Robert A. Iger
Chief Executive Officer at Walt Disney
Thanks, Alexia, and good afternoon. In the eight months since I returned, we've undertaken an unprecedented transformation at Disney, and this quarter's earnings reflect some of what we've accomplished. First, the company was completely restructured, restoring creativity to the center of our business. We made important management changes and efficiency improvements to create a more cost-effective, coordinated, and streamlined approach to our operations. We aggressively reduced costs across the enterprise and we're on track to exceed our initial goal of $5.5 billion in savings. And perhaps most importantly, we've improved our DTC operating income by roughly $1 billion dollars in just three quarters as we continue to work toward achieving DTC profitability by the end of fiscal 2024.
I'm pleased with how much we've gotten done in such a short period of time, but I also know we have a lot more to do. Before I turn the call over to Kevin Lansberry, our Interim CFO, I'd like to elaborate on the state of our company and the transformative work we are still undertaking. As I've said before, our progress will not always be linear. But despite near-term headwinds, I'm incredibly confident in Disney's long-term trajectory because of the work we've done, the team we have in place, and because of Disney's core intellectual property foundation. Moving forward, I believe three businesses will drive the greatest growth and value creation over the next five years. They are our film studios, our parks business, and streaming, all of which are inextricably linked to our brands and franchises.
Looking to Disney entertainment studios, we're focused on improving the quality of our films and on better economics, not just reducing the number of titles we release, but also the cost per title. And we're maximizing the full impact of our titles by embracing the multiple distribution windows at our disposal, enabling consumers to access our content in multiple ways. For example, Avatar: The Way of Water, which is now the third-highest grossing film of all time, is also on track to be the biggest-ever electronic home video release for Disney domestically. Certain other titles will be sold in the download-to-own window as well.
By focusing on big franchises and tempo films, we're able to generate interest in our existing library. For example, we're seeing tremendous engagement on Disney+ with the previous Guardians of the Galaxy films, the original Avatar, and the first four Indiana Jones movies. But the value of our Disney entertainment studios and the reason this will be a key growth business for us extends far beyond our library and new releases. What sets Disney apart are the numerous ways we're able to reach consumers with the stories and characters they love, including in our parks and resorts. We'll be opening new Frozen themed lands at Hong Kong Disneyland and Walt Disney Studios Park in Paris, as well as the Zootopia themed land at Shanghai Disney Resort. And later down the road, we will be bringing in Avatar experience to Disneyland reinforcing the unrivaled worldwide appeal of our brands and franchises. Our parks inexperienced segment overall has had an impressive streak and will continue to be a key growth engine for the company even as we navigate the cycles that come with operating this business.
Our Cruise Line in particular showed strong revenue and operating income growth in the third quarter. Current Q4 booked occupancy for our existing fleet of five ships is at 98%, and we will be expanding our fleet by adding two more ships in fiscal '25 and another in fiscal '26, nearly doubling our worldwide capacity. In addition to our Cruise Line, strong segment results for the quarter were driven by solid performance at our international parks and we also saw continued strength at Disneyland Resort. Our Asia parks have been doing exceptionally well, reinforcing a clear opportunity for continued growth. Both Shanghai Disney Resort and Hong Kong Disneyland have experienced stronger-than-expected recoveries from the pandemic. And in Q3, they both grew meaningfully in revenue, operating income, and attendance. We saw softer performance at Walt Disney World from the prior year, coming off our highly successful 50th anniversary celebration.
Also, as post-COVID pent-up demand continues to level off in Florida, local tax data shows evidence of some softening in several major Florida tourism markets. And the strong dollar is expected to continue to helping down international visitation to the state. However, Walt Disney World is still performing well-above pre-COVID levels, 21% higher in revenue and 29% higher in operating income compared to fiscal 2019, adjusting for Starcruiser accelerated depreciation. And following a number of recent changes we've implemented, we continue to see positive guest experience ratings in our theme parks, including Walt Disney World and positive indicators for guests looking to book future visits. This includes strong demand for our newly returned annual passes. We're making numerous investments globally to grow our parks business over the next five years, and I'm very optimistic about the future of this business over the long term.
The third area that will drive growth and value creation for Disney is our direct-to-consumer business. When you consider our path to profitability in streaming, it's important to remember where we started and how we've adapted based on what we've learned. We overachieved with massive subscriber growth for Disney+ out of the gate, and we leaned into a spending level to fuel subscriber growth which had been the key measure of success for many. All of this happened while we were still determining the right strategies for pricing, marketing, content, and specific international market investments. However, since my return, we've reset the whole business around economics designed to deliver significant sustained profitability. We're prioritizing the strength of our brands and franchises, we're rationalizing the volume of content we make, what we spend, and what markets we invest in. We're deploying the technology necessary to both improve the user experience as well as the economics of this business. We're harnessing windowing opportunities, perfecting our pricing and marketing strategies, maximizing our enormous advertising potential, and we're making extensive Hulu content available to bundle subscribers via Disney+.
As I announced last quarter, we're moving closer toward a more unified one-app experienced domestically to pair high quality general entertainment with content from our popular brands and franchises for our bundled subscribers. It's a formula for success that we have already proven in international markets with our Star offering on Disney+.
We see a future where consumers can access even more of the company's streaming content all in one place, resulting in higher user engagement, lower churn, and greater opportunities for advertisers. We're also very optimistic about the long-term advertising potential of this business. Even amid a challenging ad market, this quarter we began seeing early signs of improvement, and I'm pleased to announce that as of the end of Q3, we've signed up 3.3 million subscribers to our ad-supported Disney+ options. And since its inception, 40% of new Disney+ subscribers are choosing an ad-supported product.
On our pricing strategy, this year alone, we've raised prices in nearly 50 countries around the world to better reflect the value of our product offerings, and the impact on churn and retention has outperformed our expectations. Later today, we will release details regarding upcoming streaming price increases, and I'm pleased to share that our ad-supported Disney+ subscription offerings will become available in Canada and in select markets across Europe beginning November 1, while a new ad-free bundled subscription plan, featuring Disney+ and Hulu, will be available in the U.S. on September 6. Maintaining access to our content for as broadened audience as possible is top of mind for us, which is why pricing for our stand-alone ad-supported Disney+ and Hulu offerings will remain unchanged.
I'd also like to note that we are actively exploring ways to address account sharing and the best options for paying subscribers to share their accounts with friends and family. Later this year, we will begin to update our subscriber agreements with additional terms on our sharing policies, and we will roll out tactics to drive monetization sometime in 2024.
Our DTC ambitions also extend to our sports business, taking our ESPN flagship channels direct-to-consumer is not a matter of if, but when. And the team is hard at work looking at all components of this decision, including pricing and timing. It's interesting to note that ratings continue to increase on ESPN's main linear channel even as cord-cutting has accelerated. This rating strength creates tremendous advertising potential across the board. Our total domestic sports advertising revenue for linear and addressable is up 10% versus the prior year adjusted for comparability, which speaks to the fact that the sports business stands tall and remains a good value proposition. We believe in the power of sports and the unique ability to convene and engage audiences. Yesterday, it was announced that ESPN has entered into an exclusive licensing arrangement with Penn Entertainment to further extend the ESPN brand into the growing sports betting marketplace. This licensing deal will offer a compelling new experience for sports fans that will enhance consumer engagement. We're excited to offer this to the many fans who have long been asking for it. Overall, we're considering potential strategic partnerships for ESPN looking at distribution, technology, marketing, and content opportunities where we retain control of ESPN. We received notable interest from many different entities and we look forward to sharing more details at a later date when we're further along in this process.
Looking to our broader linear business. While linear remains highly profitable for Disney today, the trends being fueled by cord-cutting are unmistakable. And as I've stated before, we're thinking expansively and considering a variety of strategic options. However, we're fortunate to have an array of extremely productive television studios that we will rely on to continue providing exceptional content for audiences well into the future. And speaking of the content we create, I'd like to say a few words about the ongoing strikes. Nothing is more important to this company than its relationships with the creative community. And that includes actors, writers, animators, directors, and producers. I have deep respect and appreciation for all those who are vital to the extraordinary creative engine that drives this company and our industry. And it is my fervent hope that we quickly find solutions to the issues that have kept us apart these past few months, and I'm personally committed to working to achieve this result.
In closing, I returned to Disney in November and have agreed to stay on longer because there is more to accomplish before our transformation is complete, and because I want to ensure a successful transition for my successor. In spite of a challenging environment in the near term, I'm overwhelmingly bullish about Disney's future for the reasons I shared at the beginning of this call. The work we've done over these past eight months are a core foundation of creative excellence and iconic brands and franchises, and because of the unrivaled talent we have at every level here at Disney. I have the highest confidence in our leadership team today and I'm enormously proud of the ways each of them is helping steer the company through this moment of great change.
And with that, I'll turn things over to Kevin.
