Everything That Disney Just Revealed about Its Business
Every quarter, Disney’s top executives hold a conference call to detail the status of the company’s core businesses. The most recent call seemed especially crucial due to the impending debut of Disney+, the new streaming service.
Disney CEO Robert Iger and his team went into detail about their expectations while also elaborating on some other aspects of the company. Many of them provide a road map for the short- and long-term future of your favorite business. Here’s everything Iger just revealed about the current state of Disney.
Disney Park News
You’re most interested in Disney’s theme parks. So, I’ll start there. The news is mostly status quo at Disney’s American parks, which somehow feels like a loss to certain analysts. Iger indicated that per-room spending improved two percent for fiscal 2019, while the occupancy rate of 85 percent mirrored previous year totals.
Similarly, attendance was mostly static year-over-year. That aspect is somewhat problematic. Park officials had projected significant attendance increases due to the introduction of Star Wars: Galaxy’s Edge. While that didn’t happen, per-capita spending improved by five percent among park guests.
These spending increases combined with Disney Vacation Club successes aided Disney’s bottom line. Operating income in the parks division went up by a stellar 13 percent. Disney warns that operating expenses for Star Wars Land will somewhat counterbalance future park revenue increases.
All of this gobbledygook really means something simple. Galaxy’s Edge didn’t cause an attendance surge at Disney’s American theme parks. However, it did lead to additional consumer spending, enough to drive park revenue growth by double digits. Even though Disney isn’t happy with the shaky first six months of Star Wars Land, they’ve still made a lot of money on it.
One other interesting tidbit from the Parks division financial report involves toy sales. Technically, consumer products fall under this umbrella, and Disney indicated that toy sales were terrific for the quarter/fiscal year. Disney’s strongest sellers right now are Toy Story and Frozen merchandise. And that statement was true before the introduction of Arendelle Aqua!
The Hong Kong Situation
While the theme park aspect of Hong Kong’s current situation seems trivial by comparison, Iger did discuss the matter. As you know, the city of Hong Kong has suffered through a tense relationship with mainland China, one that has deteriorated in recent months.
With so many combative instances on record, tourists have shied away from Hong Kong Disneyland. Iger is brutally honest about how this impacts Disney. According to him, Disneyland Paris and Shanghai Disneyland both experienced significant growth over the past quarter. The losses at Hong Kong Disneyland were substantial enough to offset said growth.
According to Iger, Hong Kong Disneyland suffered $55 million in lost revenue for the quarter. Disney projects that this loss will grow to $80 million for the current quarter. Eventually, the Hong Kong park should drop an estimated $275 million for fiscal 2020. Yes, Disney’s that grim about Hong Kong Disneyland’s attendance due to the current political climate. Again, this is just a trifle relative to what the citizens of Hong Kong face every day, though.
From Disney’s perspective, the increases at Disneyland Paris are cause for celebration, though. The park infamously dubbed EuroDisney struggled for the body of 20 years before Disney took full control in 2017. Since then, Imagineers have turned the park around, making it a dream destination for many tourists.
Disney Television Division Update
Updates on Disney’s television and movie titles were among the most fascinating insights that Iger offered. He noted that ESPN+, the sports equivalent of Disney+, has already garnered 3.4 million subscribers. He also bragged that ESPN’s acquisition of UFC fights has proven extremely lucrative, with UFC 244 doing record numbers.
Iger offered some color about his company’s plans for FX, the recently acquired cable network. The CEO indicated that Hulu will become the home for all FX streaming. He also announced that four different FX series will launch in 2020, including Cate Blanchett’s Mrs. America and a Kate Mara series called A Teacher. The Dude himself, Jeff Bridges, will even anchor a series fittingly named Old Man.
FX matters a great deal to Disney due to its critical acclaim. Iger reminded the audience that the channel has earned 277 Emmy nominations and 157 Emmy victories over the past five years. That’s very strong.
Speaking of Hulu, Iger confirmed that the service has 28.5 paying subscribers. This number is interesting because it should increase significantly in the coming days. Disney’s announced a $12.99 super package for its three streaming services.
For that one low price, guests will receive ESPN+, Disney+, and the commercial version of Hulu. Don’t be surprised if/when Hulu’s subscriber total soars by several million customers. For $13, customers will have a viable skinny bundle replacement for cable television. It’ll include almost all ESPN broadcasting, the Disney+ library, and Hulu’s network/cable television programs. That package may become the “killer app” for Disney+ in the war with Netflix.
Disney Movie Division Update
Unfortunately, the movie studio news was a bit of a mixed bag. Okay, I’m mainly joking. Disney crushed movie box office with releases like Toy Story 4, Aladdin, and The Lion King. These films led to a historic fiscal year, the best ever for any movie studio.
The (minor) frustration stems from Fox films that Disney gained during the acquisition. Most of these titles, well, bombed miserably. Disney was left holding the bag on box office duds like The Art of Racing in the Rain and Dark Phoenix. Brad Pitt’s Ad Astra also disappointed relative to its budget.
Disney was on the hook for $120 million from these losses, an unexpected turn of events. By Iger’s account, the difference was $100 million from the previous year. Fox’s movie division executives just quit trying once it became clear that they would be working for Disney.
Despite the Fox frustrations, Disney’s film division still increased operating income by 79 percent. Folks, that’s a seemingly impossible feat that speaks to the strength of Disney’s summer movie lineup.
Disney’s highly anticipated streaming service, Disney+, launched yesterday. Iger excitedly relayed the company’s plans and vision for the app. He reconfirmed earlier comments that the appeal of the Fox acquisition came down to its components.
National Geographic, The Simpsons, and Avatar add depth to Disney’s own offerings. To accentuate these strengths, Disney+ will allow downloads of the content library. Yes, you can store your favorite Disney movies and television shows on your phone/tablet! This sort of offline viewing means that you’ll always have Disney content with you wherever you are.
Iger snuck in one reveal that the media hasn’t caught yet. While discussing the trial launch in The Netherlands, he acknowledged that this country doesn’t have access to the full library. Instead, the service will come with a few surprises when it debuts in the Americas.
Speaking of which, Iger revealed new launch dates for several countries. Australia and New Zealand must wait a week before the service debuts there on November 19th. European Disney fans are in for a much longer wait. England, France, Germany, Italy, Spain, and other countries won’t receive the service until March 31st. To be fair, that’s only four more months, but it will feel like forever.
As far as content goes, Disney+ will feature 500+ movies and 7,500 television episodes when it launches. By the end of the first year, more than 45 exclusive movies and television shows will play on Disney+. Ten of them are available this week…and yes, The Mandalorian is one of those ten!
Disney has promised that the company will produce 60 original series and movies annually by the end of year five. It’s going to evolve into the primary source for all things Disney.
Also, I should mention that Disney won one final battle this week. The Amazon Fire will feature the Disney+ app. Amazon really, really didn’t want to do this, as their Prime Video service represents direct competition to Disney. However, Disney had all of the negotiating power here since their merchandise represents a significant, important chunk of all Amazon sales.
So, Amazon eventually relented after stating for months that Disney wouldn’t get its way. Spoiler: Disney always gets its way.