts deferred generally relate to theme park admissions and vacation packages, DTC subscriptions and licensing and publishing advances included in the deferred revenue balance at September 28, 2019. For fiscal 2019, the Company recognized revenues of $2.7 billion primarily related to theme park admissionsmerchandise and vacation packages and licensing and publishing advances included in the deferred revenue balance at September 29, 2018.TV/VOD licenses.
The Company has accounts receivable with original maturities greater than one year related to the sale of film and television program rightsTV/VOD sales and vacation club properties. These receivables are discounted to present value at contract inception and the related revenues are recognized at the discounted amount.
The balance of film and television program salesTV/VOD licensing receivables recorded in other non-current assets net of an allowance for credit losses that is not material, was $0.8$0.6 billion as ofat both September 30, 2023 and October 2, 2021. The activity in the allowance for credit loss for fiscal 2021 was not material.
1, 2022. The balance of mortgagevacation club receivables recorded in other non-current assets net of anwas $0.7 billion and $0.6 billion at September 30, 2023 and October 1, 2022, respectively. The allowance for credit loss that is not material, was $0.6 billion as of October 2, 2021. Thelosses and activity in the allowance for credit loss for fiscal 20212023 and 2022 was not material.
4.Acquisitions
TFCF Corporation
On March 20, 2019, the Company acquired the outstanding capital stock of TFCF for $69.5 billion, of which the Company paid $35.7 billion in cash and $33.8 billion in Disney shares (307 million shares at a price of $110.00 per share). Prior to the acquisition, TFCF and a newly-formed subsidiary of TFCF (New Fox) entered into a separation agreement,
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pursuant to which TFCF transferred to New Fox a portfolio of TFCF’s news, sports and broadcast businesses and certain other assets. TFCF retained all of the assets and liabilities not transferred to New Fox, the most significant of which were the Twentieth Century Fox film and television studios, certain cable networks (primarily FX and National Geographic), TFCF’s international television businesses (including Star) and TFCF’s 30% interest in Hulu. Under the terms of the agreement governing the acquisition, the Company will generally phase-out Fox brands by 2024, but has perpetual rights to certain Fox brands, including Twentieth Century Fox and Fox Searchlight, although these have been rebranded to Twentieth Century Studios and Searchlight Pictures, respectively.
We acquired TFCF to enhance the Company’s position as a premier, global entertainment company by increasing our portfolio of creative assets and branded content to be monetized through our film and television studio, theme parks and direct-to-consumer offerings.
The purchase price for TFCF includes $361 million related to TFCF stock awards that were settled or replaced in connection with the acquisition, and in fiscal 2019, the Company recognized compensation expense of $164 million related to stock awards that were accelerated to vest upon closing of the acquisition. Additionally, compensation expense of $219 million related to stock awards that were replaced with new restricted stock units is being recognized over the post-acquisition service period of up to approximately two years.
In fiscal 2019, the Company incurred $0.3 billion of acquisition-related expenses, of which $0.2 billion is included in “Selling, general, administrative and other”, and $0.1 billion related to financing fees is included in “Interest expense, net” in the Consolidated Statements of Operations.
In fiscal 2019, the Company remeasured its initial 30% interest in Hulu to its estimated fair value and recorded a one-time gain of $4.8 billion (Hulu Gain), which was determined based on a discounted cash flow analysis. On April 15, 2019, Hulu redeemed Warner Media LLC’s (WM) 10% interest in Hulu for $1.4 billion. The redemption was funded by the Company and NBCU. This resulted in the Company’s and NBCU’s interests in Hulu increasing to 67% and 33%, respectively. NBCU’s interest is classified as a redeemable noncontrolling interest in the Consolidated Balance Sheets. See Note 2 for further discussion of NBCU’s interest.
In order to obtain regulatory approval for the acquisition, the Company agreed to sell TFCF’s domestic regional sports networks (RSNs) (sold in August 2019 for approximately $11 billion) and sports media operations in Brazil and Mexico. In addition, the Company agreed to divest its interest in certain European cable channels that were controlled by A+E Television Networks (A+E) (sold in April 2019 for an amount that was not material). In the third quarter of fiscal 2020, the Company received regulatory approval to retain the sports media operation in Brazil. In May 2021, the Company entered into an agreement to sell the Fox sports media business in Mexico for an amount that is not material. The transaction received regulatory approval and closed in November 2021. The RSNs and sports media operation in Mexico, along with certain other divested businesses, are presented as discontinued operations in the Consolidated Statements of Operations. At October 2, 2021 and October 3, 2020, the assets and liabilities of the businesses held for sale are not material and are included in other assets and other liabilities in the Consolidated Balance Sheets.
The following pro forma summary presents consolidated information of the Company for fiscal 2019 as if the acquisition of TFCF and consolidation of Hulu had occurred on October 1, 2017:
Revenues$78,047
Net income7,511
Net income attributable to Disney7,206
Earnings per share attributable to Disney:
Diluted$3.68
Basic3.70
The pro forma results include adjustments for purposes of consolidating the historical financial results of TFCF and Hulu (net of adjustments to eliminate transactions between Disney and TFCF, Disney and Hulu, and Hulu and TFCF). The pro forma results include $3.1 billion (of which $0.4 billion related to the RSNs) to reflect the incremental amortization as a result of recording film and television programming and production costs and finite lived intangible assets at fair value. Interest expense of $0.4 billion is included to reflect the cost of borrowings to finance the TFCF acquisition. The pro forma results also include $0.9 billion of net income attributable to Disney related to TFCF businesses that have been divested.
The pro forma results exclude the Hulu Gain, compensation expense of $0.2 billion related to TFCF equity and cash awards that were accelerated to vest upon closing of the acquisition, and $0.4 billion of acquisition-related expenses. These amounts were recognized by Disney and TFCF in fiscal 2019.
The pro forma results exclude a $10.8 billion gain on the sale of TFCF’s 39% interest in Sky plc in October 2018.
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The pro forma results do not represent financial results that would have been realized had the acquisition actually occurred on October 1, 2017, nor are they intended to be a projection of future results.
Goodwill
The changes in the carrying amount of goodwill are as follows:
Media
Networks		DPEPStudio EntertainmentDirect-to-Consumer & InternationalDMEDTotal
Balance at Sept. 28, 2019$33,423  $5,535  $17,797  $23,538  $—  $80,293  
Acquisitions(1)
568  15  98  51  —  732  
Impairments (see Note 19)—  —  —  (3,074) —  (3,074) 
Currency translation adjustments and other, net—  —  (100) (162) —  (262) 
Balance at Oct. 3, 2020$33,991  $5,550  $17,795  $20,353  $—  $77,689  
Segment recast(2)
(33,991) —  (17,795) (20,353) 72,139  —  
Currency translation adjustments and other, net—  —  —  —  382  382  
Balance at Oct. 2, 2021$—  $5,550  $—  $—  $72,521  $78,071  
(1)Reflects updates to allocation of purchase price for the acquisition of TFCF.
(2)Reflects the reallocation of goodwill as a result of the Company recasting its segments.
54Other Income (Expense), Net
Other income (expense), net is as follows:
202120202019
DraftKings gain (loss)$(111) $973  $—  
fuboTV gain186  —  —  
German FTA gain126  —  —  
Endemol Shine gain—  65  —  
Hulu gain (see Note 4)—  —  4,794  
Insurance recoveries related to legal matters—  —  46  
Charge for the extinguishment of a portion of the debt originally assumed in the TFCF acquisition (see Note 9)—  —  (511) 
Gain on sale of real estate, property rights and other—  —  28  
Other income, net$201  $1,038  $4,357  
202320222021
DraftKings gain (loss)$169  $(663) $(111) 
fuboTV gain—  —  186  
German FTA gain—  —  126  
Other, net(73) (4) —  
Other income (expense), net$96  $(667) $201  
In fiscal 2021,2023, the Company recognized a non-cash lossgain of $111$169 million from the adjustment ofon its investment in DraftKings, Inc. (DraftKings) to fair value (DraftKings gain (loss))., which was sold in the current fiscal year. In fiscal 2020,2022 and 2021, respectively, the Company recognized a $973non-cash losses of $663 million and $111 million to adjust its investment in DraftKings gain.to fair value.
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In fiscal 2021, the Company recognized a $186 million gain from the sale of our investment in fuboTV Inc. (fuboTV gain) and a $126 million gain on the sale of its 50% interest in a German free-to-air (FTA) television network (German FTA gain).
In fiscal 2020, the Company recognized a $65 million gain on the sale of its 50% interest in Endemol Shine Group (Endemol Shine gain).
65Investments
Investments consist of the following:
October 2,
2021		October 3,
2020
Investments, equity basis$2,638  $2,632  
Investments, other1,297  1,271  
$3,935$3,903
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September 30,
2023		October 1,
2022
Investments, equity basis$2,688  $2,678  
Investments, other392  540  
$3,080$3,218
Investments, Equity Basis
The Company’s significant equity investments primarily consist of media investments and include A+E (50% ownership), Tata Play Limited (30% ownership) and CTV Specialty Television, Inc. (30% ownership), Endemol Shine Group (50% ownership until sale of the interest in July 2020) and Tata Sky Limited (30% ownership). As of October 2, 2021,September 30, 2023, the book value of the Company’s equity method investments exceeded our share of the book value of the investees’ underlying net assets by approximately $0.8$0.7 billion, which represents amortizable intangible assets and goodwill arising from acquisitions.
Investments, Other
As of October 2, 2021September 30, 2023 and October 3, 2020,1, 2022, the Company had securities recorded at fair value of $1.0 billionin publicly and $1.1 billion, respectively. As of October 2, 2021 and October 3, 2020, the Company had securities recorded at book value related to non-publicly traded securities without a readily determinable fair value of $0.3 billion and $0.2 billion, respectively.investments, which were not material.
Gains, losses and impairments on securities are generally recorded in “Interest expense, net” in the Consolidated Statements of Operations.Income; these amounts were not material for fiscal 2023, 2022 and 2021. See Note 54 for fiscal 2021 realized and unrealized gains and unrealized losses on securities and fiscal 2020 unrealized gains recorded in “Other income (expense), net” in the Consolidated Statements of Operations. Fiscal 2021 and fiscal 2020 impairments on securities and fiscal 2020 realized gains were not material. In fiscal 2019, realized gains, unrealized gains and losses and impairments on securities were not material.Income.
76International Theme Parks
The Company has a 48% ownership interest in the operations of Hong Kong Disneyland Resort and a 43% ownership interest in the operations of Shanghai Disney Resort (together, the Asia Theme Parks), which are both VIEs consolidated in the Company’s financial statements. See Note 2 for the Company’s policy on consolidating VIEs. In addition, the Company has 100% ownership of Disneyland Paris. The Asia Theme Parks together with Disneyland Paris are collectively referred to as the International Theme Parks.
The following table summarizes the carrying amounts of the Asia Theme Parks’ assets and liabilities included in the Company’s Consolidated Balance Sheet:
October 2, 2021October 3, 2020 September 30, 2023October 1, 2022
Cash and cash equivalentsCash and cash equivalents$287  $372  Cash and cash equivalents$504  $280  
Other current assetsOther current assets95  91  Other current assets159  137  
Total current assetsTotal current assets382  463  Total current assets663  417  
Parks, resorts and other propertyParks, resorts and other property6,928  6,720  Parks, resorts and other property6,150  6,356  
Other assetsOther assets176  191  Other assets234  161  
Total assetsTotal assets$7,486  $7,374  Total assets$7,047  $6,934  
Current liabilitiesCurrent liabilities$473  $486  Current liabilities$720  $468  
Borrowings - long-term1,331  1,213  
Long-term borrowingsLong-term borrowings1,308  1,426  
Other long-term liabilitiesOther long-term liabilities422  403  Other long-term liabilities392  395  
Total liabilitiesTotal liabilities$2,226  $2,102  Total liabilities$2,420  $2,289  
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The following table summarizes the International Theme Parks’ revenues and costs and expenses included in the Company’s Consolidated Statements of OperationsIncome for fiscal 2021:2023:
Revenues$1,6985,095  
Costs and expenses(2,845)(4,265) 
Equity in the loss of investees(19)(2) 
Asia Theme Parks’ royalty and management fees of $119$235 million for fiscal 20212023 are eliminated in consolidation, but are considered in calculating earnings attributable to noncontrolling interests.
International Theme Parks’ cash flows included in the Company’s fiscal 20212023 Consolidated Statements of Cash Flows were $292$1,753 million used inprovided by operating activities, $668$898 million used in investing activities and $74$114 million used in financing activities.
Hong Kong Disneyland Resort
The Government of the Hong Kong Special Administrative Region (HKSAR) and the Company have a 52% and a 48% equity interest in Hong Kong Disneyland Resort, respectively.
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The Company and HKSAR have provided loans to Hong Kong Disneyland Resort with outstanding balances of $149$163 million and $100$109 million, respectively. The interest rate on both loans is three month HIBOR plus 2%, and the scheduled maturity date is September 2025. The Company’s loan is eliminated in consolidation.
The Company has provided Hong Kong Disneyland Resort with a revolving credit facility of HK $2.1$2.7 billion ($270345 million), which bears interest at a rate of three month HIBOR plus 1.25% and matures in December 2023.2028. The outstanding balance under the line of credit at October 2, 2021September 30, 2023 was $124$80 million. The Company’s line of credit is eliminated in consolidation.
Hong Kong Disneyland Resort is undergoing a multi-year expansion estimated to cost HK $10.9 billion ($1.4 billion). The Company and HKSAR have agreed to fund the expansion on an equal basis through equity contributions, which totaled $42$57 million and $188$148 million in fiscal 20212023 and 2020,2022, respectively. To date, the Company and HKSAR have funded a total of $568$773 million.
HKSAR has the right to receive additional shares over time to the extent Hong Kong Disneyland Resort exceeds certain return on asset performance targets. The amount of additional shares HKSAR can receive is capped on both an annual and cumulative basis and could decrease the Company’s equity interest by up to an additional 6 percentage points over a period no shorter than 1110 years. Assuming HK $10.9 billion is contributed in the expansion, the impact to the Company’s equity interest would be limited to 4 percentage points.
Shanghai Disney Resort
Shanghai Shendi (Group) Co., Ltd (Shendi) and the Company have 57% and 43% equity interests in Shanghai Disney Resort, respectively. A management company, in which the Company has a 70% interest and Shendi a 30% interest, operates Shanghai Disney Resort.
The Company has provided Shanghai Disney Resort with loans totaling $895$967 million, bearing interest at rates up to 8% and maturing in 2036, with early repayment permitted. The Company has also provided Shanghai Disney Resort with a 1.01.9 billion yuan (approximately $0.2$0.3 billion) line of credit bearing interest at 8%. There is noAs of September 30, 2023, the total amount outstanding balance under the line of credit as of October 2, 2021.was 0.1 billion yuan (approximately $9 million). These balances are eliminated in consolidation.
Shendi has provided Shanghai Disney Resort with loans totaling 7.98.7 billion yuan (approximately $1.2 billion), bearing interest at rates up to 8% and maturing in 2036, with early repayment permitted. Shendi has also provided Shanghai Disney Resort with a 1.42.6 billion yuan (approximately $0.2$0.4 billion) line of credit bearing interest at 8%. There is noAs of September 30, 2023, the total amount outstanding balance under the line of credit as of October 2, 2021.was 0.1 billion yuan (approximately $13 million).
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7Produced and Acquired/Licensed Content Costs and Advances
Total capitalized produced and licensed content by predominant monetization strategy is as follows:
As of October 2, 2021As of October 3, 2020
Predominantly Monetized IndividuallyPredominantly
Monetized
as a Group		TotalPredominantly Monetized IndividuallyPredominantly
Monetized
as a Group		Total
Produced content
Released, less amortization$4,944 $9,779 $14,723 $5,090 $8,185 $13,275 
Completed, not released630 762 1,392 555 720 1,275 
In-process4,371   4,623   8,994   3,585   2,090   5,675   
In development or pre-production351 162 513 268 103 371 
$10,296 $15,326 25,622 $9,498 $11,098 20,596 
Licensed content - Programming rights and advances6,110 6,597 
Total produced and licensed content$31,732 $27,193 
Current portion$2,183 $2,171 
Non-current portion$29,549 $25,022 
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As of September 30, 2023As of October 1, 2022
Predominantly Monetized IndividuallyPredominantly
Monetized
as a Group		TotalPredominantly Monetized IndividuallyPredominantly
Monetized
as a Group		Total
Produced content
Released, less amortization$4,968 $13,555 $18,523 $4,639 $12,688 $17,327 
Completed, not released70 1,786 1,856 214 2,019 2,233 
In-process3,331   6,120   9,451   5,041   6,793   11,834   
In development or pre-production279 133 412 372 254 626 
$8,648 $21,594 30,242 $10,266 $21,754 32,020 
Licensed content - Television Programming rights and advances6,351 5,647 
Total produced and licensed content$36,593 $37,667 
Current portion$3,002 $1,890 
Non-current portion$33,591 $35,777 
Amortization of produced and licensed content is as follows:
20212020202320222021
Produced contentProduced contentProduced content
Predominantly monetized individuallyPredominantly monetized individually$2,947 $4,305 Predominantly monetized individually$3,999$3,448$2,947
Predominantly monetized as a groupPredominantly monetized as a group5,228 5,032 Predominantly monetized as a group7,8626,7765,228
8,175 9,337 11,86110,2248,175
Licensed programming rights and advancesLicensed programming rights and advances12,784 11,241 Licensed programming rights and advances13,40513,43212,784
Total produced and licensed content costs(1)
Total produced and licensed content costs(1)
$20,959 $20,578 
Total produced and licensed content costs(1)
$25,266$23,656$20,959
(1)Primarily included in “Costs of services” in the Consolidated Statements of Operations.
AmortizationIncome. Fiscal 2023 amounts exclude impairment charges of $2.0 billion for produced content and $257 million for licensed content for fiscal 2019 was $17.1 billion.programming rights recorded in “Restructuring and impairment charges” in the Consolidated Statements of Income (see Note 18).
Total expected amortization by fiscal year of completed (released and not released) produced, licensed and acquired film and television library content on the balance sheet as of October 2, 2021September 30, 2023 is as follows:
Predominantly Monetized IndividuallyPredominantly
Monetized
as a Group		TotalPredominantly Monetized IndividuallyPredominantly
Monetized
as a Group		Total
Produced contentProduced contentProduced content
ReleasedReleasedReleased
2022$1,459 $3,127 $4,586 
2023764 1,987 2,751 
20242024473   1,254   1,727   2024$1,069 $3,257 $4,326 
20252025600 2,055 2,655 
20262026506   1,632   2,138   
Completed, not releasedCompleted, not releasedCompleted, not released
2022334   312   646   
2024202436   794   830   
Licensed content - Programming rights and advancesLicensed content - Programming rights and advancesLicensed content - Programming rights and advances
2022$3,663 
20231,125 
20242024585   2024$4,202 
20252025785 
20262026495   
Approximately $2.4 billion of accrued participations and residual liabilities will be paid in fiscal 2022.2024.
At October 2, 2021,September 30, 2023, acquired film and television libraries havelibrary content has remaining unamortized costs of $3.5$3.1 billion, which are generally being amortized straight-line over a weighted-average remaining period of approximately 1615 years.
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Content Production Incentives
Programming and production costs were reduced by $0.8 billion for fiscal 2023 related to the amortization of production tax incentives. We have production tax credit receivables of $1.6 billion as of September 30, 2023, which, based on the expected timing of collection, are reflected in “Receivables, net” or “Other Assets” in our Consolidated Balance Sheet.
98Borrowings
The Company’s borrowings, including the impact of interest rate and cross-currency swaps, are summarized as follows:
  October 2, 2021   September 30, 2023
Oct. 2, 2021Oct. 3, 2020
Stated
Interest
Rate(1)
Pay Floating Interest rate and Cross-
Currency Swaps(2)
Effective
Interest
Rate(3)
Swap
Maturities		 Sep. 30, 2023Oct. 1, 2022
Stated
Interest
Rate(1)
Pay Floating Interest rate and Cross-
Currency Swaps(2)
Effective
Interest
Rate(3)
Swap
Maturities
Commercial paperCommercial paper$1,992  $2,023  —$—0.31%Commercial paper$1,476  $1,662  —$—5.62%
U.S. dollar denominated notes(4)
U.S. dollar denominated notes(4)
49,090  52,736  3.86%13,1253.08%2022-2031
U.S. dollar denominated notes(4)
43,504  45,091  4.03%11,6254.90%2024-2031
Foreign currency denominated debtForeign currency denominated debt2,011  1,983  2.92%2,0162.83%2027Foreign currency denominated debt1,872  1,844  2.92%1,8784.99%2025-2027
Other(5)
Other(5)
(18) 583  —
Other(5)
(1,729) (1,653) —
53,075  57,325  3.68%15,1412.96%45,123  46,944  3.85%13,5034.92%
Asia Theme Parks borrowingsAsia Theme Parks borrowings1,331  1,303  1.53%—5.32%Asia Theme Parks borrowings1,308  1,425  1.86%—5.90%
Total borrowingsTotal borrowings54,406  58,628  3.63%15,1413.02%Total borrowings46,431  48,369  3.94%13,5034.95%
Less current portionLess current portion5,866  5,711  2.23%5002.10%Less current portion4,330  3,070  2.35%—5.12%
Total long-term borrowingsTotal long-term borrowings$48,540  $52,917  $14,641Total long-term borrowings$42,101  $45,299  $13,503
(1)The stated interest rate represents the weighted-average coupon rate for each category of borrowings. For floating-rate borrowings, interest rates are the rates in effect at October 2, 2021;September 30, 2023; these rates are not necessarily an indication of future interest rates.
(2)Amounts represent notional values of interest rate and cross-currency swaps outstanding as of October 2, 2021.September 30, 2023.
(3)The effective interest rate includes the impact of existing and terminated interest rate and cross-currency swaps, purchase accounting adjustments and debt issuance premiums, discounts and costs.
(4)Includes net debt issuance discounts, costs and purchase accounting adjustments totaling a net premium of $2.1$1.8 billion and a net premium of $2.2$1.9 billion at October 2, 2021September 30, 2023 and October 3, 2020,1, 2022, respectively.
(5)Includes market value adjustments for debt with qualifying hedges, which reduces borrowings by $99 million$1.8 billion and increases borrowings by $509 million$1.7 billion at October 2, 2021September 30, 2023 and October 3, 2020,1, 2022, respectively.
Commercial Paper
At October 2, 2021,September 30, 2023, the Company’s bank facilities, which are with a syndicate of lenders and support our commercial paper borrowings, were as follows:
Committed
Capacity		Capacity
Used		Unused
Capacity		Committed
Capacity		Capacity
Used		Unused
Capacity
Facility expiring March 2022$5,250$—$5,250
Facility expiring March 20234,000—4,000
Facility expiring March 2024Facility expiring March 2024$5,250$—$5,250
Facility expiring March 2025Facility expiring March 20253,000—3,000Facility expiring March 20253,000—3,000
Facility expiring March 2027Facility expiring March 20274,000—4,000
TotalTotal$12,250$—$12,250Total$12,250$—$12,250
TheThese facilities expiring in March 2023 and March 2025 allow for borrowings at LIBOR-based rates plus a spread dependingbased on the credit default swap spread applicable to the Company’s debt, orSecured Overnight Financing Rate (SOFR), and at other variable rates for non-U.S. dollar denominated borrowings plus a fixed spread in the case of the facility expiring in March 2022, subject to a cap and floor that varyvaries with the Company’s debt ratingratings assigned by Moody’s Investors Service and Standard & Poor’s. The spread above LIBOR can rangePoor’s ranging from 0.18%0.655% to 1.63%1.225%. The bank facilities specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default. The bank facilities contain only one financial covenant, which isrelating to interest coverage of three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs. On October 2, 2021September 30, 2023, the financialCompany met this covenant was met by a significant margin. The bank facilities specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default. The Company also has the ability to issue up to $500 million of letters of credit under the facility expiring in March 2023,2027, which if utilized, reduces available borrowings under this facility. As of October 2, 2021,September 30, 2023, the Company has $1.4$1.7 billion of outstanding letters of credit, of which none were issued under this facility.
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Commercial paper activity is as follows:
Commercial paper with original maturities less than three months, net(1)
Commercial paper with original maturities greater than three monthsTotal
Commercial paper with original maturities less than three months, net(1)
Commercial paper with original maturities greater than three monthsTotal
Balance at Sept. 28, 2019$1,934  $3,408  $5,342  
Balance at Oct. 2, 2021Balance at Oct. 2, 2021$—  $1,992  $1,992  
AdditionsAdditions—  11,500  11,500  Additions50  2,417  2,467  
PaymentsPayments(1,961) (12,893) (14,854) Payments—  (2,801) (2,801) 
Other ActivityOther Activity27  8  35  Other Activity—  4  4  
Balance at Oct. 3, 2020$—  $2,023  $2,023  
Balance at Oct. 1, 2022Balance at Oct. 1, 2022$50  $1,612  $1,662  
AdditionsAdditions—  2,221  2,221  Additions238  3,603  3,841  
PaymentsPayments—  (2,247) (2,247) Payments—  (4,032) (4,032) 
Other ActivityOther Activity—  (5) (5) Other Activity1  4  5  
Balance at Oct. 2, 2021$—  $1,992  $1,992  
Balance at Sep. 30, 2023Balance at Sep. 30, 2023$289  $1,187  $1,476  
(1)Borrowings and reductions of borrowings are reported net.
U.S. Dollar Denominated Notes
At October 2, 2021,September 30, 2023, the Company had $49.1$43.5 billion of fixed rate U.S. dollar denominated notes with maturities ranging from 1 to 75 years. The debt outstanding includes $48.1 billion of fixed rate notes, which have73 years and stated interest rates that range from 1.65%1.75% to 9.50% and $1.0 billion of floating-rate notes that bear interest at U.S. LIBOR plus or minus a spread. At October 2, 2021, the effective rate on the floating-rate notes was 0.54%.
On March 20, 2019, the Company assumed public debt with a fair value of $21.2 billion (principal balance of $17.4 billion) upon completion of the TFCF acquisition. On March 20, 2019, 96% (principal balance of $16.8 billion) of the assumed debt was exchanged for senior notes of TWDC, with essentially the same terms. In September 2019, the Company repurchased previously exchanged debt with a carrying value of approximately $3.5 billion (principal balance of approximately $2.7 billion) and TFCF debt with a carrying value of approximately $280 million (principal balance of approximately $260 million) for $4.3 billion and recognized a charge of $511 million in “Other income, net” in the fiscal 2019 Consolidated Statement of Operations.
Foreign Currency Denominated Debt
Prior to 2019,At September 30, 2023, the Company issuedhad fixed rate senior notes of Canadian $1.3 billion ($0.9 billion) and Canadian $1.3 billion ($1.0 billion) with maturities of fixed rate senior notes, which bearOctober 2024 and March 2027, respectively, and stated interest atrates of 2.76% and mature in October 2024.3.057%, respectively. The Company alsohas entered into pay-floating interest rate and cross currency swaps that effectively convert the borrowingborrowings to a variable-rate U.S. dollar denominated borrowingborrowings indexed to LIBOR.
In fiscal 2020, the Company issued Canadian $1.3 billion ($1.0 billion) of fixed rate senior notes, which bear interest at 3.057% and mature in March 2027. The Company also entered into pay-floating interest rate and cross currency swaps that effectively convert the borrowing to a variable-rate U.S. dollar denominated borrowing indexed to LIBOR.
RSN Debt
On March 20, 2019, as part of the TFCF acquisition, the Company assumed $1.1 billion of debt related to one of the RSNs. In August 2019, the RSN was sold and the buyer has assumed the outstanding debt obligation.
Credit Facilities to Acquire TFCF
On March 20, 2019, the Company borrowed $31.1 billion under two 364-day unsecured bridge loan facilities with a bank syndicate to fund the cash component of the TFCF acquisition. On March 21, 2019, the Company repaid one bridge loan facility in the amount of $16.1 billion, utilizing cash acquired in the TFCF transaction, and terminated the facility. The remaining 364-day unsecured bridge loan facility in the amount of $15.0 billion was repaid and terminated during the fourth quarter of fiscal 2019 using the after-tax proceeds from the divestiture of the RSNs and proceeds from new borrowings.SOFR.
Cruise Ship Credit Facilities
The Company has credit facilities to finance up to 80%a significant portion of the contract price of threetwo new cruise ships, which are scheduled to be delivered in 2022, 2024fiscal 2025 and 2025.fiscal 2026. Under the facilities, $1.0 billion in financing is available beginning in October 2021, $1.1 billion isbecame available beginning in August 2023 and $1.1 billion is available beginning in August 2024. Each tranche of financing may be utilized for a period of 18 months from the initial availability date. If utilized, the interest rates will be fixed at 3.48%, 3.80% and 3.74%, respectively, and the loan and interest will be payable semi-annually over a 12-year period from the borrowing date. Early repayment is permitted subject to cancellation fees.
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Asia Theme Parks Borrowings
HKSAR provided Hong Kong Disneyland Resort with loans totaling HK$0.8HK $0.9 billion ($100109 million). The interest rate is three month HIBOR plus 2%, and the maturity date is September 2025.
Shendi has provided Shanghai Disney Resort with loans totaling 7.98.7 billion yuan (approximately $1.2 billion) bearing interest at rates up to 8% and maturing in 2036, with early repayment permitted. Shendi has also provided Shanghai Disney Resort with a 1.42.6 billion yuan (approximately $0.2$0.4 billion) line of credit bearing interest at 8%. As of October 2, 2021 thereSeptember 30, 2023 the total amount outstanding under the line of credit was no outstanding balance.0.1 billion yuan (approximately $13 million).
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Maturities
The following table provides total borrowings, excluding market value adjustments and debt issuance premiums, discounts and costs, by scheduled maturity date as of October 2, 2021.September 30, 2023. The table also provides the estimated interest payments on these borrowings as of October 2, 2021September 30, 2023 although actual future payments will differ for floating-rate borrowings:
BorrowingsBorrowings
Fiscal Year:Fiscal Year:Before 
Asia
Theme Parks
Consolidation		Asia 
Theme Parks		Total Borrowings
Interest(1)
Total Borrowings and InterestFiscal Year:
Before Asia
Theme Parks
Consolidation
Asia 
Theme Parks		Total BorrowingsInterestTotal Borrowings and Interest
2022$5,861$10$5,871$1,846$7,717
20231,241251,2661,8043,070
202420242,872302,9021,7384,6402024$4,369$13$4,382$1,733$6,115
202520253,685353,7201,7285,44820253,6191093,7281,6265,354
202620264,578—4,5781,7006,27820264,578—4,5781,6166,194
202720272,921—2,9211,5064,427
202820281,599—1,5991,5023,101
ThereafterThereafter32,8611,23134,09220,60254,694Thereafter28,0181,18629,20416,93546,139
$51,098$1,331$52,429$29,418$81,847$45,104$1,308$46,412$24,918$71,330
(1) In 2023, the Company has the ability to call a debt instrument prior to its scheduled maturity, which if exercised by the Company would reduce future interest payments by $1.1 billion.Interest
The Company capitalizes interest on assets constructed for its parks and resorts and on certain film and television productions. In fiscal 2021, 20202023, 2022 and 2019,2021, total interest capitalized was $187$365 million, $157$261 million and $222 million, respectively. Interest expense, net of capitalized interest, for fiscal 2021, 2020 and 2019 was $1,546 million, $1,647 million and $1,246$187 million, respectively.
Interest expense (net of amounts capitalized), interest and investment income, and net periodic pension and postretirement benefit costs (other than service costs) (see Note 10) are reported net in the Consolidated Statements of Income and consist of the following:
202320222021
Interest expense$(1,973)$(1,549)$(1,546)
Interest and investment income424    90    307    
Net periodic pension and postretirement benefit costs (other than service costs)340 62 (167)
Interest expense, net$(1,209)$(1,397)$(1,406)
109Income Taxes
Provision forIncome (Loss) Before Income Taxes by Domestic and Deferred Tax Assets and LiabilitiesForeign Subsidiaries
Income (Loss) Before Income Taxes202120202019
Domestic (including U.S. exports)$5,241  $4,706  $12,389  
Foreign subsidiaries(1)
(2,680) (6,449) 1,534  
Total income (loss) from continuing operations2,561  (1,743) 13,923  
Income (loss) from discontinued operations(38) (42) 726  
$2,523  $(1,785) $14,649  
Income Before Income Taxes202320222021
Domestic subsidiaries (including U.S. exports)$3,086  $5,955  $5,241  
Foreign subsidiaries1,683  (670) (2,680) 
Total income from continuing operations4,769  5,285  2,561  
Loss from discontinued operations—  (62) (38) 
$4,769  $5,223  $2,523  
(1) Includes goodwill and intangible asset impairment in fiscal 2020.
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Income Tax Expense (Benefit)
Current202120202019
Federal$594  $95  $14  
State129  148  112  
Foreign(1)
554  731  824  
1,277  974  950  
Deferred
Federal(526) 279  1,829  
State(220) (29) 259  
Foreign(506) (525) (12) 
(1,252) (275) 2,076  
Income tax expense from continuing operations25  699  3,026  
Income tax expense from discontinued operations(9) (10) 39  
$16  $689  $3,065  
Provision for Income Taxes: Current and Deferred
Income Tax Expense (Benefit)
Current202320222021
Federal$1,475  $436  $594  
State402  282  129  
Foreign(1)
867  846  554  
2,744  1,564  1,277  
Deferred
Federal(1,180) 407  (526) 
State4  26  (220) 
Foreign(189) (265) (506) 
(1,365) 168  (1,252) 
Income tax expense on income from continuing operations1,379  1,732  25  
Income tax expense on loss from discontinued operations—  (14) (9) 
$1,379  $1,718  $16  
(1)Includes foreign withholding taxes.
Components of Deferred Tax (Assets) and LiabilitiesOctober 2, 2021October 3, 2020
Deferred tax assets
Net operating losses and tax credit carryforwards(1)
$(3,944) $(3,137) 
Accrued liabilities(2,544) (2,952) 
Lease liabilities(764) (825) 
Licensing revenues(202) —  
Other(725) (652) 
Total deferred tax assets(8,179) (7,566) 
Deferred tax liabilities
Depreciable, amortizable and other property7,916  8,256  
Investment in U.S. entities2,775  2,514  
Right-of-use assets697  740  
Licensing revenues—  189  
Investment in foreign entities392  266  
Other164  150  
Total deferred tax liabilities11,944  12,115  
Net deferred tax liability before valuation allowance3,765  4,549  
Valuation allowance2,795  2,410  
Net deferred tax liability$6,560  $6,959  
Deferred Tax Assets and Liabilities
Components of Deferred Tax (Assets) and LiabilitiesSeptember 30, 2023October 1, 2022
Deferred tax assets
Net operating losses and tax credit carryforwards(1)
$(3,841) $(3,527) 
Accrued liabilities(1,335) (1,570) 
Lease liabilities(852) (748) 
Licensing revenues(115) (124) 
Other(623) (819) 
Total deferred tax assets(6,766) (6,788) 
Deferred tax liabilities
Depreciable, amortizable and other property7,581  8,575  
Investment in U.S. entities1,271  1,798  
Right-of-use lease assets751  676  
Investment in foreign entities482  543  
Other81  64  
Total deferred tax liabilities10,166  11,656  
Net deferred tax liability before valuation allowance3,400  4,868  
Valuation allowance3,187  2,859  
Net deferred tax liability$6,587  $7,727  
(1)Balances as of October 2, 2021at September 30, 2023 and October 3, 20201, 2022 include approximately $1.6 billion and $1.4$1.5 billion, respectively, of International Theme Park net operating losses and approximately $1.0 billion at both September 30, 2023 and $0.7 billion, respectivelyOctober 1, 2022 of foreign tax credits in the U.S. The International Theme Park net operating losses are primarily in France and, to a lesser extent, Hong Kong and China. Losses in France and Hong Kong have an indefinite carryforward period and losses in China have a five-year carryforward period. China theme park net operating losses of $0.1$0.2 billion, mayif not used, expire between fiscal 20222024 and fiscal 2027.2028. Foreign tax credits in the U.S. have a ten-year carryforward period. Foreign tax credits of $1.0 billion, mayif not used, expire beginning in fiscal 2028.
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The following table details the change in valuation allowance for fiscal 2021, 20202023, 2022 and 20192021 (in billions):
Balance at Beginning of Period
Charges to Tax Expense(1)
Changes Due to
TFCF Acquisition		Balance at End of Period
Year ended October 2, 2021$2.4  $0.4  $—  $2.8  
Year ended October 3, 20201.9  0.6  (0.1) 2.4  
Year ended September 28, 20191.4  (0.1) 0.6  1.9  
(1) Charges to tax expense in fiscal 2021 and fiscal 2020 are primarily due to International Theme Parks net operating losses.
Balance at Beginning of PeriodCharges to Tax ExpenseOther ChangesBalance at End of Period
Year ended September 30, 2023$2.9  $0.2  $0.1  $3.2  
Year ended October 1, 20222.8  0.4  (0.3) 2.9  
Year ended October 2, 20212.4  0.4  —  2.8  
Reconciliation of the effective income tax rate for continuing operations to the federal rate for continuing operations
2021
2020(1)
2019202320222021
Federal income tax rateFederal income tax rate21.0  % 21.0  % 21.0  % Federal income tax rate21.0  % 21.0  % 21.0  % 
State taxes, net of federal benefit(1)State taxes, net of federal benefit(1)1.9 4.3 1.9 State taxes, net of federal benefit(1)5.8 3.1 1.9 
Tax rate differential on foreign incomeTax rate differential on foreign income12.0 (16.5)0.3 Tax rate differential on foreign income0.1 4.3 12.0 
Foreign derived intangible incomeForeign derived intangible income(6.4)— (1.1)Foreign derived intangible income(4.3)(3.4)(6.4)
Excess tax benefits from equity awards(5.3)3.7 (0.3)
Tax impact of equity awardsTax impact of equity awards2.1 — (5.3)
Legislative changesLegislative changes(12.2)4.4 (0.3)Legislative changes— 1.7 (12.2)
Income tax audits and reservesIncome tax audits and reserves(4.8)(6.1)(0.6)Income tax audits and reserves1.3 2.7 (4.8)
Goodwill impairmentGoodwill impairment— (41.1)— Goodwill impairment3.5 — — 
Valuation allowanceValuation allowance2.6 (14.6)0.1 Valuation allowance(1.8)4.5 2.6 
OtherOther(7.8)4.8 0.7 Other1.2 (1.1)(7.8)
1.0 %(40.1 %)21.7 %28.9 %32.8 %1.0 %
(1)In fiscal 2020, the Company had a pre-tax loss. Positive amounts reflect tax benefits, whereas negative amounts reflect tax expense.
The effective income tax rate in the current year was lower than the U.S. statutory rate due to favorable adjustmentsFiscal 2023 includes an adjustment related to prior years and excess tax benefits on employee share-based awards, partially offset by an unfavorable impact from foreign losses for which we are unable to recognize a tax benefit. The effective income tax rate in the prior year included an unfavorable impact of the goodwill impairment, which was not tax deductible, the impact of higher tax rates on foreign earnings than U.S. statutory rates and an unfavorable impact from foreign losses for which we are unable to recognize a tax benefit.certain deferred state taxes
Unrecognized tax benefits
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, excluding the related accrual for interest and penalties, is as follows:
202120202019202320222021
Balance at the beginning of the yearBalance at the beginning of the year$2,740  $2,952  $648  Balance at the beginning of the year$2,449  $2,641  $2,740  
Increases due to acquisitions—  34  2,728  
Increases for current year tax positionsIncreases for current year tax positions51  26  84  Increases for current year tax positions98  48  51  
Increases for prior year tax positionsIncreases for prior year tax positions556  134  143  Increases for prior year tax positions273  103  556  
Decreases in prior year tax positionsDecreases in prior year tax positions(174) (99) (61) Decreases in prior year tax positions(150) (108) (174) 
Settlements with taxing authoritiesSettlements with taxing authorities(532) (307) (590) Settlements with taxing authorities(153) (235) (532) 
Balance at the end of the yearBalance at the end of the year$2,641  $2,740  $2,952  Balance at the end of the year$2,517  $2,449  $2,641  
The fiscal year-endBalances at September 30, 2023, October 1, 2022 and October 2, 2021 2020 and 2019 balances include $2.0$1.8 billion, $2.1$1.9 billion and $2.4$2.0 billion, respectively, that if recognized, would reduce our income tax expense and effective tax rate. These amounts are net of the offsetting benefits from other tax jurisdictions.
At September 30, 2023, October 1, 2022 and October 2, 2021 October 3, 2020 and September 28, 2019, the Company had $1.0 billion, $1.1 billion and $1.0 billion, respectively, in accrued interest and penalties related to unrecognized tax benefits.benefits were $1.0 billion in each period. During fiscal 2021, 20202023, 2022 and 2019,2021, the Company recorded additional interest and penalties of $191$210 million, $211$157 million and $802$191 million, (of which the substantial majority is due to the acquisition of TFCF), respectively, and recorded reductions in accrued interest and penalties of $256
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$241 million, $101$119 million and $96$256 million, respectively, as a result of audit settlements and other prior-year adjustments.respectively. The Company’s policy is to report interest and penalties as a component of income tax expense.
The Company is generally no longer subject to U.S. federal examination for years prior to 2018 for The Walt Disney Company and for years prior to 2016 for TFCF.2018. The Company is no longer subject to examination in any of its major state or foreign tax jurisdictions for years prior to 2008.
In the next twelve months, it is reasonably possible that our unrecognized tax benefits could change due to the resolution of certainopen tax matters, which could include payments on those tax matters. These resolutions and payments couldwould reduce our unrecognized tax benefits by $0.4$0.3 billion.
Intra-Entity Transfers of Assets Other Than Inventory
At the beginning of fiscal 2019, the Company adopted new FASB accounting guidance that requires recognition of the income tax consequences of an intra-entity transfer of an asset (other than inventory) when the transfer occurs instead of when the asset is ultimately sold to an outside party. In the first quarter of fiscal 2019, the Company recorded a $0.2 billion deferred tax asset with an offsetting increase to retained earnings.
Other
In fiscal 2021, 20202023, the Company recognized income tax expense of $93 million for the shortfall between equity-based compensation deductions and 2019,amounts recorded based on the grant date fair value. In fiscal 2022 and 2021, the Company recognized income tax benefits of $135 million, $64$2 million and $41$135 million, respectively, for the excess of equity-based compensation deductions over amounts recorded based on the grant date fair value.
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1110Pension and Other Benefit Programs
The Company maintains pension and postretirement medical benefit plans covering certain of its employees not covered by union or industry-wide plans. The Company has defined benefit pension plans that cover employees hired prior to January 1, 2012. For employees hired after this date, the Company has a defined contribution plan. Benefits under these pension plans are generally based on years of service and/or compensation and generally require 3 years of vesting service. Employees generally hired after January 1, 1987 for certain of our media businesses and other employees generally hired after January 1, 1994 are not eligible for postretirement medical benefits. In addition, the Company has a defined benefit plan for TFCF employees for which benefits stopped accruing in June 2017.
Defined Benefit Plans
The Company measures the actuarial value of its benefit obligations and plan assets for its defined benefit pension and postretirement medical benefit plans at September 30 and adjusts for any plan contributions or significant events between September 30 and our fiscal year end.
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The following chart summarizes the benefit obligations, assets, funded status and balance sheet impacts associated with the defined benefit pension and postretirement medical benefit plans:
Pension PlansPostretirement Medical Plans Pension PlansPostretirement Medical Plans
October 2,
2021		October 3,
2020		October 2,
2021		October 3,
2020		 September 30,
2023		October 1,
2022		September 30,
2023		October 1,
2022
Projected benefit obligationsProjected benefit obligationsProjected benefit obligations
Beginning obligationsBeginning obligations$(20,760) $(18,531) $(2,104) $(1,946) Beginning obligations$(15,028) $(20,955) $(1,539) $(2,121) 
Service costService cost(434) (410) (10) (10) Service cost(282) (400) (5) (9) 
Interest costInterest cost(457) (527) (47) (56) Interest cost(784) (500) (81) (51) 
Actuarial gain (loss)(1)
15  (1,958) (13) (127) 
Actuarial gain(1)
Actuarial gain(1)
757  6,159  59  595  
Plan amendments and other(2)Plan amendments and other(2)20  1  (14) (12) Plan amendments and other(2)14  39  539  (16) 
Benefits paidBenefits paid661  662  67  47  Benefits paid633  629  66  63  
Curtailments—  3  —  —  
Ending obligationsEnding obligations$(20,955) $(20,760) $(2,121) $(2,104) Ending obligations$(14,690) $(15,028) $(961) $(1,539) 
Fair value of plans’ assetsFair value of plans’ assetsFair value of plans’ assets
Beginning fair valueBeginning fair value$15,598  $14,878  $771  $762  Beginning fair value$14,721  $18,076  $749  $889  
Actual return on plan assetsActual return on plan assets2,653  770  137  38  Actual return on plan assets1,324  (2,715) 71  (134) 
ContributionsContributions565  664  47  9  Contributions73  96  29  61  
Benefits paidBenefits paid(661) (662) (67) (47) Benefits paid(633) (629) (66) (63) 
Expenses and otherExpenses and other(79) (52) 1  9  Expenses and other(43) (107) (2) (4) 
Ending fair valueEnding fair value$18,076  $15,598  $889  $771  Ending fair value$15,442  $14,721  $781  $749  
Underfunded status of the plans$(2,879) $(5,162) $(1,232) $(1,333) 
Overfunded (Underfunded) status of the plansOverfunded (Underfunded) status of the plans$752  $(307) $(180) $(790) 
Amounts recognized in the balance sheetAmounts recognized in the balance sheetAmounts recognized in the balance sheet
Non-current assetsNon-current assets$88  $20  $—  $—  Non-current assets$1,971  $913  $209  $—  
Current liabilitiesCurrent liabilities(63) (59) (4) (5) Current liabilities(72) (66) (2) (4) 
Non-current liabilitiesNon-current liabilities(2,904) (5,123) (1,228) (1,328) Non-current liabilities(1,147) (1,154) (387) (786) 
$(2,879) $(5,162) $(1,232) $(1,333) $752  $(307) $(180) $(790) 
(1)The actuarial lossgain for 2020fiscal 2022 was primarily due to a reductionan increase in the discount rate used to determine the fiscal year-end benefit obligation from the rate that was used in the preceding fiscal year.
(2)The decrease in fiscal 2023 was due to a change in postretirement medical benefit options.
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The components of net periodic benefit cost (benefit) are as follows:
Pension PlansPostretirement Medical Plans Pension PlansPostretirement Medical Plans
202120202019202120202019 202320222021202320222021
Service costService cost$434  $410  $345  $10  $10  $8  Service cost$282  $400  $434  $5  $9  $10  
Other costs (benefits):Other costs (benefits):Other costs (benefits):
Interest costInterest cost457  527  592  47  56  67  Interest cost784  500  457  81  51  47  
Expected return on plan assetsExpected return on plan assets(1,100) (1,084) (978) (55) (57) (56) Expected return on plan assets(1,149) (1,174) (1,100) (61) (59) (55) 
Amortization of prior-year service costsAmortization of prior-year service costs11  13  13  —  —  —  Amortization of prior-year service costs8  7  11  —  —  —  
Recognized net actuarial loss777  544  260  30  14  —  
Total other costs (benefits)145  —  (113) 22  13  11  
Net periodic benefit cost$579  $410  $232  $32  $23  $19  
Recognized net actuarial loss/(gain)Recognized net actuarial loss/(gain)19  585  777  (22) 28  30  
Total other costs (benefit)Total other costs (benefit)(338) (82) 145  (2) 20  22  
Net periodic benefit cost (benefit)Net periodic benefit cost (benefit)$(56) $318  $579  $3  $29  $32  
In fiscal 2022,2024, we expect pension and postretirement medical costs to decrease by $260be a net benefit of $155 million compared to $350a net benefit of $53 million driven by lower amortization of previously deferred losses.in fiscal 2023.
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Key assumptions are as follows:Key assumptions are as follows:Key assumptions are as follows:
Pension PlansPostretirement Medical Plans Pension PlansPostretirement Medical Plans
202120202019202120202019 202320222021202320222021
Discount rate used to determine the fiscal year‑end benefit obligationDiscount rate used to determine the fiscal year‑end benefit obligation2.88 %2.82 %3.22 %2.89 %2.80 %3.22 %Discount rate used to determine the fiscal year‑end benefit obligation5.94 %5.44 %2.88 %5.94 %5.47 %2.89 %
Discount rate used to determine the interest cost component of net periodic benefit costDiscount rate used to determine the interest cost component of net periodic benefit cost2.28 %2.94 %4.09 %2.28 %2.95 %4.10 %Discount rate used to determine the interest cost component of net periodic benefit cost5.37 %2.45 %2.28 %5.38 %2.47 %2.28 %
Rate of return on plan assetsRate of return on plan assets7.00 %7.00 %7.25 %7.00 %7.00 %7.25 %Rate of return on plan assets7.00 %7.00 %7.00 %7.00 %7.00 %7.00 %
Weighted average rate of compensation increase to determine the fiscal year‑end benefit obligationWeighted average rate of compensation increase to determine the fiscal year‑end benefit obligation3.10 %3.20 %3.20 %n/an/an/aWeighted average rate of compensation increase to determine the fiscal year‑end benefit obligation3.10 %3.10 %3.10 %n/an/an/a
Year 1 increase in cost of benefitsYear 1 increase in cost of benefitsn/an/an/a7.00 %7.00 %7.00 %Year 1 increase in cost of benefitsn/an/an/a7.00 %7.00 %7.00 %
Rate of increase to which the cost of benefits is assumed to decline (the ultimate trend rate)Rate of increase to which the cost of benefits is assumed to decline (the ultimate trend rate)n/an/an/a4.00 %4.25 %4.25 %Rate of increase to which the cost of benefits is assumed to decline (the ultimate trend rate)n/an/an/a4.00 %4.00 %4.00 %
Year that the rate reaches the ultimate trend rateYear that the rate reaches the ultimate trend raten/an/an/a204020342033Year that the rate reaches the ultimate trend raten/an/an/a204220412040
AOCI, before tax, as of October 2, 2021September 30, 2023 consists of the following amounts that have not yet been recognized in net periodic benefit cost:
Pension PlansPostretirement
Medical Plans		Total
Prior service cost$18  $—  $18  
Net actuarial loss6,628  333  6,961  
Total amounts included in AOCI6,646  333  6,979  
Prepaid (accrued) pension cost(3,767) 899  (2,868) 
Net balance sheet liability$2,879  $1,232  $4,111  
Pension PlansPostretirement
Medical Plans		Total
Prior service costs (benefits)$15  $(556) $(541) 
Net actuarial loss (gain)2,929  (137) 2,792  
Total amounts included in AOCI2,944  (693) 2,251  
Prepaid (accrued) pension cost(3,696) 873  (2,823) 
Net balance sheet liability (asset)$(752) $180  $(572) 
Plan Funded Status
TheAs of September 30, 2023, the projected benefit obligation and accumulated benefit obligation and aggregate fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $9.0 billion, $8.5$1.2 billion and $6.9$1.1 billion, respectively, asand the aggregate fair value of plan assets was not material. As of October 2, 20211, 2022, the projected benefit obligation and $19.5 billion, $18.1accumulated benefit obligation for pension plans with accumulated benefit obligations in excess of plan assets were $1.2 billion and $14.4$1.1 billion, respectively, asand the aggregate fair value of October 3, 2020.plan assets was not material.
ForAs of September 30, 2023, the projected benefit obligation for pension plans with projected benefit obligations in excess of plan assets was $1.2 billion and the projected benefit obligation and aggregate fair value of plan assets were $19.9was not material. As of October 1, 2022, the projected benefit obligation for pension plans with projected benefit obligations in excess of plan assets was $1.2 billion and $16.9 billion, respectively, asthe aggregate fair value of October 2, 2021 and $19.8 billion and $14.6 billion respectively, as of October 3, 2020.plan assets was not material.
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The Company’s total accumulated pension benefit obligations at October 2, 2021September 30, 2023 and October 3, 20201, 2022 were $19.4$13.8 billion and $19.1$14.1 billion, respectively. Approximately 98% was vested as of both October 2, 2021September 30, 2023 and October 3, 2020.1, 2022.
The accumulated postretirement medical benefit obligations and fair value of plan assets for postretirement medical plans with accumulated postretirement medical benefit obligations in excess of plan assets were $2.1 billion and $0.9 billion, respectively, at October 2, 2021 and $2.1$1.0 billion and $0.8 billion, respectively, at September 30, 2023 and $1.5 billion and $0.7 billion, respectively, at October 3, 2020.1, 2022.
Plan Assets
A significant portion of the assets of the Company’s defined benefit plans are managed in a third-party master trust. The investment policy and allocation of the assets in the master trust were approved by the Company’s Investment and Administrative Committee, which has oversight responsibility for the Company’s retirement plans. The investment policy ranges for the major asset classes are as follows:
Asset ClassMinimumMaximum
Equity investments30%60%
Fixed income investments20%40%
Alternative investments10%30%
Cash & money market funds—%10%
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The primary investment objective for the assets within the master trust is the prudent and cost effective management of assets to satisfy benefit obligations to plan participants. Financial risks are managed through diversification of plan assets, selection of investment managers and through the investment guidelines incorporated in investment management agreements. Investments are monitored to assess whether returns are commensurate with risks taken.
The long-term asset allocation policy for the master trust was established taking into consideration a variety of factors that include, but are not limited to, the average age of participants, the number of retirees, the duration of liabilities and the expected payout ratio. Liquidity needs of the master trust are generally managed using cash generated by investments or by liquidating securities.
Assets are generally managed by external investment managers pursuant to investment management agreements that establish permitted securities and risk controls commensurate with the account’s investment strategy. Some agreements permit the use of derivative securities (futures, options, interest rate swaps, credit default swaps) that enable investment managers to enhance returns and manage exposures within their accounts.
Fair Value Measurements of Plan Assets
Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and is generally classified in one of the following categories of the fair value hierarchy:
Level 1 – Quoted prices for identical instruments in active markets
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets
Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable
Investments that are valued using the net asset value (NAV) (or its equivalent) practical expedient are excluded from the fair value hierarchy disclosure. NAV per share is determined based on the fair value using the underlying assets divided by the number of units outstanding.
The following is a description of the valuation methodologies used for assets reported at fair value. The methodologies used at October 2, 2021September 30, 2023 and October 3, 20201, 2022 are the same.
Level 1 investments are valued based on reported market prices on the last trading day of the fiscal year. Investments in common and preferred stocks and mutual funds are valued based on the securities’ exchange-listed price or a broker’s quote in an active market. Investments in U.S. Treasury securities are valued based on a broker’s quote in an active market.
Level 2 investments in government and federal agency bonds and notes (excluding U.S. Treasury securities), corporate bonds, mortgage-backed securities (MBS) and asset-backed securities are valued using a broker’s quote in a non-active market or an evaluated price based on a compilation of reported market information, such as benchmark yield curves, credit spreads and estimated default rates. Derivative financial instruments are valued based on models that incorporate observable inputs for the underlying securities, such as interest rates or foreign currency exchange rates.
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The Company’s defined benefit plan assets are summarized by level in the following tables:
As of October 2, 2021As of September 30, 2023
DescriptionDescriptionLevel 1Level 2TotalPlan Asset MixDescriptionLevel 1Level 2TotalPlan Asset Mix
CashCash$77  $—  $77  —%Cash$68  $—  $68  —%
Common and preferred stocks(1)
Common and preferred stocks(1)
4,407  —  4,407  23%
Common and preferred stocks(1)
3,517  —  3,517  22%
Mutual fundsMutual funds1,326  —  1,326  7%Mutual funds1,139  —  1,139  7%
Government and federal agency bonds, notes and MBSGovernment and federal agency bonds, notes and MBS2,437  349  2,786  15%Government and federal agency bonds, notes and MBS2,025  442  2,467  15%
Corporate bondsCorporate bonds—  1,098  1,098  6%Corporate bonds—  750  750  4%
Other mortgage- and asset-backed securitiesOther mortgage- and asset-backed securities—  96  96  1%Other mortgage- and asset-backed securities—  120  120  1%
Derivatives and other, netDerivatives and other, net8  21  29  —%Derivatives and other, net—  12  12  —%
Total investments in the fair value hierarchyTotal investments in the fair value hierarchy$8,255  $1,564  $9,819  Total investments in the fair value hierarchy$6,749  $1,324  8,073  
Assets valued at NAV as a practical expedient:Assets valued at NAV as a practical expedient:Assets valued at NAV as a practical expedient:
Common collective fundsCommon collective funds4,550  24%Common collective funds3,517  22%
Alternative investmentsAlternative investments4,342  23%Alternative investments4,352  27%
Money market funds and otherMoney market funds and other254  1%Money market funds and other281  2%
Total investments at fair valueTotal investments at fair value$18,965  100%Total investments at fair value$16,223  100%
As of October 3, 2020As of October 1, 2022
DescriptionDescriptionLevel 1Level 2TotalPlan Asset MixDescriptionLevel 1Level 2TotalPlan Asset Mix
CashCash$207  $—  $207  1%Cash$177  $—  $177  1%
Common and preferred stocks(1)
Common and preferred stocks(1)
3,308  —  3,308  20%
Common and preferred stocks(1)
3,118  —  3,118  20%
Mutual fundsMutual funds1,154  —  1,154  7%Mutual funds1,044  —  1,044  7%
Government and federal agency bonds, notes and MBSGovernment and federal agency bonds, notes and MBS2,326  354  2,680  16%Government and federal agency bonds, notes and MBS2,061  293  2,354  15%
Corporate bondsCorporate bonds—  935  935  6%Corporate bonds—  751  751  5%
Other mortgage- and asset-backed securitiesOther mortgage- and asset-backed securities—  106  106  1%Other mortgage- and asset-backed securities—  84  84  1%
Derivatives and other, netDerivatives and other, net(2) 7  5  —%Derivatives and other, net2  13  15  —%
Total investments in the fair value hierarchyTotal investments in the fair value hierarchy$6,993  $1,402  $8,395  Total investments in the fair value hierarchy$6,402  $1,141  7,543  
Assets valued at NAV as a practical expedient:Assets valued at NAV as a practical expedient:Assets valued at NAV as a practical expedient:
Common collective fundsCommon collective funds3,993  24%Common collective funds3,479  22%
Alternative investmentsAlternative investments3,375  21%Alternative investments4,208  27%
Money market funds and otherMoney market funds and other606  4%Money market funds and other240  2%
Total investments at fair valueTotal investments at fair value$16,369  100%Total investments at fair value$15,470  100%
(1)Includes 2.9 million shares of Company common stock valued at $489$235 million (3%(1% of total plan assets) and 2.9 million shares valued at $355$273 million (2% of total plan assets) at October 2, 2021September 30, 2023 and October 3, 2020,1, 2022, respectively.
Uncalled Capital Commitments
Alternative investments held by the master trust include interests in funds that have rights to make capital calls to the investors. In such cases, the master trust would be contractually obligated to make a cash contribution at the time of the capital call. At October 2, 2021,September 30, 2023, the total committed capital still uncalled and unpaid was $1.2$1.3 billion.
Plan Contributions
During fiscal 2021,2023, the Company made $612$102 million of contributions to its pension and postretirement medical plans. The Company currently expectsdoes not expect to make approximately $100 million to $150 million inmaterial pension and postretirement medical plan contributions in fiscal 2022.2024. Final minimum funding requirements for fiscal 20222024 will be determined based on a January 1, 20222024 funding actuarial valuation, which is expected to be received during the fourth quarter of fiscal 2022.2024.
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Estimated Future Benefit Payments
The following table presents estimated future benefit payments for the next ten fiscal years:
Pension
Plans
Postretirement
Medical Plans(1)
Pension
Plans
Postretirement
Medical Plans(1)
2022$692$61
202369265
20242024728702024$768$56
2025202576974202577655
2026202681179202682259
2027 – 20314,626459
2027202786662
2028202891164
2029 – 20332029 – 20335,132356
(1)Estimated future benefit payments are net of expected Medicare subsidy receipts of $81$39 million.
Assumptions
Assumptions, such as discount rates, long-term rate of return on plan assets and the healthcare cost trend rate, have a significant effect on the amounts reported for net periodic benefit cost as well as the related benefit obligations.
Discount Rate — The assumed discount rate for pension and postretirement medical plans reflects the market rates for high-quality corporate bonds currently available. 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. The Company measures service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows.
Long-term rate of return on plan assets — The long-term rate of return on plan assets represents an estimate of long-term returns on an investment portfolio consisting of a mixture of equities, fixed income and alternative investments. When determining the long-term rate of return on plan assets, the Company considers long-term rates of return on the asset classes (both historical and forecasted) in which the Company expects the pension funds to be invested. The following long-term rates of return by asset class were considered in setting the long-term rate of return on plan assets assumption:
Equity SecuritiesEquity Securities6 %to10 %Equity Securities6 %to10 %
Debt SecuritiesDebt Securities2 %to4 %Debt Securities3 %to5 %
Alternative InvestmentsAlternative Investments6 %to11 %Alternative Investments6 %to11 %
Healthcare cost trend rate — The Company reviews external data and its own historical trends for healthcare costs to determine the healthcare cost trend rates for the postretirement medical benefit plans. The 20212023 actuarial valuation assumed a 7.00% annual rate of increase in the per capita cost of covered healthcare claims with the rate decreasing in even increments over nineteen years until reaching 4.00%.
Sensitivity — A one percentage point change in the discount rate and expected long-term rate of return on plan assets would have the following effects on the projected benefit obligations for pension and postretirement medical plans as of October 2, 2021September 30, 2023 and on cost for fiscal 2022:2024:
Discount RateExpected Long-Term
Rate of Return On Assets		 Discount RateExpected Long-Term
Rate of Return On Assets
Increase (decrease)Increase (decrease)Benefit
Expense		Projected Benefit ObligationsBenefit
Expense		Increase (decrease)Benefit
Expense		Projected Benefit ObligationsBenefit
Expense
1 percentage point decrease1 percentage point decrease$341  $4,011  $175  1 percentage point decrease$201  $2,038  $170  
1 percentage point increase1 percentage point increase(292) (3,402) (175) 1 percentage point increase(45) (1,798) (170) 
Multiemployer Benefit Plans
The Company participates in a number of multiemployer pension plans under union and industry-wide collective bargaining agreements that cover our union-represented employees and expenses its contributions to these plans as incurred. These plans generally provide for retirement, death and/or termination benefits for eligible employees within the applicable collective bargaining units, based on specific eligibility/participation requirements, vesting periods and benefit formulas. The risks of participating in these multiemployer plans are different from single-employer plans. For example:
•Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.
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•If a participating employer stops contributing to the multiemployer plan, the unfunded obligations of the plan may become the obligation of the remaining participating employers.
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•If a participating employer chooses to stop participating in these multiemployer plans, the employer may be required to pay those plans an amount based on the underfunded status of the plan.
The Company also participates in several multiemployer health and welfare plans that cover both active and retired employees. Health care benefits are provided to participants who meet certain eligibility requirements under the applicable collective bargaining unit.
The following table sets forth our contributions to multiemployer pension and health and welfare benefit plans:
202120202019202320222021
Pension plansPension plans$289$221$189Pension plans$316$402$289
Health & welfare plansHealth & welfare plans272217218Health & welfare plans299401272
Total contributionsTotal contributions$561$438$407Total contributions$615$803$561
Defined Contribution Plans
The Company has defined contribution retirement plans for domestic employees who began service after December 31, 2011 and are not eligible to participate in the defined benefit pension plans. In general, the Company contributes from 4% to 10% of an employee’s compensation depending on the employee’s age and years of service with the Company up to plan limits. The Company has savings and investment plans that allow eligible employees to contribute up to 50% of their salary through payroll deductions depending on the plan in which the employee participates. The Company matches 50% of the employee’s contribution up to plan limits. The Company also has defined contribution retirement plans for employees in our international operations. In fiscal 2021, 20202023, 2022 and 2019,2021, the costs of our domestic and international defined contribution plans were $254$378 million, $242$325 million and $233$254 million, respectively.
1211Equity
The Company paid the following dividends in fiscal 2020 and 2019:
Per ShareTotal PaidPayment TimingRelated to Fiscal Period
$0.88$1.6 billionSecond Quarter of Fiscal 2020Second Half 2019
$0.88$1.6 billionFourth Quarter of Fiscal 2019First Half 2019
$0.88$1.3 billionSecond Quarter of Fiscal 2019Second Half 2018
The Company did not pay a dividend with respect to fiscal year 2020 operations and has not declared or paid a dividend with respect to fiscal 2021 operations.
As a result of the acquisition of TFCF, TWDC became the parent entity of both TFCF and TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company and referred to herein as Legacy Disney). TWDC issued 307 million shares of common stock to acquire TFCF (see Note 4), and all the outstanding shares of Legacy Disney (other than shares of Legacy Disney held in treasury that were not held on behalf of a third party) were converted on a one-for-one basis into new publicly traded shares of TWDC.
In March 2019, Legacy Disney terminated its share repurchase program, and 1.4 billion treasury shares were canceled, which resulted in a decrease to common stock and retained earnings of $17.6 billion and $49.1 billion, respectively. The cost of treasury shares canceled was allocated to common stock based on the ratio of treasury shares to total shares outstanding, with the excess allocated to retained earnings. At October 2, 2021, TWDC held 19 million treasury shares.
TWDC’s authorized share capital consists of 4.6 billion common shares at $0.01 par value and 100 million preferred shares at $0.01 par value, both of which represent the same authorized capital structure in effect prior to the completion of the TFCF acquisition and as of September 29, 2018. As of September 29, 2018, Legacy Disney had 40 thousand preferred series B shares authorized with $0.01 par value, which were eliminated in fiscal 2019.
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The following table summarizes the changes in each component of accumulated other comprehensive income (loss) (AOCI) including our proportional share of equity method investee amounts:
 Market Value
Adjustments
for Hedges		Unrecognized
Pension and 
Postretirement
Medical 
Expense		Foreign
Currency
Translation
and Other		AOCI
AOCI, before tax
Balance at September 29, 2018$201  $(4,323) $(727) $(4,849) 
Unrealized gains (losses) arising during the period136  (3,457) (359) (3,680) 
Reclassifications of net (gains) losses to net income(185) 278  —  93  
Reclassifications to retained earnings(23)— — (23) 
Balance at September 28, 2019$129  $(7,502) $(1,086) $(8,459) 
Unrealized gains (losses) arising during the period(57) (2,468) (2) (2,527) 
Reclassifications of net (gains) losses to net income(263) 547  —  284  
Balance at October 3, 2020$(191) $(9,423) $(1,088) $(10,702) 
Unrealized gains (losses) arising during the period70  1,582  41  1,693  
Reclassifications of net (gains) losses to net income(31) 816  —  785  
Balance at October 2, 2021$(152) $(7,025) $(1,047) $(8,224) 
Market Value
Adjustments
for Hedges		Unrecognized
Pension and 
Postretirement
Medical 
Expense		Foreign
Currency
Translation
and Other		AOCI Market Value
Adjustments
for Hedges		Unrecognized
Pension and 
Postretirement
Medical 
Expense		Foreign
Currency
Translation
and Other		AOCI
Tax on AOCI
Balance at September 29, 2018$(41) $1,690  $103  $1,752  
Unrealized gains (losses) arising during the period(31) 797  28  794  
Reclassifications of net (gains) losses to net income43  (64) —  (21) 
Reclassifications to retained earnings(1)
— (667)(16)(683)
Balance at September 28, 2019$(29) $1,756  $115  $1,842  
Unrealized gains (losses) arising during the period8  572  24  604  
Reclassifications of net (gains) losses to net income61  (127) —  (66) 
AOCI, before taxAOCI, before tax
Balance at October 3, 2020Balance at October 3, 2020$40  $2,201  $139  $2,380  Balance at October 3, 2020$(191) $(9,423) $(1,088) $(10,702) 
Unrealized gains (losses) arising during the periodUnrealized gains (losses) arising during the period(8) (358) (50) (416) Unrealized gains (losses) arising during the period70  1,582  41  1,693  
Reclassifications of net (gains) losses to net incomeReclassifications of net (gains) losses to net income10  (190) —  (180) Reclassifications of net (gains) losses to net income(31) 816  —  785  
Balance at October 2, 2021Balance at October 2, 2021$42  $1,653  $89  $1,784  Balance at October 2, 2021$(152) $(7,025) $(1,047) $(8,224) 
Unrealized gains (losses) arising during the periodUnrealized gains (losses) arising during the period1,098  2,635  (967) 2,766  
Reclassifications of net (gains) losses to net incomeReclassifications of net (gains) losses to net income(142) 620  —  478  
Balance at October 1, 2022Balance at October 1, 2022$804  $(3,770) $(2,014) $(4,980) 
Unrealized gains (losses) arising during the periodUnrealized gains (losses) arising during the period(101) 1,594  (2) 1,491  
Reclassifications of net (gains) losses to net incomeReclassifications of net (gains) losses to net income(444) 4  42  (398) 
Balance at September 30, 2023Balance at September 30, 2023$259  $(2,172) $(1,974) $(3,887) 
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Market Value
Adjustments
for Hedges		Unrecognized
Pension and 
Postretirement
Medical 
Expense		Foreign
Currency
Translation
and Other		AOCI Market Value
Adjustments
for Hedges		Unrecognized
Pension and 
Postretirement
Medical 
Expense		Foreign
Currency
Translation
and Other		AOCI
AOCI, after tax
Balance at September 29, 2018$160  $(2,633) $(624) $(3,097) 
Unrealized gains (losses) arising during the period105  (2,660) (331) (2,886) 
Reclassifications of net (gains) losses to net income(142) 214  —  72  
Reclassifications to retained earnings(1)
(23) (667) (16) (706) 
Balance at September 28, 2019$100  $(5,746) $(971) $(6,617) 
Unrealized gains (losses) arising during the period(49) (1,896) 22  (1,923) 
Reclassifications of net (gains) losses to net income(202) 420  —  218  
Tax on AOCITax on AOCI
Balance at October 3, 2020Balance at October 3, 2020$(151) $(7,222) $(949) $(8,322) Balance at October 3, 2020$40  $2,201  $139  $2,380  
Unrealized gains (losses) arising during the periodUnrealized gains (losses) arising during the period62  1,224  (9) 1,277  Unrealized gains (losses) arising during the period(8) (358) (50) (416) 
Reclassifications of net (gains) losses to net incomeReclassifications of net (gains) losses to net income(21) 626  —  605  Reclassifications of net (gains) losses to net income10  (190) —  (180) 
Balance at October 2, 2021Balance at October 2, 2021$(110) $(5,372) $(958) $(6,440) Balance at October 2, 2021$42  $1,653  $89  $1,784  
Unrealized gains (losses) arising during the periodUnrealized gains (losses) arising during the period(254) (608) 50  (812) 
Reclassifications of net (gains) losses to net incomeReclassifications of net (gains) losses to net income33  (144) —  (111) 
Balance at October 1, 2022Balance at October 1, 2022$(179) $901  $139  $861  
Unrealized gains (losses) arising during the periodUnrealized gains (losses) arising during the period12  (384) 17  (355) 
Reclassifications of net (gains) losses to net incomeReclassifications of net (gains) losses to net income103  —  (14) 89  
Balance at September 30, 2023Balance at September 30, 2023$(64) $517  $142  $595  
(1)At the beginning of fiscal 2019, the Company adopted new FASB accounting guidance, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, and reclassified $691 million from AOCI to retained earnings. In addition, at the beginning of fiscal 2019, the Company adopted new FASB accounting guidance, Recognition and Measurement of Financial Assets and Liabilities, and reclassified $24 million ($15 million after tax) of market value adjustments on investments previously recorded in AOCI to retained earnings.
 Market Value
Adjustments
for Hedges		Unrecognized
Pension and 
Postretirement
Medical 
Expense		Foreign
Currency
Translation
and Other		AOCI
AOCI, after tax
Balance at October 3, 2020$(151) $(7,222) $(949) $(8,322) 
Unrealized gains (losses) arising during the period62  1,224  (9) 1,277  
Reclassifications of net (gains) losses to net income(21) 626  —  605  
Balance at October 2, 2021$(110) $(5,372) $(958) $(6,440) 
Unrealized gains (losses) arising during the period844  2,027  (917) 1,954  
Reclassifications of net (gains) losses to net income(109) 476  —  367  
Balance at October 1, 2022$625  $(2,869) $(1,875) $(4,119) 
Unrealized gains (losses) arising during the period(89) 1,210  15  1,136  
Reclassifications of net (gains) losses to net income(341) 4  28  (309) 
Balance at September 30, 2023$195  $(1,655) $(1,832) $(3,292) 
Details about AOCI components reclassified to net income are as follows:
Gains (losses) in net income:Gains (losses) in net income:Affected line item in the Consolidated Statements of Operations:202120202019Gains (losses) in net income:Affected line item in the Consolidated Statements of Operations:202320222021
Market value adjustments, primarily cash flow hedgesMarket value adjustments, primarily cash flow hedgesPrimarily revenue$31  $263  $185  Market value adjustments, primarily cash flow hedgesPrimarily revenue$444  $142  $31  
Estimated taxEstimated taxIncome taxes(10) (61) (43) Estimated taxIncome taxes(103) (33) (10) 
21  202  142  341  109  21  
Pension and postretirement medical expensePension and postretirement medical expenseInterest expense, net(816) (547) (278) Pension and postretirement medical expenseInterest expense, net(4) (620) (816) 
Estimated taxEstimated taxIncome taxes190  127  64  Estimated taxIncome taxes—  144  190  
(626) (420) (214) (4) (476) (626) 
Foreign currency translation and otherForeign currency translation and otherOther income (expense), net(42) —  —  
Estimated taxEstimated taxIncome taxes14  —  —  
(28) —  —  
Total reclassifications for the periodTotal reclassifications for the period$(605) $(218) $(72) Total reclassifications for the period$309  $(367) $(605) 
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12Equity-Based Compensation
Under various plans, the Company may grant stock options and other equity-based awards to executive, management, technology and creative personnel. The Company’s approach to long-term incentive compensation contemplates awards of stock options and restricted stock units (RSUs). Certain RSUs awarded to senior executives vest based upon the achievement of market or performance conditions (Performance RSUs).
Stock options are generally granted with a 10 year term at exercise prices equal to or exceeding the stock’s market price at the date of grant and become exercisable ratably over a three-year period from the grant date (exercisable ratably over a four-year period from the grant date for awards granted prior to fiscal 2021). The contractual terms for our outstanding stock option grants are 10 years. At the discretion of the Compensation Committee of the Company’s Board of Directors, options can occasionally extend up to 15 years after date of grant. RSUs generally vest ratably over three years (four years for grants awarded prior to fiscal 2021) and Performance RSUs generally fully vest after three years, subject to achieving market or performance conditions. Equity-based award grants generally provide continued vesting, in the event of termination, for employees that reach age 60 or greater, have at least ten years of service and have held the award for at least one year.
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Each share granted subject to a stock option award reduces the number of shares available under the Company’s stock incentive plans by one share while each share granted subject to a RSU award reduces the number of shares available by two shares. As of October 2, 2021,September 30, 2023, the maximum number of shares available for issuance under the Company’s stock incentive plans (assuming all the awards are in the form of stock options) was approximately 14893 million shares and the number available for issuance assuming all awards are in the form of RSUs was approximately 7144 million shares. The Company satisfies stock option exercises and vesting of RSUs with newly issued shares. Stock options and RSUs are generally forfeited by employees who terminate prior to vesting.
Each year, generally during the first half of the year, the Company awards stock options and restricted stock units to a broad-based group of management, technology and creative personnel. The fair value of options is estimated based on the binomial valuation model. The binomial valuation model takes into account variables such as volatility, dividend yield and the risk-free interest rate. The binomial valuation model also considers the expected exercise multiple (the multiple of exercise price to grant price at which exercises are expected to occur on average) and the termination rate (the probability of a vested option being canceled due to the termination of the option holder) in computing the value of the option.
The weighted average assumptions used in the option-valuation model were as follows:
202120202019202320222021
Risk-free interest rateRisk-free interest rate1.2%1.8%2.8%Risk-free interest rate3.6%1.6%1.2%
Expected volatilityExpected volatility30%23%23%Expected volatility31%28%30%
Dividend yieldDividend yield0.03%1.36%1.61%Dividend yield—%—%0.03%
Termination rateTermination rate5.8%5.8%4.8%Termination rate5.9%5.8%5.8%
Exercise multipleExercise multiple1.83 1.83 1.75 Exercise multiple1.98 1.98 1.83 
Although the initial fair value of stock options is not adjusted after the grant date, changes in the Company’s assumptions may change the value of, and therefore the expense related to, future stock option grants. The assumptions that cause the greatest variation in fair value in the binomial valuation model are the expected volatility and expected exercise multiple. Increases or decreases in either the expected volatility or expected exercise multiple will cause the binomial option value to increase or decrease, respectively. The volatility assumption considers both historical and implied volatility and may be impacted by the Company’s performance as well as changes in economic and market conditions.
Compensation expense for RSUs and stock options is recognized ratably over the service period of the award. Compensation expense for RSUs is based on the market price of the shares underlying the awards on the grant date. Compensation expense for Performance RSUs reflects the estimated probability that the market or performance conditions will be met.
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Compensation expense related to stock options and RSUs is as follows:
202120202019202320222021
Stock optionStock option$95  $101  $84  Stock option$76  $88  $95  
RSUs(1)
RSUs(1)
505  424  627  
RSUs(1)
1,067  889  505  
Total equity-based compensation expense(2)(1)
Total equity-based compensation expense(2)(1)
600  525  711  
Total equity-based compensation expense(2)(1)
1,143  977  600  
Tax impactTax impact(136) (118) (161) Tax impact(260) (221) (136) 
Reduction in net incomeReduction in net income$464  $407  $550  Reduction in net income$883  $756  $464  
Equity-based compensation expense capitalized during the periodEquity-based compensation expense capitalized during the period$112  $87  $81  Equity-based compensation expense capitalized during the period$145  $148  $112  
(1)Fiscal 2019 includes a $164 million charge for acceleration of TFCF performance RSUs converted to Company RSUs in connection with the TFCF acquisition (see Note 4).
(2)Equity-based compensation expense is net of capitalized equity-based compensation and estimated forfeitures and excludes amortization of previously capitalized equity-based compensation costs.
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The following table summarizes information about stock option transactions in fiscal 20212023 (shares in millions):
SharesWeighted  
Average
Exercise Price		 SharesWeighted
Average
Exercise Price
Outstanding at beginning of yearOutstanding at beginning of year23$101.41Outstanding at beginning of year18    $121.28
Awards forfeited(1) 141.97
Awards grantedAwards granted2177.27Awards granted2    89.85
Awards exercisedAwards exercised(6) 79.21Awards exercised(1)   60.46
Awards expired/canceledAwards expired/canceled(1)   111.62
Outstanding at end of yearOutstanding at end of year18$113.99Outstanding at end of year18    $120.20
Exercisable at end of yearExercisable at end of year12$98.04Exercisable at end of year14    $119.78
The following tables summarize information about stock options vested and expected to vest at October 2, 2021September 30, 2023 (shares in millions):
Vested
Range of Exercise PricesNumber of
Options		Weighted Average
Exercise Price		Weighted Average
Remaining Years of 
Contractual Life
$0 —$50 1$43.760.6
$51 —$100 476.092.4
$101 —$150 7113.705.9
12
Vested
Range of Exercise PricesNumber of
Options		Weighted Average
Exercise Price		Weighted Average
Remaining Years of 
Contractual Life
$40 —$80 1$72.590.2
$81 —$120 9107.133.7
$121 —$160 3148.096.7
$161 —$200 1177.727.4
14
Expected to Vest
Range of Exercise Prices
Number of
Options(1)
Weighted Average
Exercise Price		Weighted Average
Remaining Years of 
Contractual Life
$100 —$135 2$111.167.0
$136 —$170 2148.028.2
$171 —$200 2177.749.4
6
Expected to Vest
Range of Exercise Prices
Number of
Options(1)
Weighted Average
Exercise Price		Weighted Average
Remaining Years of 
Contractual Life
$50 —$100 2$89.899.4
$101 —$150 1146.646.3
$151 —$200 1161.367.8
4
(1)Number of options expected to vest is total unvested options less estimated forfeitures.
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The following table summarizes information about RSU transactions in fiscal 20212023 (shares in millions):
Units(3)
Weighted Average
Grant-Date Fair Value
Units(3)
Weighted Average
Grant-Date Fair Value
Unvested at beginning of yearUnvested at beginning of year12$128.56Unvested at beginning of year18$144.00
Granted(1)
Granted(1)
6179.44
Granted(1)
1889.66
VestedVested(4) 122.72Vested(9) 136.15
ForfeitedForfeited(1) 151.54Forfeited(3) 118.86
Unvested at end of year(2)
Unvested at end of year(2)
13$151.61
Unvested at end of year(2)
24$109.04
(1)Includes 0.20.4 million Performance RSUs.RSUs
(2)Includes 1.50.8 million Performance RSUs.RSUs
(3)Excludes Performance RSUs for which vesting is subject to service conditions and the number of units vesting is subject to the discretion of the CEO. At October 2, 2021,September 30, 2023, the maximum number of these Performance RSUs that could be issued upon vesting is 0.1 million.not material.
The weighted average grant-date fair values of options granted during fiscal 2023, 2022 and 2021 2020were $33.18, $46.76 and 2019$57.05, respectively, and for RSUs were $57.05, $36.19$89.66, $136.36 and $28.76,$178.70, respectively. The total intrinsic value (market value on date of exercise less exercise price) of options exercised and RSUs vested during fiscal 2023, 2022 and 2021 2020 and 2019 totaled $1,175$829 million, $989$982 million and $646$1,175 million, respectively. The aggregate intrinsic values of stock options vested and expected to vest at October 2, 2021September 30, 2023 were $885$4.8 million and $217$0 million, respectively.
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As of October 2, 2021,September 30, 2023, unrecognized compensation cost related to unvested stock options and RSUs was $114$77 million and $1,202$1,774 million, respectively. That cost is expected to be recognized over a weighted-average period of 1.41.1 years for stock options and 1.61.2 years for RSUs.
Cash received from option exercises for fiscal 2023, 2022 and 2021 2020 and 2019 was $435$52 million, $305$127 million and $318$435 million, respectively. Tax benefits realized from tax deductions associated with option exercises and RSUs vestingRSU vestings for fiscal 2023, 2022 and 2021 2020 and 2019 waswere approximately $256$190 million, $220$219 million and $145$256 million, respectively.
1413Detail of Certain Balance Sheet Accounts
Current receivablesCurrent receivablesOctober 2,
2021		October 3,
2020		Current receivablesSeptember 30,
2023		October 1,
2022
Accounts receivableAccounts receivable$11,177  $11,299  Accounts receivable$10,179  $10,811  
OtherOther2,360  1,835  Other2,266  1,999  
Allowance for credit lossesAllowance for credit losses(170) (426) Allowance for credit losses(115) (158) 
$13,367  $12,708  $12,330  $12,652  
Parks, resorts and other propertyParks, resorts and other propertyParks, resorts and other property
Attractions, buildings and improvementsAttractions, buildings and improvements$32,765  $31,279  Attractions, buildings and improvements$35,255  $33,795  
Furniture, fixtures and equipmentFurniture, fixtures and equipment24,008  22,976  Furniture, fixtures and equipment26,358  24,409  
Land improvementsLand improvements7,061  6,828  Land improvements7,419  7,757  
Leasehold improvementsLeasehold improvements1,058  1,028  Leasehold improvements1,058  1,037  
64,892  62,111  70,090  66,998  
Accumulated depreciationAccumulated depreciation(37,920) (35,517) Accumulated depreciation(42,610) (39,356) 
Projects in progressProjects in progress4,521  4,449  Projects in progress6,285  4,814  
LandLand1,131  1,035  Land1,176  1,140  
$32,624  $32,078  $34,941  $33,596  
Intangible assets
Character/franchise intangibles, copyrights and trademarks$10,572  $10,572  
MVPD agreements8,089  8,098  
Other amortizable intangible assets4,303  4,309  
Accumulated amortization(7,641) (5,598) 
Net amortizable intangible assets15,323  17,381  
Indefinite lived intangible assets(1)
1,792  1,792  
$17,115  $19,173  
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Intangible assetsSeptember 30,
2023		October 1,
2022
Character/franchise intangibles, copyrights and trademarks$10,572  $10,572  
MVPD agreements8,056  8,058  
Other amortizable intangible assets4,016  4,045  
Accumulated amortization(11,375) (9,630) 
Net amortizable intangible assets11,269  13,045  
Indefinite lived intangible assets(1)
1,792  1,792  
$13,061  $14,837  
(1)Indefinite lived intangible assets consist of ESPN, Pixar and Marvel trademarks and television FCC licenses.
Accounts payable and other accrued liabilitiesAccounts payable and other accrued liabilitiesAccounts payable and other accrued liabilities
Accounts and accrued payablesAccounts and accrued payables$16,357  $13,183  Accounts and accrued payables$15,125  $16,205  
Payroll and employee benefitsPayroll and employee benefits3,482  2,925  Payroll and employee benefits3,061  3,447  
Income taxes payableIncome taxes payable2,276 378 
OtherOther1,055  693  Other209  183  
$20,894  $16,801  $20,671  $20,213  
Other long-term liabilities
Pension and postretirement medical plan liabilities$4,132  $6,451  
Operating and financing lease liabilities3,229  2,911  
Other7,161  7,842  
$14,522  $17,204  
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1514Commitments and Contingencies
Commitments
The Company has various contractual commitments for broadcast rights forto sports, films and other programming, totaling approximately $77.4$66.8 billion, including approximately $2.7$3.0 billion for available programming as of October 2, 2021.September 30, 2023. The Company also has contractual commitments for the construction of three new cruise ships, creative talent and employment agreements and unrecognized tax benefits. Creative talent and employment agreements include obligations to actors, producers, sports, television and radio personalities and executives. Contractual commitments for sports programming rights, other broadcast programming rights and other commitments including cruise ships and creative talent are as follows:
Fiscal Year:Fiscal Year:Sports ProgrammingBroadcast
Programming		OtherTotalFiscal Year:
Sports Programming(1)
Other
Programming		OtherTotal
2022$10,305  $3,105  $4,469  $17,879  
20239,658  1,739  1,624  13,021  
202420248,406  852  1,735  10,993  2024$10,331  $3,286  $4,055  $17,672  
202520258,663  520  1,384  10,567  202510,631  1,591  2,803  15,025  
202620265,863  314  165  6,342  20267,876  941  760  9,577  
202720276,687  671  388  7,746  
202820284,713  565  146  5,424  
ThereafterThereafter27,501  428  3,477  31,406  Thereafter19,121  376  2,181  21,678  
$70,396  $6,958  $12,854  $90,208  $59,359  $7,430  $10,333  $77,122  
Sports programming primarily(1)Primarily relates to rights for NFL, college football (including bowl games and the College Football Playoff) and basketball, cricket, NBA, NHL, UFC,soccer, MLB, soccer, cricket,UFC, tennis, golf and Top Rank Boxing. Certain sports programming rights have payments that are variable based primarily on revenues and are not included in the table above.
See Note 16 for discussion of the Company’s operating and financing lease commitments.
Legal Matters
On May 12, 2023, a private securities class action lawsuit was filed in the U.S. District Court for the Central District of California against the Company, its former Chief Executive Officer, Robert Chapek, its former Chief Financial Officer, Christine M. McCarthy, and the former Chairman of the Disney Media and Entertainment Distribution segment, Kareem Daniel on behalf of certain purchasers of securities of the Company (the “Securities Class Action”). On November 6, 2023, a consolidated complaint was filed in the same action, adding Robert Iger, the Company’s Chief Executive Officer, as a defendant. Claims in the Securities Class Action include (i) violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder against all defendants, (ii) violations of Section 20A of the Exchange Act against Iger and McCarthy, and (iii) violations of Section 20(a) of the Exchange Act against all defendants. Plaintiffs in the Securities Class Action allege purported misstatements and omissions concerning, and a scheme to conceal, accurate costs and subscriber growth of the
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Disney+ platform. The Company intends to defend against the lawsuit vigorously. The lawsuit is in the early stages and at this time we cannot reasonably estimate the amount of any potential loss.
Two shareholder derivative complaints have been filed. The first, in which Hugues Gervat is the plaintiff, was filed on August 4, 2023, in the U.S. District Court for the Central District of California. The second, in which Stourbridge Investments LLC is the plaintiff, was filed on August 23, 2023 in the U.S. District Court for the District of Delaware. Each named The Walt Disney Company as a nominal defendant and alleged claims on its behalf against the Company’s Chief Executive Officer, Robert Iger; its former Chief Executive Officer, Robert Chapek; its former Chief Financial Officer, Christine M. McCarthy; the former Chairman of the Disney Media and Entertainment Distribution segment, Kareem Daniel, and ten current and former members of the Disney Board (Susan E. Arnold; Mary T. Barra; Safra A. Catz; Amy L. Chang; Francis A. deSouza; Michael B.G. Froman; Maria Elena Lagomasino; Calvin R. McDonald; Mark G. Parker; and Derica W. Rice). Along with alleged violations of Sections 10(b), 14(a), 20(a), and Rule 10b-5 of the Securities Exchange Act, premised on the same allegations as the Securities Class Action, plaintiffs in both actions sought to recover for alleged breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement and waste. On October 24, 2023, the Stourbridge action was voluntarily dismissed and, on November 16, 2023, was refiled in Delaware state court alleging equivalent theories of liability based on state law. On October 30, 2023, the Gervat action was stayed pending a ruling on an expected motion to dismiss to be filed in the Securities Class Action. The Company intends to defend against these lawsuits vigorously. The lawsuits are in the early stages, and at this time we cannot reasonably estimate the amount of any potential loss.
The Company, together with, in some instances, certain of its directors and officers, is a defendant in various other legal actions involving copyright, breach of contract and various other claims incident to the conduct of its businesses. Management does not believe that the Company has incurred a probable material loss by reason of any of those actions.
Contractual Guarantees
The Company has guaranteed bond issuances by the Anaheim Public Authority that were used by the City of Anaheim to finance construction of infrastructure and a public parking facility adjacent to the Disneyland Resort. Revenues from sales, occupancy and property taxes from the Disneyland Resort and non-Disney hotels are used by the City of Anaheim to repay the bonds, which mature in 2037. In the event of a debt service shortfall, the Company will be responsible to fund the shortfall. As of October 2, 2021, the remaining debt service obligation guaranteed by the Company was $220 million. To the extent that tax revenues exceed the debt service payments subsequent to the Company funding a shortfall, the Company would be reimbursed for any previously funded shortfalls. To date, tax revenues have exceeded the debt service payments for these bonds.
1615Leases
The Company’s operating leases primarily consist of real estate and equipment, including office space for general and administrative purposes, production facilities, land, cruise terminals, retail outlets and distribution centers for consumer products and content broadcast equipment.products. The Company also has finance leases, primarily for landbroadcast equipment and broadcast equipment.land.
Some of our leases include renewal and/or termination options. If it is reasonably certain that a renewal or termination option will be exercised, the exercise of the option is considered in calculating the term of the lease. As of October 2, 2021,September 30, 2023, our operating leases have a weighted-average remaining lease term of approximately 10 years, and our finance leases have a weighted-average remaining lease term of approximately 2729 years. The weighted-average incremental borrowing rate is 2.4%3.6% and 6.3%6.5%, for our operating leases and finance leases, respectively. At October 2, 2021September 30, 2023 total estimated future lease payments for signed non-cancelable leaseslease agreements that have not commenced of approximately $0.5 billion are not material.excluded from the measurement of the right-of-use asset and lease liability.
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The Company’s operating and finance right-of-use assets and lease liabilities are as follows:
October 2, 2021October 3, 2020September 30, 2023October 1, 2022
Right-of-use assets(1)
Right-of-use assets(1)
Right-of-use assets(1)
Operating leasesOperating leases$3,895  $3,687  Operating leases$4,211  $3,966  
Finance leasesFinance leases336  361  Finance leases291  303  
Total right-of-use assetsTotal right-of-use assets4,231  4,048  Total right-of-use assets4,502  4,269  
Short-term lease liabilities(2)
Short-term lease liabilities(2)
Short-term lease liabilities(2)
Operating leasesOperating leases637  747  Operating leases740  614  
Finance leasesFinance leases41  37  Finance leases37  37  
678  784  777  651  
Long-term lease liabilities(3)
Long-term lease liabilities(3)
Long-term lease liabilities(3)
Operating leasesOperating leases2,983  2,640  Operating leases3,258  3,020  
Finance leasesFinance leases246  271  Finance leases206  219  
3,229  2,911  3,464  3,239  
Total lease liabilitiesTotal lease liabilities$3,907  $3,695  Total lease liabilities$4,241  $3,890  
(1)Included in “Other assets” in the Consolidated Balance Sheet.
(2)Included in “Accounts payable and other accrued liabilities” in the Consolidated Balance Sheet.
(3)Included in “Other long-term liabilities” in the Consolidated Balance Sheet.
The components of lease costs are as follows:
October 2, 2021October 3, 2020202320222021
Finance lease costFinance lease costFinance lease cost
Amortization of right-of-use assetsAmortization of right-of-use assets$42  $37 Amortization of right-of-use assets$39  $39 $42 
Interest on lease liabilitiesInterest on lease liabilities20  16 Interest on lease liabilities15  15 20 
Operating lease costOperating lease cost853  899 Operating lease cost820  796 853 
Variable fees and other(1)
Variable fees and other(1)
414  491 
Variable fees and other(1)
444  363 414 
Total lease costTotal lease cost$1,329  $1,443  Total lease cost$1,318  $1,213  $1,329  
(1)Includes variable lease payments related to our operating and finance leases and costs of Short-term leases netwith initial terms of sublease income.less than one year.
Rental expense for operating leases during fiscal 2019, including common-area maintenance and contingent rentals, was $1.1 billion.
Cash paid during the year for amounts included in the measurement of lease liabilities is as follows:
October 2, 2021October 3, 2020202320222021
Operating cash flows for operating leasesOperating cash flows for operating leases$925  $879  Operating cash flows for operating leases$714  $736  $925  
Operating cash flows for finance leasesOperating cash flows for finance leases20  16  Operating cash flows for finance leases15  15  20  
Financing cash flows for finance leasesFinancing cash flows for finance leases25  37  Financing cash flows for finance leases41  48  25  
TotalTotal$970  $932  Total$770  $799  $970  
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Future minimum lease payments, as of October 2, 2021,September 30, 2023, are as follows:
OperatingFinancingOperatingFinancing
Fiscal Year:Fiscal Year:Fiscal Year:
2022$707  $59  
2023601  52  
20242024467  42  2024$824  $47  
20252025415  38  2025792  44  
20262026298  32  2026504  38  
20272027384  33  
20282028318  29  
ThereafterThereafter2,057  443  Thereafter2,265  350  
Total undiscounted future lease paymentsTotal undiscounted future lease payments4,545  666  Total undiscounted future lease payments5,087  541  
Less: Imputed interestLess: Imputed interest(925) (379) Less: Imputed interest(1,089) (298) 
Total reported lease liabilityTotal reported lease liability$3,620  $287  Total reported lease liability$3,998  $243  

1716Fair Value Measurement
The Company’s assets and liabilities measured at fair value are summarized in the following tables by fair value measurement Level. See Note 1110 for definitions of fair value measures and the Levels within the fair value hierarchy.
Fair Value Measurement at October 2, 2021 Fair Value Measurement at September 30, 2023
DescriptionDescriptionLevel 1 Level 2Level 3TotalDescriptionLevel 1 Level 2Level 3Total
AssetsAssetsAssets
InvestmentsInvestments$950  $—  $—  $950  Investments$46  $128  $—  $174  
DerivativesDerivativesDerivatives
Interest rate—  186  —  186  
Foreign exchangeForeign exchange—  707  —  707  Foreign exchange—  1,336  —  1,336  
OtherOther—  10  —  10  Other—  18  —  18  
LiabilitiesLiabilitiesLiabilities
DerivativesDerivativesDerivatives
Interest rateInterest rate—  (287) —  (287) Interest rate—  (1,791) —  (1,791) 
Foreign exchangeForeign exchange—  (618) —  (618) Foreign exchange—  (815) —  (815) 
OtherOther—  (8) —  (8) Other—  (13) —  (13) 
OtherOther—  (375) —  (375) Other—  (465) —  (465) 
Total recorded at fair valueTotal recorded at fair value$950  $(385) $—  $565  Total recorded at fair value$46  $(1,602) $—  $(1,556) 
Fair value of borrowingsFair value of borrowings$—  $58,913  $1,411  $60,324  Fair value of borrowings$—  $40,123  $1,333  $41,456  
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Fair Value Measurement at October 3, 2020 Fair Value Measurement at October 1, 2022
DescriptionDescriptionLevel 1Level 2Level 3TotalDescriptionLevel 1Level 2Level 3Total
AssetsAssetsAssets
InvestmentsInvestments$—  $1,057  $—  $1,057  Investments$308  $—  $—  $308  
DerivativesDerivativesDerivatives
Interest rateInterest rate—  515  —  515  Interest rate—  1  —  1  
Foreign exchangeForeign exchange—  505  —  505  Foreign exchange—  2,223  —  2,223  
OtherOther—  1  —  1  Other—  10  —  10  
LiabilitiesLiabilitiesLiabilities
DerivativesDerivativesDerivatives
Interest rateInterest rate—  (4) —  (4) Interest rate—  (1,783) —  (1,783) 
Foreign exchangeForeign exchange—  (549) —  (549) Foreign exchange—  (1,239) —  (1,239) 
OtherOther—  (22) —  (22) Other—  (31) —  (31) 
OtherOther—  (294) —  (294) Other—  (354) —  (354) 
Total recorded at fair valueTotal recorded at fair value—  1,209  —  1,209  Total recorded at fair value$308  $(1,173) $—  $(865) 
Fair value of borrowingsFair value of borrowings$—  $63,370  $1,448  $64,818  Fair value of borrowings$—  $42,509  $1,510  $44,019  
The fair valuesvalue of Level 2 investments are primarily determined based on quoted market prices, adjusted foran internal valuation model that uses observable inputs such as stock trading restrictions.price, volatility and risk free rate.
The fair values of Level 2 derivatives are primarily determined by internal discounted cash flow models that use observable inputs such as interest rates, yield curves and foreign currency exchange rates. Counterparty credit risk, which is mitigated by master netting agreements and collateral posting arrangements with certain counterparties, had an impact on derivative fair value estimates that was not material.
Level 2 other liabilities are primarily arrangements that are valued based on the fair value of underlying investments, which are generally measured using Level 1 and Level 2 fair value techniques.
Level 2 borrowings, which include commercial paper, U.S. dollar denominated notes and certain foreign currency denominated borrowings, are valued based on quoted prices for similar instruments in active markets or identical instruments in markets that are not active.
Level 3 borrowings include the Asia Theme Park borrowings, which are valued based on the current borrowing cost and credit risk of the Asia Theme Parks as well as prevailing market interest rates.
The Company’s financial instruments also include cash, cash equivalents, receivables and accounts payable. The carrying values of these financial instruments approximate the fair values.
The Company also has assets that are required to be recorded at fair value on a non-recurring basis. These assets are evaluated when certain triggering events occur (including a decrease in estimated future cash flows) that indicate the asset should be evaluated for impairment. In the fourth quarter of fiscal 2020,2023, the Company recorded impairment charges for goodwill and intangible assets as disclosed in Note 19.18. The fair value of these assets was determined using estimated discounted future cash flows, which is a Level 3 valuation technique (see Note 1918 for a discussion of the more significant inputs used in our discounted cash flow analysis).
Credit Concentrations
The Company monitors its positions with, and the credit quality of, the financial institutions that are counterparties to its financial instruments on an ongoing basis and does not currently anticipate nonperformance by the counterparties.
The Company does not expect that it would realize a material loss, based on the fair value of its derivative financial instruments as of October 2, 2021,September 30, 2023, in the event of nonperformance by any single derivative counterparty. The Company generally enters into derivative transactions only with counterparties that have a credit rating of A- or better and requires collateral in the event credit ratings fall below A- or aggregate exposures exceed limits as defined by contract. In addition, the Company limits the amount of investment credit exposure with any one institution.
The Company does not have material cash and cash equivalent balances with financial institutions that have below investment grade credit ratings and maintains short-term liquidity needsbalances in high quality money market funds. At October 2, 2021,September 30, 2023, the Company did not have balances (excluding money market funds) with individual financial institutions that exceeded 10% of the Company’s total cash and cash equivalents.
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The Company’s trade receivables and financial investments do not represent a significant concentration of credit risk at October 2, 2021September 30, 2023 due to the wide variety of customers and markets in which the Company’s products are sold, the dispersion of our customers across geographic areas and the diversification of the Company’s portfolio among financial institutions.
1817Derivative Instruments
The Company manages its exposure to various financial risks relating to its ongoing business operations according to a risk management policy. The primary risks managed with derivative instruments are interest rate risk and foreign exchange risk.
The Company’s derivative positions measured at fair value are summarized in the following tables:
As of October 2, 2021 As of September 30, 2023
Current
Assets		Other
Assets		Other
Current
Liabilities		Other Long-
Term
Liabilities		 Current
Assets		Other
Assets		Other
Current
Liabilities		Other Long-
Term
Liabilities
Derivatives designated as hedgesDerivatives designated as hedgesDerivatives designated as hedges
Foreign exchangeForeign exchange$165  $240  $(122) $(83) Foreign exchange$595  $338  $(123) $(93) 
Interest rateInterest rate—  186  (287) —  Interest rate—  —  (1,791) —  
OtherOther10  —  —  —  Other12  6  —  —  
Derivatives not designated as hedges(1)Derivatives not designated as hedges(1)Derivatives not designated as hedges(1)
Foreign exchangeForeign exchange183  119  (208) (205) Foreign exchange384  19  (520) (79) 
OtherOther(8) —  —  —  Other—  —  (13) —  
Gross fair value of derivativesGross fair value of derivatives350  545  (617) (288) Gross fair value of derivatives991  363  (2,447) (172) 
Counterparty nettingCounterparty netting(301) (360) 460  201  Counterparty netting(770) (262) 900  132  
Cash collateral (received) paidCash collateral (received) paid(3) (51) 157  73  Cash collateral (received) paid(123) (7) 1,257  —  
Net derivative positionsNet derivative positions$46  $134  $—  $(14) Net derivative positions$98  $94  $(290) $(40) 
 As of October 3, 2020
 Current
Assets		Other
Assets		Other
Current
Liabilities		Other Long-
Term
Liabilities
Derivatives designated as hedges
Foreign exchange$184  $132  $(77) $(273) 
Interest rate—  515  (4) —  
Other1  —  (15) (4) 
Derivatives not designated as hedges
Foreign exchange53  136  (98) (101) 
Other— — (3)— 
Gross fair value of derivatives238  783  (197) (378) 
Counterparty netting(143) (378) 184  338  
Cash collateral (received) paid(26) (142) —  9  
Net derivative positions$69  $263  $(13) $(31) 
(1)In fiscal 2023, the Company entered into a licensing and promotional arrangement and received warrants to purchase equity that are accounted for as a derivative asset. The warrants are recorded in investments at their fair market value of $128 million at September 30, 2023.
 As of October 1, 2022
 Current
Assets		Other
Assets		Other
Current
Liabilities		Other Long-
Term
Liabilities
Derivatives designated as hedges
Foreign exchange$864  $786  $(228) $(350) 
Interest rate—  1  (1,783) —  
Other10  —  (4) —  
Derivatives not designated as hedges
Foreign exchange336  247  (374) (287) 
Other— — (27)— 
Gross fair value of derivatives1,210  1,034  (2,416) (637) 
Counterparty netting(831) (715) 1,070  476  
Cash collateral (received) paid(341) (151) 1,282  96  
Net derivative positions$38  $168  $(64) $(65) 
Reference Rate Reform
In fiscal 2023, the Company amended its interest rate and cross-currency swap agreements to implement modifications related to changing the reference rates from LIBOR to SOFR and from the Canadian Dollar Offered Rate to the Canadian Overnight Repo Rate Average. In connection with these amendments, the Company applied the hedge accounting relief provided by the Financial Accounting Standards Board (FASB) in ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting to preserve the fair value hedge designation of the interest rate and cross-currency swaps.
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Interest Rate Risk Management
The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows and on the market value of its borrowings. In accordance with its policy, the Company targets its fixed-rate debt as a percentage of its net debt between a minimum and maximum percentage. The Company primarily uses pay-floating and pay-fixed interest rate swaps to facilitate its interest rate risk management activities.
The Company designates pay-floating interest rate swaps as fair value hedges of fixed-rate borrowings effectively converting fixed-rate borrowings to variable-rate borrowings indexed to LIBOR. As of October 2, 2021 and October 3, 2020, theborrowings. The total notional amount of the Company’s pay-floating interest rate swaps as of September 30, 2023 and October 1, 2022, was $15.1$13.5 billion and $15.8$14.5 billion, respectively.
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The following table summarizes fair value hedge adjustments to hedged borrowings:
Carrying Amount of Hedged BorrowingsFair Value Adjustments Included in Hedged BorrowingsCarrying Amount of Hedged BorrowingsFair Value Adjustments Included in Hedged Borrowings
October 2, 2021October 3, 2020October 2, 2021October 3, 2020September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Borrowings:Borrowings:Borrowings:
CurrentCurrent$505  $753  $5  $4  Current$1,439  $997  $(59) $(3) 
Long-termLong-term15,136  16,229  (103) 505  Long-term10,748  12,358  (1,694) (1,733) 
$15,641  $16,982  $(98) $509  $12,187  $13,355  $(1,753) $(1,736) 
The following amounts are included in “Interest expense, net” in the Consolidated Statements of Operations:Income:
202120202019 202320222021
Gain (loss) on:Gain (loss) on:Gain (loss) on:
Pay-floating swapsPay-floating swaps$(603) $479  $337  Pay-floating swaps$(14) $(1,635) $(603) 
Borrowings hedged with pay-floating swapsBorrowings hedged with pay-floating swaps603  (479) (337) Borrowings hedged with pay-floating swaps14  1,635  603  
Benefit (expense) associated with interest accruals on pay-floating swapsBenefit (expense) associated with interest accruals on pay-floating swaps143  28  (58) Benefit (expense) associated with interest accruals on pay-floating swaps(510) 31  143  
The Company may designate pay-fixed interest rate swaps as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed interest rate swaps effectively convert floating-rate borrowings to fixed-rate borrowings. The unrealized gains or losses from these cash flow hedges are deferred in AOCI and recognized in interest expense as the interest payments occur. The Company did not have pay-fixed interest rate swaps that were designated as cash flow hedges of interest payments at October 2, 2021September 30, 2023 or at October 3, 2020,1, 2022, and gains and losses related to pay-fixed swaps recognized in earnings for fiscal 2021, 20202023, 2022 and 20192021 were not material.
Foreign Exchange Risk Management
The Company transacts business globally and is subject to risks associated with changing foreign currency exchange rates. The Company’s objective is to reduce earnings and cash flow fluctuations associated with changes in foreign currency exchange rate changes,rates, enabling management to focus on core business issues and challenges.operations.
The Company enters into option and forward contracts that change in value as foreign currency exchange rates change to protect the value of its existing foreign currency assets, liabilities, firm commitments and forecasted but not firmly committed foreign currency transactions. In accordance with policy, the Company hedges its forecasted foreign currency transactions for periods generally not to exceed four years within an established minimum and maximum range of annual exposure. The gains and losses on these contracts offset changes in the U.S. dollar equivalent value of the related forecasted transaction, asset, liability or firm commitment. The principal currencies hedged are the euro, Japanese yen, British pound, Chinese yuan and Canadian dollar. Cross-currency swaps are used to effectively convert foreign currency denominated borrowings into U.S. dollar denominated borrowings.
The Company designates foreign exchange forward and option contracts as cash flow hedges of firmly committed and forecasted foreign currency transactions. As of October 2, 2021September 30, 2023 and October 3, 2020,1, 2022, the notional amounts of the Company’s net foreign exchange cash flow hedges were $6.9$8.3 billion and $4.6$7.4 billion, respectively. Mark-to-market gains and losses on these contracts are deferred in AOCI and are recognized in earnings when the hedged transactions occur, offsetting changes in the value of the foreign currency transactions. Net deferred gains recorded in AOCI for contracts that will mature in
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the next twelve months total $68$488 million. The following table summarizes the effect of foreign exchange cash flow hedges on AOCI:
20212020202320222021
Gain (loss) recognized in Other Comprehensive IncomeGain (loss) recognized in Other Comprehensive Income$61  $(63) Gain (loss) recognized in Other Comprehensive Income$(136) $1,093  $61  
Gain (loss) reclassified from AOCI into the Statement of Operations(1)
Gain (loss) reclassified from AOCI into the Statement of Operations(1)
24  269  
Gain (loss) reclassified from AOCI into the Statement of Operations(1)
446  116  24  
(1)Primarily recorded in revenue.
The Company designates cross currency swaps as fair value hedges of foreign currency denominated borrowings. The impact offrom the designated exposurechange in foreign currency on both the cross currency swap and borrowing is recorded to “Interest expense, net” to offset the foreign currency. The impact of the foreign currency denominated borrowing. The non-hedged exposurefrom interest rate changes is recorded toin AOCI and is amortized over the life of the cross currency swap. As of October 2, 2021both September 30, 2023 and October 3, 2020,1, 2022, the total notional amounts of the Company’s designated cross currency swaps were Canadian $1.3 billion ($1.0 billion), respectively. The related gains or losses recognized in earnings were not material for the fiscal years ended 2023, 2022 and Canadian $1.3 billion ($1.0 billion), respectively.
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The following amounts are included in “Interest expense, net” in the Consolidated Statements of Operations:
October 2,
2021		October 3,
2020
Gain (loss) on:
Cross currency swaps$47 $53 
Borrowings hedged with cross currency swaps(47)(53)
2021.
Foreign exchange risk management contracts with respect to foreign currency denominated assets and liabilities are not designated as hedges and do not qualify for hedge accounting. The notional amounts of these foreign exchange contracts at both October 2, 2021September 30, 2023 and October 3, 2020 was $3.5 billion.1, 2022 were $3.1 billion and $3.8 billion, respectively. The following table summarizes the net foreign exchange gains or losses recognized on foreign currency denominated assets and liabilities and the net foreign exchange gains or losses on the foreign exchange contracts we entered into to mitigate our exposure with respect to foreign currency denominated assets and liabilities by the corresponding line item in which they are recorded in the Consolidated Statements of Operations:Income:
Costs and ExpensesInterest expense, netIncome Tax ExpenseCosts and ExpensesInterest expense, netIncome Tax Expense
202120202019202120202019202120202019202320222021202320222021202320222021
Net gains (losses) on foreign currency denominated assets and liabilitiesNet gains (losses) on foreign currency denominated assets and liabilities$(30) $10  $(188) $(47) $1  $16  $(7) $(35) $50  Net gains (losses) on foreign currency denominated assets and liabilities$(37) $(685) $(30) $(15) $82  $(47) $(91) $212  $(7) 
Net gains (losses) on foreign exchange risk management contracts not designated as hedgesNet gains (losses) on foreign exchange risk management contracts not designated as hedges(83) (56) 123  47  —  (19) 2  33  (51) Net gains (losses) on foreign exchange risk management contracts not designated as hedges(159) 547  (83) 10  (82) 47  64  (208) 2  
Net gains (losses)Net gains (losses)$(113) $(46) $(65) $—  $1  $(3) $(5) $(2) $(1) Net gains (losses)$(196) $(138) $(113) $(5) $—  $—  $(27) $4  $(5) 
Commodity Price Risk Management
The Company is subject to the volatility of commodities prices, and the Company designates certain commodity forward contracts as cash flow hedges of forecasted commodity purchases. Mark-to-market gains and losses on these contracts are deferred in AOCI and are recognized in earnings when the hedged transactions occur, offsetting changes in the value of commodity purchases. The notional amount of these commodities contracts at October 2, 2021September 30, 2023 and October 3, 20201, 2022 and related gains or losses recognized in earnings were not material for fiscal 2021, 20202023, 2022 and 2019.2021.
Risk Management – Other Derivatives Not Designated as Hedges
The Company enters into certain other risk management contracts that are not designated as hedges and do not qualify for hedge accounting. These contracts, which include certain total return swap contracts, are intended to offset economic exposures of the Company and are carried at market value with any changes in value recorded in earnings. The notional amount of these contracts at October 2, 2021both September 30, 2023 and October 3, 2020 were1, 2022 was $0.4 billion and $0.3 billion, respectively. The related gains or losses recognized in earnings were not material for fiscal 2021, 20202023, 2022 and 2019.2021.
Contingent Features and Cash Collateral
The Company has master netting arrangements by counterparty with respect to certain derivative financial instrument contracts. The Company may be required to post collateral in the event that a net liability position with a counterparty exceeds limits defined by contract and that vary with the Company’sCompany���s credit rating. In addition, these contracts may require a counterparty to post collateral to the Company in the event that a net receivable position with a counterparty exceeds limits defined by contract and that vary with the counterparty’s credit rating. If the Company’s or the counterparty’s credit ratings were to fall below investment grade, such counterparties or the Company would also have the right to terminate our derivative contracts, which could lead to a net payment to or from the Company for the aggregate net value by counterparty of our derivative contracts. The aggregate fair values of derivative instruments with credit-risk-related contingent features in a net liability position by counterparty were $244$1,587 million and $53$1,507 million at October 2, 2021September 30, 2023 and October 3, 2020,1, 2022, respectively.
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1918Restructuring and Impairment Charges
GoodwillContent Impairment
As a result of our strategic change in approach to content curation, we removed content from our Entertainment Direct-to-Consumer services and Intangible Asset Impairment
Prior to the Company’s reorganization in October 2020 (see Note 1 for additional information), the former Direct-to-Consumer & International segment included the International Channels reporting unit, which comprised the Company’s international television networks. Our international television networks primarily derive revenues from affiliate fees charged to multi-channel video programming distributors (i.e. cable, satellite, telecommunications and digital over-the-top service
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providers) (MVPDs)terminated certain third-party license agreements for the right to deliver our programming under multi-year licensing agreements and the sales of advertising time/space on the networks. A majority of the operations in this reporting unit were acquired in the TFCF acquisition, and therefore the fair value of these businesses approximated the carrying value at the date of the acquisition of TFCF.
The International Channels business has been negatively impacted by the COVID-19 pandemic resulting in decreased viewership and lower advertising revenue related to the availability ofuse content including the deferral of certain live sporting events. The Company’s increased focus on DTC distribution in international markets is expected to negatively impact the International Channels business as we shift the primary means of monetizing our film and television content from licensing of linear channels to distributing it on our DTC platforms. The International Channels reporting unit valuation does not include the value derived from this shift, which is reflected in other reporting units. In addition, the industry shift to DTC, including by us and many of our distributors, who are pursuing their own DTC strategies, has changed the competitive dynamics for the International Channels business and resulted in unfavorable renewal terms for certain of our distribution agreements.
Due to these circumstances, in fiscal 2020, we tested the International Channels’ goodwill and long-lived assets (including intangible assets) for impairment.
We determined the appropriate asset groups for our International Channels to be the regions in which they operate. We estimated the projected undiscounted cash flows over the remaining useful life of the significant assets of the asset group. If the carrying value of an asset group exceeds the estimated undiscounted future cash flows, an impairment is measured as the difference between the fair value of the group’s long-lived assets and the carrying value of the group’s long-lived assets.
We tested the International Channels reporting unit goodwill for impairment by comparing the fair value of the International Channels reporting unit to its carrying value.
The more significant inputs used in determining our estimate of the projected undiscounted cash flows included future revenue growth and projected margins as well as the discount rates used to calculate the present value of the future cash flows (fair value). The determination of fair value requires us to make assumptions and estimates about how market participants would value the business or asset group. Given the ongoing impacts of COVID-19, the projected cash flows and underlying assumptions are subject to greater uncertainty than normal.
In fiscal 2020, we recorded a non-cash impairment charge primarily on our MVPD agreement intangible assetsEntertainment Direct-to-Consumer platforms. We recorded charges of $1.9$2.6 billion in fiscal 2023, including a $2.0 billion write-off of produced content costs and we recorded a $3.1$0.6 billion non-cash impairment charge to fully impair the International Channels reporting unit goodwill. Theseterminate license agreements. We paid approximately $0.4 billion of cash to terminate these license agreements. The charges are recorded in “Restructuring and impairment charges” in the Consolidated Statements of Operations.Income.
AsGoodwill Impairment
In the fourth quarter of Octoberfiscal 2023, the Company performed a quantitative goodwill impairment test 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. See Note 2 2021,for additional information regarding the remaining balancequantitative goodwill impairment assessment.
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. Significant judgments and assumptions in the discounted cash flow model relate to future revenues and certain operating expenses, terminal growth rates and discount rates. 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. If we had established different reporting units or utilized different valuation methodologies or assumptions, the impairment test results would differ.
Based on our projections, the carrying amounts of our entertainment and international MVPD agreement intangible assets was $2.2 billion, primarily related to our channel businesses in Latin Americasports linear networks reporting units exceeded their fair values, and India.
TFCF Integration
In fiscal 2019, the Company implemented a restructuring and integration plan as a part of its initiative to realize cost synergies from the acquisition of TFCF, which was substantially complete as of the end of fiscal 2020. We havewe recorded restructuringnon-cash goodwill impairment charges of $1.7approximately $0.7 billion since the TFCF acquisition primarily related to the DMED segment. These charges included $1.3 billion related to severance (including employee contract terminations) and $0.3 billion of equity based compensation costs, primarily for TFCF awards that were accelerated to vest upon the closing of the TFCF acquisition. These charges are recorded in “Restructuring and impairment charges” in the Consolidated StatementsStatement of Operations.Income. Goodwill, net of impairments recorded was $77.1 billion as of September 30, 2023
The changesOther
In fiscal 2023, the Company recorded charges of $0.4 billion of severance, $0.1 billion for an impairment of an investment and $0.1 billion for exiting our businesses in restructuring reservesRussia. In fiscal 2022, the Company recorded charges of $0.2 billion, primarily due to asset impairments related to the TFCF integration for fiscal 2021, 2020 and 2019 are as follows:
Balance at September 29, 2018$— 
Additions in fiscal 2019906 
Payments in fiscal 2019(230)
Balance at September 28, 2019676 
Additions in fiscal 2020453 
Payments in fiscal 2020(772)
Balance at October 3, 2020357 
Additions in fiscal 202144 
Payments in fiscal 2021(351)
Balance at October 2, 2021$50 
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exiting our businesses in Russia. In fiscal 2021, the Company recognizedrecorded restructuring and impairment charges of $0.6$0.7 billion, primarily related to the planned closure of an animation studio and a substantial number of our Disney-branded retail stores in North America and Europe as well as severance at our parks and experiences businesses. In fiscal 2020, the Company recognized restructuring and impairment charges of $0.3 billion, primarily for severance at our parks and experiences businesses. Other restructuring and impairment charges in fiscal 2019 were not material. These charges are recordedreported in “Restructuring and impairment charges” in the Consolidated Statements of Operations.Income.
2019New Accounting Pronouncements
Accounting Pronouncements Adopted in Fiscal 20212023
Measurement of Credit Losses on Financial InstrumentsDisclosures by Business Entities about Government Assistance
In June 2016,November 2021, the FASB issued newguidance requiring annual disclosures about transactions with a government that are accounted for by analogizing to a grant or contribution accounting guidance which modifies existing guidance related tomodel, including: the measurement of credit losses on financial instruments, including trade and loan receivables. The new guidance requires the allowance for credit losses to be measured based on expected losses over the lifenature of the asset rather than incurred losses.transactions, the accounting for the transactions and the effect of the transactions on the financial statements. The Company adopted the new guidance prospectively in the firstfourth quarter of fiscal 2021 without restating prior periods by recording the impact of adoption as an adjustment to retained earnings at the beginning of fiscal 2021.2023. The adoption did not have a material impact on our financial statements.
Accounting Pronouncements Not Yet Adopted
Facilitation of the Effects of Reference Rate Reform
In March 2020, the FASB issued guidance which provides optional expedientsstatements other than additional disclosures related to content production incentives. See Notes 2 and exceptions7 for applying current GAAP to contracts, hedging relationships, and other transactions affected by the transition from the use of LIBOR to an alternative reference rate. We are currently evaluating our contracts and hedging relationships that reference LIBOR and the potential effects of adopting this new guidance. The guidance can be adopted immediately and is applicable to contracts entered into before January 1, 2023.
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued guidance which simplifies the accounting for income taxes. The guidance amends the rules for recognizing deferred taxes for investments, performing intraperiod tax allocations and calculating income taxes in interim periods. It also reduces complexity in certain areas, including the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating taxes to members of a consolidated group. The guidance is effective at the beginning of the Company’s 2022 fiscal year. The new guidance will not have a material impact on our financial statements.additional information.
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