Everything We Just Learned about Disney
Disney has started 2020 with a bang. While the coronavirus has disrupted some plans, the overall business has never looked stronger. Disney just enjoyed record earnings for the fiscal first quarter, and CEO Robert Iger held a conference call to explain everything that went right. Here’s everything we just learned about Disney.
About the Parks
The holiday season proved immensely successful for Disney. The company indicated that operating income for the entire business increased nine percent thanks in large part to the parks.
Revenue increased by 10 percent, as guests spent substantially more over the holidays. Attendance also increased somewhat, up two percent year-over-year. So, price increases from surge pricing didn’t deter anyone.
Meanwhile, guests spent four percent more per room, while occupancy reached a spectacular level of 92 percent. Disney aims for 90 each quarter, but it’s extremely rare for the occupancy rate to reach those levels.
We do know that merchandising increased mightily across the board. Disney sold 25 percent more from its licensing, as new Frozen and Star Wars movies excited guests enough to buy toys.
Yes, a certain baby called The Child helped a lot in this area. Disney officials stated that more Baby Yoda gear is in the offing, as audiences have an insatiable appetite for the little tyke.
Disney+ Is a Juggernaut
Yesterday, I posted a quick article about Disney+ subscriber totals. By the time the story went live, it was already outdated. During the conference call, Iger revealed that Disney+ claimed 26.5 million subscribers by the end of the quarter.
However, Iger added an update. You see, the quarter ended in late-December. Disney didn’t announce results until more than a month afterward. By this point, Disney+ had gained another 2.1 million subscribers.
Yes, 28.6 million people currently pay for Disney+ as of this past Monday, February 1st. I don’t want to get too far ahead of myself here, but I will throw out some numbers for you. At a pace of two million new subscribers per month, Disney+ would hit 50 million by the end of 2020.
Do I think that will happen? Probably not. But, I can’t rule it out since The Falcon and the Winter Soldier debuts in August. A Marvel television show will drive a massive number of subscribers.
Also, I’ll add two other data points. When Disney suggests that Hulu claims 30.7 million subscribers, the company’s including the Live TV service. The regular Hulu version has 27.2 million paying customers. So, Disney+ has already overtaken its sibling.
On the downside, Disney has indicated that growth should remain static for a while. The company doesn’t project anything more than steady increases until August when the MCU will swoop in to save the day.
Finally, Iger mentioned that 28.6 million customers were the company’s year-five projection for Disney+. Disney already reached that milestone in 11 weeks!
Popular Disney+ Content
Disney’s staff recounted some of the most popular programs on Disney+. Those of you who pay attention to the Trending Now section won’t be surprised by any of these entries.
Still, Iger lauded The Mandalorian and The Simpsons, which have consistently claimed top-five spots since their debuts. He also mentioned Frozen, Moana, and the 2019 version of The Lion King along with television series like Hannah Montana and The Suite Life of Zack & Cody.
One interesting stat is that The Mandalorian didn’t function as a standalone offering. Subscribers who watched this program weren’t there only for Star Wars. Roughly 65 percent of them tore through at least 10 other Disney+ programs, too. So, it wasn’t a “buy then quit” scenario as some had feared.
Overall, Disney’s streaming services have bright futures. When Disney+ launches in India on March 29th, the Hotstar system that’s shattered records will rebrand. Hotstar will become Disney+, guaranteeing Disney millions of new subscribers.
Also, ESPN did remarkably well this quarter. The service claimed 6.6 million paying customers by the end of 2019. Then, the Connor McGregor UFC fight persuaded more than 500,000 people to buy in early 2020. So, ESPN+ now has 7.6 million subscribers, and half of that growth came from one prizefight.
The other staggering stat here involves Disney+. Disney indicated that for every $6.99 subscription, the company earns $5.56. In other words, when you hear customer numbers, Disney’s revenue is 80 percent of that number…each month. This thing’s a juggernaut, and Disney will maximize its profit because of vertical integration.
The Coronavirus Concern
Everyone involved with the conference call acknowledged the obvious. A Black Swan event will hurt Disney financially for the foreseeable future. Coronavirus has forced the closures of Hong Kong Disneyland and Shanghai Disneyland. Both parks could remain out of business for several weeks.
In such a scenario, Disney’s out a lot of money. Think about the situation from this perspective. Disney operates six theme parks around the world. Their Parks division just earned $7.4 billion for the quarter. One-third of those parks will face budget shortfalls during the fiscal second quarter of 2020.
Disney’s CFO, Christine McCarthy, provided details on the situation. She suggested that the company could face $145 million in losses over the situation. I’ll be blunt; I think that’s low. But I hope that she’s right, and I’m wrong! For what it’s worth, McCarthy indicated that she’s based her calculations on two months of park closures.
Movies and Television Info
Disney understandably bragged a bit about its historic 2019 box office campaign. The film studio earned $11 billion, absolutely destroying the previous record of $7.6 billion. In fact, seven films alone were enough to best that total, as Disney became the first company ever to release seven billion-dollar movies in the same calendar year.
The news was grim for the Fox titles in the queue. Disney wrote off $50 million in losses due to the tragic Fox film content that they acquired in their $71 billion transaction. Heads have already rolled at Fox, and Disney’s gone so far as to remove the name from the film studio. It’s now called 20th Century Studios, which still feels like something that needs a bit of revision unless I’m reading the calendar wrong.
Revenue also increased in the Media Networks division. Executives stressed that the explanation here was more about quantity than quality. The new Fox assets bring in a lot of money, one of the reasons why the deal proved so attractive to Iger.
However, the anchor channel, ESPN, experienced an up-and-down quarter. Revenue dropped due to a weaker slate of live football and basketball programming, especially on the college level. The management team did take satisfaction in the improved ratings for Monday Night Football, though.
So, despite all of the epidemic concerns plaguing Disney’s Chinese theme parks right now, business is hotter than it’s ever been. And the management team knows it.