Welcome to The Walt Disney Company Q1 FY 'seventeen Earnings Conference Call. My name is Victoria, and I will be your operator for today's call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded.
And I will now turn the call over to your host, Lowell Singer, Senior Vice President of Investor Relations. Lowell, you may begin.
Good afternoon, and welcome to The Walt Disney Company's Q1 2017 earnings call. Our press release was issued about 25 minutes ago and is available on our website at www.disney.com/investors. Today's call is also being webcast, and we will post a transcript and a copy of the webcast to our website. Joining me for today's call are Bob Iger, Disney's Chairman and Chief Executive Officer and Christine McCarthy, Senior Executive Vice President and Chief Financial Officer. Bob will lead off, followed by Christine, and then of course, we'll be happy to take your questions.
So with that, let me turn
the call over to Bob, and we can get started. Thanks, Lowell, and good afternoon. We're very happy with our results for the quarter and we continue to be extremely confident in our ability to drive significant long term growth. Coming off an historic performance last year, including more than $7,500,000,000 in global box office, we're thrilled with the continued success of our studio in the Q1. All three films released by the studio in the quarter were global hits.
Marvel's Doctor Strange became the latest addition to Marvel Studios winning streak, generating $670,000,000 in global box office and sending us into the new fiscal year with some great momentum. We followed that success with Disney Animation's newest musical masterpiece Moana, which has achieved total worldwide box office of $555,000,000 along with 2 Oscar nominations for outstanding animated feature and original song. We're incredibly proud of this movie as well as Zootopia, which topped $1,000,000,000 in box office and also earned an Oscar nomination. Rogue 1, our first standalone Star Wars story also connected with audiences in a big way. It's our first $1,000,000,000 movie of the fiscal year as well as our 4th $1,000,000,000 release in calendar 2016 further demonstrating the incredible strength of this franchise.
Star Wars: The Last Jedi, otherwise known as Episode VIII will open in December and I just saw it last week, the great next chapter in the iconic Skywalker family saga. It will be followed by our Han Solo origin film, which is just going into production. Our studio's next release is our live action Beauty and the Beast premiering in March. The anticipation and excitement around this movie is astonishing. The first trailer drew more than 127,000,000 online views in the first 24 hours, breaking the record held by Star Wars: The Force Awakens.
And the trailer we released last week also generated more than 100,000,000 views. The 1st week of ticket presales has also been very strong reminiscent of presales for some of our biggest Marvel movies. After Beauty, we have Marvel's Guardians of the Galaxy Volume 2 opening in May. It's another great Marvel film with even more of the fantastic action and humor that made the original Guardians such a breakout hit. We'll follow that with another grand adventure, Pirates of the Dead Men Tell No Tales in a new story that captures everything audiences have always loved about this franchise.
Pixar's Cars 3 will give fans an original twist on the world of Cars this summer with a brand new story and some great new characters. And in November, we'll release Coco, another brand new new Hulk. One of our biggest success stories in 2016 came from Parks and Resorts with the opening of Shanghai Disneyland. The park recently proved to be enormously popular with guests celebrating the Chinese New Year operating at maximum capacity for virtually the entire holiday period. With the year's 2 peak seasons now behind us, we welcomed more than 7,000,000 guests to date.
We're thrilled with this performance and could potentially exceed 10,000,000 in total attendance by the resort's 1st anniversary. The park's rapidly growing popularity, its extremely high levels of guest satisfaction and the huge attendance during Chinese New Year add to our confidence in the resort's ability to reach breakeven in this fiscal year. In our domestic parks, this year we'll open a great addition to Disney's Animal Kingdom with a brand new land called Pandora, The World of Avatar. Our Imagineers have brought the breathtaking world of Pandora to life through astonishing feats of artistic genius and groundbreaking engineering. The result is an exquisite environment with phenomenal attractions.
And today, I'm and
Walt
Disney World, both and Walt Disney World, both of which will open in calendar 2019. Turning to media networks. We continue to address a dynamic evolving media environment. We're certainly well aware of the attention paid to ESPN. We're pleased with our implementation of strategies aimed at further strengthening ESPN's position and expanding its growth opportunities.
As outlined in our last call, these include launching ESPN on all new multichannel services, including Sling TV, PlayStation Vue, DIRECTV NOW and the soon to be launched Hulu. We're also continuing to invest in ESPN's industry leading programming. And we're improving and growing ESPN's presence on mobile devices with new and compelling apps. We're also investing in technology platforms to enable direct to consumer products. To that end, I spent time with the team at BAMTech recently and I'm very impressed and excited about the various initiatives being implemented to grow that business and to leverage its capabilities for our media businesses.
Great content will continue to drive opportunities and growth in this changing environment. And given our incredible portfolio of high quality in demand branded content, we're extremely well positioned to strategically and successfully navigate the dynamic marketplace and generate value for our consumers and our shareholders over the long term. I'm going to let Christine take you through the details of the quarter and then we'll be happy to take your questions. Christine?
Thanks, Bob, and good afternoon, everyone. Earnings per share for the Q1 of fiscal 2017 were $1.55 which, when adjusted for items affecting comparability, represents a decline of only 5% compared to Q1 last year. I'll remind you last year's Q1 was the best quarter in the company's history. The year over year decline in earnings per share reflects this difficult comparison, especially in our Studio and Consumer Products businesses due to the strength of Star Wars and to a lesser extent Frozen during the Q1 last year. Parks and Resorts had another strong quarter with 6% revenue growth and operating income growth of 13%, driven by increases in our domestic and international businesses.
Results in the quarter include unfavorable impacts totaling about $70,000,000 due to Hurricane Matthew, which disrupted operations at Walt Disney World and resulted in the closure of our parks for about a day and a half, and the impact of 1 week of the winter holiday period falling in Q2 this year, whereas the entire holiday period fell in Q1 last year. We estimate these two items had an adverse impact on the year over year growth in operating income of about 7 percentage points. Growth at our domestic operations was driven primarily by higher spending across our businesses, partially offset by lower attendance. Attendance at our domestic parks was down 5% in the quarter, reflecting a number of comparability factors. Last year's 60th anniversary celebration at Disneyland Resort, the impact of Hurricane Matthew and the shift in timing of the winter holiday.
We estimate these factors had an adverse impact on the year over year change in attendance of about 4 percentage points. We continued to see very healthy spending at our domestic parks. Per capita spending was up 7 on higher admissions and food and beverage spending. Per room spending at our domestic hotels was up 3% and occupancy was down modestly to 91%. So far this quarter, domestic resort reservations are comparable to prior year levels, while booked rates are up 2%.
Growth at our international parks was due to the opening of Shanghai Disney Resort in Q3 of fiscal 2016 and improved results at both Disneyland Paris and Hong Kong Disneyland. Shanghai Disney Resort is off to a strong start. We continue to make great progress, and as Bob discussed, we are very encouraged by what we're seeing there so far. We feel great about the performance of our Parks business during the Q1. Segment operating margin was 24.4%, up 150 basis points over last year and represents the highest margin for the segment since we began consolidating our international parks in 2,004.
And that's despite an estimated 100 basis point headwind due to the impact of Hurricane Matthew and the timing of the winter holiday. At Media Networks, operating income was down 4% in the quarter as growth in broadcasting was more than offset by a decline in cable. Lower cable results were driven by a decline at ESPN, where higher affiliate revenue was more than offset by an increase in programming and production expenses and a decrease in advertising revenue. Growth in ESPN's programming costs was due to our new NBA agreement and contractual rate increases for NFL programming, partially offset by lower programming costs for college football due to the timing of the college football play off relative to our fiscal calendar. As you know, this year ESPN aired only 3 of the New Year's 6 bowl games during the Q1, whereas it aired all 6 games during the Q1 last year.
ESPN's ad revenue was down 7% in the quarter. The majority of the decline was due to the shift of the 3 bowl games out of Q1. So far this quarter, ESPN's ad sales are pacing up compared to last year. At Broadcasting, growth in operating income reflected higher affiliate revenue and lower programming costs at the ABC Network. 1st quarter ad revenue across our broadcasting business was roughly comparable to last year, as higher
ad revenue at our own TV
stations was offset by lower ad revenue at the ABC Network, where higher pricing was more than offset by a decrease in impressions. Quarter to date, prime time scatter pricing at the ABC network is running over 25% above upfront levels. Total Media Networks affiliate revenue was up 4% in the quarter due to growth at both cable and broadcasting as growth in rates was partially offset by lower subscribers and foreign exchange. At Consumer Products and Interactive Media, as anticipated, operating income was down meaningfully in the Q1 given the record breaking quarter the segment delivered last year. The decline in operating income was driven by lower results in our merchandise licensing business as sales of Rogue 1, Binding Dory and Moana merchandise were more than offset by very strong sales of Star Wars and Frozen merchandise in Q1 last year.
The strength of Star Wars last year also created a tough comp in our games businesses. During Q1, given the success of Star Wars Battlefront last year and no comparable title this year. Our studio had another outstanding quarter and continues to deliver on both financial and creative fronts. While operating income was lower in the Q1 compared to last year, keep in mind, Q1 fiscal 2016 was the best quarter ever for the studio and Q1 of fiscal 2017 was the 2nd best quarter ever with $842,000,000 in operating income. The decline in operating income was due to lower results in our home entertainment and theatrical businesses.
Lower home entertainment results reflected strong catalog unit sales in Q1 last year, particularly the classic Star Wars titles and Frozen compared to Q1 this year. On the theatrical side, Q1 results benefited from the strong performance of Rogue 1: A Star Wars Story, but that was more than offset by the exceptional performance of Star Wars: The Force Awakens in the Q1 last year. During the Q1, we repurchased about 15,000,000 shares for about $1,500,000,000 Fiscal year to date, we've repurchased 22,200,000 shares for approximately $2,200,000,000 And as we've mentioned previously, we intend to repurchase between $7,000,000,000 $8,000,000,000 for the year. As we look to the Q2, there are a couple of comparability items I want to highlight. At ESPN, the shift of the 3 college football playoff games into Q2 will drive an increase in ESPN's programming costs ESPN's programming costs compared to Q2 last year.
Additionally, ESPN's programming costs will continue to reflect the 1st year of its new the Q2 results will benefit from 1 week of the winter holiday shifting into the quarter. However, the timing of the Easter holiday will negatively impact Q2 results as this holiday period will fall entirely in Q3 this year, where as it fell in Q2 last year. We estimate these two shifts will have a net adverse impact of about $50,000,000 to operating income. And at the studio, while we are incredibly excited for the release of Beauty and the Beast, I want to remind everyone it will be our only release in the quarter. So studio results will once again face a tough comparison to a very strong Q2 last year, which benefited from the strength of Star Wars: The Force Awakens and the release of Zootopia.
Overall, we are pleased with our Q1 results and with the start of the fiscal year. And with that, I'll now turn the call over to Lowell for Q and
A. Okay, Christine, thanks a lot. Operator, we're ready for the first question.
Thank you. Our first question comes from Alexia Quadrani from JPMorgan. Please go ahead. Thank you. How should
we think about the outlook for the consumer products business this year given that what you know about the studio slate or what we know about the studio slate? I mean, it looks very favorable from what we can see with the Prince's character of Beauty and the Beast and Cars and Spider Man. I guess any other growth drivers such as higher royalty rates or additional international territories that you see as opportunities? And any color on that would be great.
Alexia, it's Christine. I think the best way to look at consumer products is we had given you sort of the outlook that they were going be down for this 1st fiscal quarter and they in fact were. But we expected them to have growth for the year, but most of that will be back end loaded, and that is the case. So you should expect growth year over year for the second half, both third and fourth quarter. The properties that are really going to contribute to that are going to be Cars and Spider Man, and we expect that to be a strong back half of the year for consumer products.
And just a bigger picture question I was going
to ask on the studio side. You've had such a stellar performance, obviously, so many home runs, particularly when some your peers have had a bit of a bit of a slump. I guess with the slate ahead, I don't want to jinx it, looks equally impressive. I guess what gives us the confidence that this is more reflective of the assets you own and the franchise that you've invested in versus sort of a positive sort of streak that you're going through?
Well, I think if you look at the record, Alexia, since we bought Pixar, which was a decade ago, we've made about 30 films under Pixar and Disney Animation because John Lassner and Ed Catmull took over that and then Marvel and then Star Wars or Lucasfilm. And those films averaged about $900,000,000 in global box office. So we're not I'm sorry, about $800,000,000 in global box office. So we don't think that there's a coincidence to this. And while, obviously, because we're dealing in a creative business, there's risk associated, we think that we've done a really great job of derisking the business.
Then that's a combination of the franchises we have and obviously the stories that we're mining, but also the talent that we have at the company or that we are attracting to the company to make those films. And we have a lot of visibility into the early part of the next decade of the film slate, and we feel great about the projects that have been chosen and the progress that has been made on them.
Our next question comes from Michael Nathanson from MoffettNathanson. Please go ahead.
Thanks. I have 2. First, Bob and then Christine. Bob, I wonder if you could comment on the story that was in the journal yesterday that you may have seen your contract past 2018?
What's the second question? All right. I'll I'll hand before you ask the second one.
Thank you.
When I targeted 2018 as the year that I was going to leave the company, it was a very personal decision. But I think, as you know, I've been with this company for 43 years, and I've actually been CEO for almost a dozen years. And I'm going to do what's in the best interest of this company, which is something the Board's clearly going to help determine. And while I'm confident that my successor is going to be chosen on a timely basis and chosen well, if it's in the best interest of the company for me to extend my term, I'm open to that. There's nothing specific to announce at this point.
We have a good strong succession process underway. The Board's engaged in this, as I've said before, on absence of any announcements or specifics about it should in no way indicate otherwise.
Okay. Thanks, Bob. And then for Christine, in the press release, it said the parks and resort costs were flat in the quarter, and it looks like there are some cost initiatives. Can you tell us what you guys have done to control cost of the parks? And how sustainable is low single digit cost inflation this year?
Yes. The parks, as you saw the margin in my comments, 24.4% operating margin. That's not only for the domestic operations, but that's for the global segment. So they've done a really good job on many fronts. And very importantly is their cost control.
That's been through ongoing cost initiatives throughout their businesses, and they've offset the normal increases that we would get through inflation and wage increases. So I think you can expect continued cost management in the parks and continued strong margins.
Okay, thanks.
Michael, thank you. Operator, next question please.
Our next question comes from Jessica Reiss Cohen from Bank of America Merrill Lynch. Please go ahead.
Thanks. Two questions. 1, the press release states that, Hulu results were in line with a year ago. Can you discuss the ramp into its launch and I guess overall expectations for this and other over the top services? And as part of that, Bob, I remember you saying that you were bullish on ESPN's outlook for subs in the last call.
Is that because of new services or more or due to better penetration by distributors like Comcast XX1?
First of all, on Hulu, as you know, they've announced they're going to launch an over the top MVPD service. They have not been specific about a date. It's in, I think private beta and will go into I guess more broad beta relatively soon. They've negotiated deals with of the product, we're encouraged by it in terms of its user interface and actually have a lot of faith in it from a technological perspective as well.
To the second part
of the question, my confidence in ESPN is due to a number of things. But clearly, the deals that we have done with new platform owners, mostly over the top, have already yielded some nice gains from those services in subs, but they're not right now being counted fully by Nielsen. We've also done a deal with Hulu and we have done a deal with another entity that has not been announced and we're in discussions with others. So it seems like we're on the cusp of some significant growth for new entrants in the multichannel marketplace. And what we like about them is they are mobile friendly or mobile first.
Their user interfaces tend to be very strong and their pricing is priced substantially lower than the expanded basic bundle that most of the MVPDs are offering. And that obviously, we think, gives us a chance to both attract consumers that may not sign up for multichannel service or hold consumers into multichannel subscriptions. And then lastly, what's really important is the deals that we've negotiated for households launched. And so these are light subs or all households launched. And so these are light packages that offer us 100% penetration from those packages.
And so we think that this wave that we're seeing is really a signal of what is to come and what the future will be. And the other thing I think is really good about this is that if we end up with a world where the $40 to $50 a month package becomes more and more popular. That means that some consumers may obviously take the savings that they may have from that and spend it on other things or save it. It also could mean they spend it on other video services and some of those services are services that we might offer. When we talk about going with our own direct to consumer product, it is possible that the first product that goes into the marketplace will be in effect add on or adjunct product that consumers can buy on top of what is their normal multichannel package.
So if the multichannel package is less expensive, consumers, could argue, could have more spendable income or more money to spend on other video services, whether it's Netflix, whether it's Hulu or whether it's other Disney owned products that we're selling direct to the consumer. I also want to say one other thing, Jessica. I mentioned it in my remarks, but I was at BAMTech a couple of weeks ago. And the quality of that technology has just blown us away. And the potential that we believe that has for us is enormous.
We have as you know, we've invested so that we own a third. We have a path to control. We are extremely excited about the prospects of what BAM is going to be doing near term. We will be launching a direct to consumer sports service sometime in probably calendar 2017, but we're also very excited about what the potential of this is long term, both for third parties who can use the product because the technological side of it is so strong in ways that are value enhancing for them as well.
Can you just address the advertising implications because you have so much direct to consumer and so much data on the users?
Well, one of the things that impressed me a lot from the BAMTech meeting that had is what the potential is for them to use data to increase or to generate great revenue from advertising. Something that we don't have today in part because a lot of our distribution comes through 3rd parties, so we don't get access to that information.
Right. Thank you.
Jessica, thank you. Operator, next question please.
Our next question comes from Benjamin Swineburne from Morgan Stanley. Please go ahead.
Thanks. Good afternoon. Bob, last quarter you talked about, both on the earnings call and I think at some conferences, kind of digital distribution, as a sort of a question mark and something that the company was thinking about strategically. You had Disney Life in the market in a few regions. You made the BAMTech investment.
But how are you thinking about the distribution side of the business strategically? Do you think there's acquisitions you need to make to get ESPN where it needs to be or an ABC long term? You find just sort of watching the market evolve and make your move from there. Any updated thoughts on the parks the parks for either you or Christine, any help in thinking about Avatar Land and sort of sizing the opportunity? I'm trying to get a sense for how big of a needle mover that might be for the business when that opens in May.
Let me I'll take the second question first on Avatar land, which as I said earlier, will open on May 27. This is a very big land with an extremely unique design and architecture because it really does make you feel as though you're in Pandora, the great world that Jim Cameron created and an e ticket attraction that is unlike any e ticket eticket add on to Animal Kingdom, which has always been a good park, but it has never been a full day experience. So we included we added within the last year a nighttime safari experience and some other entertainment. And by adding this, we're going to be turning what is our 4th gate, the last one to be opened in Orlando, into a much fuller experience, and that gives it a lot of potential. It's also the biggest new land that we've opened in Florida in a very long time, and I think that's good for the whole part the whole business down there.
And we to the extent that we can know this, we really believe that in the coming years that the interest in Avatar is only going to grow as those movies enter the marketplace. And so we can't quantify it, but we think this is big potential. The first question, we don't really believe we need to make any acquisitions to accomplish what we need to do on the digital side. In reality, we believe that the best approach to doing well in a world that is disrupted, in a world that has far more digital distribution is to have great content and tell great stories. And that includes ESPN, by the way.
So if anything, I think the most important thing for ESPN is continue to support and nurture their program offerings. 2nd to that, you have to be willing to either create or experience some disruption as we migrate from what has been a more traditionally distributed world to a more modern or more nontraditional distribution world. And some of that we're going to end up doing to ourselves, meaning we understand that there's disruption, but we believe we have to be a disruptor too. And the investment in BAM, which is significant from a variety of different perspectives, is aimed at doing just that. We have to be careful because we have existing agreements and existing relationships and a lot of value still being reaped from the traditional distribution relationships.
But I can tell you that it is our full intent to go out there aggressively with digital offerings direct to the consumer for ESPN and other Disney branded properties.
Helpful. Thank you. Thank you, Ben. Operator, next question please.
Our next question comes from Anthony DiClemente from Nomura. Please go ahead.
Anthony?
Yes, I'm here. Sorry. Thanks for taking my questions and good afternoon. So just to keep the ball rolling on the BAMTech meeting, Bob, just curious what came out of that meeting in terms of specific sports content that would be included in it. I mean, you previously mentioned you had a lot of digital rights already.
Do still think it's not necessary to go out and acquire incremental digital rights for it? And then just kind of following on to Ben's question, once it launches, do you think it would make sense for you to go and partner with a big Internet platform in order to help distribute that product? And if I may, one for Christine, please. Just Christine, on the quarter, what was the underlying affiliate fee growth rate for the cable network segment? And then also you mentioned the timing shifts of the college football games in the quarter for the CableNet segment.
What was the underlying ad growth or decline if you sort of normalize out those timing shifts in the quarter? Thank you.
Wow, okay. Multipronged question. BAMTech has already licensed a number of digital rights to sporting events. And we have licensed at ESPN a number of them. So we bring to the table a fair amount of rights that can be added to the rights that they have.
And I we're a minority shareholder right now, so I want to be careful. But our strong senses as partners and as part owners is that we're going to continue to go out on behalf of the entity license more content to that entity. But they're going to start off with, I think, a wide array of pretty attractive sports that come from both what they've licensed and what we've licensed. When you see it all together and some of the early, I'll call it, concepts, you realize that there's a lot there and a lot more than anyone else has. So I actually and I think that there's there will be continued opportunities.
In terms of distribution, do they need to enter into an agreement with a 3rd party entrant? I'll leave that to BAM ultimately to address maybe at a time that they are ready to launch the product. I don't think it would be appropriate for me to speak on their behalf.
Okay.
Anthony, on your drivers of the affiliate revenue in the quarter, as I said in my comments, the affiliate revenue growth was 4%. That was rates impacted it by 7%. Subs were a 2 point drag and FX was a 1 point drag, and that's for Media Networks overall. And these trends are consistent with the trends that we've had in recent quarters. So it's really no change.
On advertising, as it relates to ESPN, the ad revenue was down 7% in the quarter. The biggest driver of that was the shift in the college football playoff gains 3 into 2Q. But you also had some ratings decline in SportsCenter, and that was in part due to fewer programming hours for SportsCenter. And also, when we talked about this last conference call for earnings, was declines in Monday night football ratings. But when you look at 2Q pacings, they're up even when you adjust for the Operator, next question, please.
Our
next question
comes from Todd Operator, next question please.
Our next question comes from Todd Juenger from Sanford Bernstein. Please go ahead.
Hi, thanks. I'll try to keep it to one for Bob and one for Christine. Bob, I would love your current thoughts on the business of kids television. I know there's lots of different ways to count audiences. It looks to us like conventionally defined audiences on your linear kids networks are down pretty significantly over multiple years.
You're not alone in that. It seems true for most kids networks. I just wonder as you process that and especially thinking about direct to consumer offerings, what that what you take from that in terms of thinking about that business and how that looks in the future. And then Christine, just a quick one for you. Carter and I, believe it or not, it looked like there was maybe an extra $1,000,000,000 of cash contribution to fund the pension.
So, it caused me to think it was probably worthwhile asking you, in a rising rate environment, a couple of things, like how that might affect the pension expense that rolls through the parks and its impact on margins and how it might affect cash contributions and if there's anything else we need to think about that after seeing that $1,000,000,000 number? Thanks.
First question on kids programming, you're right. We've seen a decline ratings wise in kids viewing overall on linear channels. I don't want to speak for the industry, but I'll speak for the Disney. And I think that's the result of a couple of things. 1, I'll call it a bit of an off cycle in terms of programming and 2, proliferation of kids programming in Roadster Racers that's done extremely well.
We have Roadster Racers that's done extremely well. We have a Tangled series that's hitting soon and a lot of and a product cycle over the next year to 2 years that we feel great about. And so we think that the ratings are likely to improve with the addition of some new shows that we think creatively are very strong. In addition to that, I think we stand a chance of doing really well no matter what the environment is from a disruption perspective because of that name Disney and what it means to the consumer. And I think that will result in a couple of things, greater demand for to license our product on other direct to consumer platforms, Hulu, Netflix, examples of that, and also the possibility of us taking Disney branded television programming direct to the consumer.
That's what we're doing in the U. K. With Disney Life. It's a combination of movies, television programming and then other Disney properties like digital books and music, for instance. We're still in what I'll call an experimental stage because we've been learning more and more about technology platform, churn rates, pricing, those sorts of things.
But we do know that we have a brand and the product behind it to be able to take it direct to consumer. So I think as we look at the future of our kids programming, we look at it in all likelihood as probably a a properties. And this is not just for the United States. I had an interesting meeting with our country manager in India recently where we own a number of channels, And he was talking about the opportunities there from Netflix and Amazon and discussing the possibility of licensing more to them. And the other thing, by the way, you have to think about is some of that licensing doesn't have to be off network.
It could be original programming as we've done with Netflix Marvel. So the demand for Disney is huge from a consumer perspective and from a distribution perspective. And again, we're seeing, I think, a world where disruption is definitely on the table and real, but it's not something that we feel is daunting in terms of the task
ahead. So Todd, to answer your question on pension, on the as you saw, the first page of our press release, on the first table, we showed cash from operations. You saw it down pretty significantly from a year ago. But if you account for that if you adjust for the $1,300,000,000 of pension contribution that we made in the quarter, it more than offsets that decline. You mentioned rising rates, and rising rates will definitely benefit our pension going forward.
In our 10 Q, we I believe the 10 Q had explicitly stated that for each 100 basis point increase in the discount rate, our pension liability would decrease by about $2,400,000,000 So that being said, rising rates are certainly going to benefit us. As it relates to pension expense for the year, we don't expect a change from what we had talked about in our last conference call. And after this $1,300,000,000 that we put in, in the Q1, there shouldn't be any meaningful contributions for the balance of the year.
Thanks guys. Fantastic.
Okay, Todd. Thank you. Operator, next question please.
Our next question comes from John James from Jefferies. Please go ahead.
Maybe another quick follow-up at the parks. I think you've increased ticket prices in February the last couple of years. You're going to lap the demand based pricing model in a couple of weeks. And with Pandora opening, is there maybe a near term opportunity to further increase single or multi day ticket prices?
Yes. Nothing to announce at this point, but we do take ticket pricing up on typically an annual basis, and we do so in a variety of different ways. Sometimes it's redesign of packages. Remember less important than when we take single day pricing up in California. But less important than when we take single day pricing up in California.
But we're not prepared to make any specific comments about what's in store in that regard.
Okay. Thanks. Maybe separately, I thought it was interesting that units delivered were up at ESPN and down at ABC. There's clearly been a lot of discussion around inventory across the industry. So as you look at your strategy this year, is there a flex to add units at ESPN if some of the programming or ratings are soft?
And is there a concerted effort to reduce units at ABC?
I think that the on the ABC side, the reason there weren't as many units sold is that they were using units for audience deficiencies or make goods. I think that in general, there's probably too much commercial interruption in television. It's a subject that has been discussed both the ESPN front and on the ABC front, and it's something we're going to continue to look at, particularly when you've got entrants in the marketplace that are offering programming that are not commercially interrupted.
Thanks, Bob.
Okay, John. Thanks. Operator, next question please.
Our next question comes from Jason Bazinet from Citi. Please go ahead.
I just had one question for Mr. Iger. As it relates to BAMTech, as a minority holder, you've got baseball that owns a stake and also the Hockey League NHL as a minority holder as well. Can you just spend a minute and talk about the strategic implication of leagues have an equity stake in that entity with you?
Well, I think the it's obvious in the sense that the equity position, particularly the one you cited, the hockey position, came with an agreement to license product to BAMTech. And so, well, I don't necessarily believe that, that means that the future will result in more owners coming in, although again, I don't want to speak for BAM. I guess that could potentially be on the table. I do want to say though that our agreement with BAM to take the stake that we took does give us a path to control and where it's premature for us to discuss whether we'll exercise that right or not. But I should say that if we were to exercise that right when we can, it's still quite possible that there will be minority shareholders if that is in a way a quid pro quo to having access to their content.
That makes sense?
It does. It does. I just can I just ask a follow-up? It seems like at some level, it fundamentally changes your relationship though with the leagues in that in the past, you would buy sports rights and then resell them to the pay TV distributors and now they see it seems like your equity incentives are more aligned in a way? Is that
Well, I think there's a yes and no to that. I think it will be both. We don't see ourselves getting out of what I'll call the linear ESPN multichannel service for a while. We do see ourselves, as I mentioned, adding through BAMTech, a direct to consumer proposition that will in all likelihood include a lot of sports and sports from some entities that we license content from for ESPN. ESPN.
Baseball is actually one example of that. I don't think it fundamentally changes the relationship. I think I mean, I guess, in a way, it creates a different form of partnership. But I don't think that's necessarily a bad thing.
No, no, I think it's a good thing. Thank you very much.
All right, Jason. Thank you. Operator, next question please.
Our next question comes from David Miller from Loop Capital Markets. Please go ahead.
Yes. Hey, Bob, just another quick question on the ESPN direct to consumer offering using the BAMTech technology. I would assume that you guys will probably have this out by maybe like July or August or so. So any kind of hint on timing would be great. And then how do you see pricing this?
Do you see kind of pricing it like CBS All Access and doing what they've done? Or do you see perhaps pricing it lower than that and taking sort of a Starbucks point of view of pricing it low and then getting people hooked into it and then raising the price later? Any thoughts on pricing would be helpful. Thanks so much.
Well, first of all, I am hooked on Starbucks, by the way. So maybe I guess I've fallen prey to that strategy. I just can't comment about pricing. It has been discussed with BAM, but I really can't comment about that nor can I comment about the specifics of 2017? Okay.
And then Christine, if I can just sneak 2017.
Okay. And then Christine, if I can just sneak one in, I apologize, my audio faded out. Did you happen to say in your prepared remarks where ABC scatter stands at this time in terms of scatter spreads relative to upfront? Thanks a lot.
Yes. Quarter to date scatter pricing is over 25% above upfront. Wonderful.
Okay. Thank you so much.
Thank you, David. Operator, we have time for one more question.
Okay. And our last question comes from Bryan Kraft from Deutsche Bank. Please go ahead.
Hi, thank you. I had a question on the parks. I think, Christine, you said attendance was down 1%, excluding the one timers and the timing factors. And I just want to ask, is this would you say weaker demand or is there something else at play here? And as we think about the normal attendance levels going forward, should we think about those as being flattish except for the, of course, the timing of holiday periods?
And then, I also just wanted to ask about under operating activities. There was a large use of cash in accounts payable and other liabilities. I just want to see if you could help us understand what was driving that. I don't know if that was partly the pension contribution.
Okay. On the parks, as you noted, we did have a lot comparability factors. And once again, there's a lapping of the 6 gs at the Hurricane Matthew and also the impact of the shift of holiday period. We also, as was noted previously in the call, we did introduce seasonal pricing a year ago, and we are seeing some shift in some of our demand to try to smooth attendance over those peak demand periods. So I don't think you should read too much into the attendance.
Over the same period that you're noting, we've also seen strong increases in per cap spending. It was up 7% in the quarter, which we gave you. And so that's more than offset the impact of the attendance decline. As Bob mentioned, Avatar. There's also Guardians of the Galaxy coming this summer at Disneyland Resort in Anaheim.
So we think these new offerings are going to stimulate future demand, and I don't think you should read too much into this one quarter. On the change in payables, that decline is related to the pension plan contribution of $1,300,000,000
Okay, great. Thank you.
And thanks again, everyone, for joining us today. Note that a reconciliation of non GAAP measures that were referred to on this call to equivalent GAAP measures can be found on our Investor Relations website. Let me also remind you that certain statements on this call may constitute forward looking statements under the securities laws. We make these statements on the basis of our views and assumptions regarding future events and business performance at the time we make them, and we do not undertake any obligation to update these statements. Forward looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results expressed or implied in light of a variety factors, including factors contained in our annual report on Form 10 ks and our other filings with the Securities and Exchange Commission.
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Thank you, ladies and gentlemen. This concludes today's call. Thank you for participating. You may now disconnect.