Disney Just Won Its Press Conference. Here’s How.
Every three months, Disney executives hold a conference call as part of the fiscal quarter earnings report.
Much of the discussion involves corporate gibberish that’s not interesting to casual Disney fans. And that’s why you read MickeyBlog!
We listen to the entire conference call and take notes so that we can pass along the best tidbits to you!
In this particular outing, the deck was stacked against the company.
Somehow, Disney just did the impossible and left everyone excited for the future. Here’s how!
Disney CEO Bob Chapek started the call by announcing a return to normalcy.
The big boss mentioned the return of Disney theme parks and highlighted the sports that reside within the Walt Disney World bubble.
However, the first bombshell of the discussion came moments later. Chapek revealed that Disney+ has surpassed 60 million subscribers.
As a reminder, the most optimistic outside forecasts for this streaming service called for 60 million subscribers by 2024.
Sure, this year may feel like it’s five years long, but we’re still in the summer of 2020.
I want to mention that the folks who had the most ambitious projections for Disney+ came from inside the building.
Former CEO Bob Iger believes that the service could register 84-96 million subscribers by the end of 2024.
People thought Iger sounded crazy, but he appears to have lowballed his projections, if anything. As always, trust Bob Iger’s expertise.
How Much Is a Lot?
What does this mean to Disney’s bottom line? CFO Christine McCarthy updated the rate of return for a Disney+ subscription.
During the first three months, Disney kept $5.56 for every $6.99 monthly subscription. Back then, I mentioned that the number would drop over time.
Well, the current rate is $5.31, which represents a better hold than I would have expected.
In terms of dollars, 60 million subscribers pay roughly $420 million per month for Disney+. Meanwhile, Disney keeps a bit less than $320 million.
Now, I’m using some loose math here due to India’s service differences and the fact that some subscribers pay annually. You get the point, though.
Disney+ will earn about $3.5 billion for the company annually at its current pace. That’s found money for Disney.
So, the company has discovered a bright spot during the pandemic. The Great Shut-In has escalated the adoption rate for Disney+.
Long term, Disney will be able to pay for all its movie and television productions using only the profits from Disney+!
In fact, the good news doesn’t stop there. Chapek later added that Disney claims more than 100 million subscribers across Hulu, ESPN+, and Disney+.
I can’t say with certainty that Disney earns half a billion a month from digital subscriptions, but it’s getting there.
Chapek even threw in this tidbit:
“Both Hamilton and Black Is King have clearly shown the power of the Disney+ platform for premiering world-class content.”
Finally, Disney provided a shocking announcement about an upcoming Star streaming service internationally.
Alas, this subject matter is too difficult to explain to Americans who are unfamiliar with Star.
The important part about the project is that Disney will make a boatload of money when this service debuts.
Disney executives provided unusually sparse details about the parks this time.
In their defense, they could have just said, “What do you expect? We were closed.”
Still, we did learn a bit about Walt Disney World. The park is operating at a profit during the pandemic.
Officials had previously stated that Disney parks wouldn’t return unless they could make money. Apparently, that’s happening.
However, the news isn’t all rosy. The Florida outbreak has renewed customer concerns about park safety.
For this reason, park attendance hasn’t increased at the level Disney had expected.
Chapek stated, “We expect demand will grow when the COVID situation in Florida improves.”
Apparently, Disney surveys from early June indicated significant interest in returning to the parks in July.
Then, the pandemic worsened in Florida, reducing consumer confidence. This escalation in infection numbers led to higher cancellations than projected.
Disney’s team noted that 50 percent of guests have come from out of state, a much lower percentage than usual.
So, Walt Disney World during the summer of 2020 functions similarly to Disneyland throughout the year. The locals are sustaining the business right now.
Another interesting reveal involved capital expenditures. MickeyBlog readers know that Disney cut $900 million from the parks and resorts budget.
Chapek clarified that Disney will spend $700 million less this year than during fiscal 2019. So, the situation isn’t as grim as it sounded three months ago.
Other Disney Updates
Many of the other significant updates involve the yin and yang of pandemic-related shutdowns.
Disney’s cable channels experienced many financial ups and downs due to Coronavirus.
On the one hand, the closures ended televised sports and several television/movie productions for a while.
So, Disney was unable to capitalize financially on expected revenue generators.
However, production costs grew noticeably cheaper due to the altered nature of broadcasting.
For example, virtually all ESPN broadcasters performed from their homes during the quarter. This saved on building upkeep, utilities, and staffing needs.
Other cable/network productions couldn’t finish during the pandemic. Disney faces abnormally high production costs to bring back these programs.
After all, the company must safeguard the production crews against COVID-19. Plus, some shoots must effectively start from scratch again.
To my frustration, Disney once again chose not to update the status of its Marvel projects.
In a backhanded way, Chapek confirmed that WandaVision and The Falcon and the Winter Soldier haven’t completed filming yet.
The only Disney+ programming update Chapek offered is that season two of The Mandalorian will debut in October.
One other fascinating tidbit came in response to an analyst’s question.
You may have heard that Disney’s in terrible financial shape due to the pandemic.
Well, I’m here to alleviate you of that misconception. Disney confirmed that it’s sitting on $23 billion in cash at the moment.
The analyst sounded frustrated that Disney’s not doing more with that cash.
McCarthy, the CFO, dismissed this concern by noting how much she emphasizes liquidity.
Remember when Disney took out those multi-billion loans at the start of the pandemic? The company didn’t need that money, despite what got reported.
Instead, Disney performed the equivalent of refinancing a home mortgage at a historically low interest rate. Isn’t that brilliant?
Mulan Will Debut on Disney+ in a Month
All the way back in March, I suggested that Disney should consider releasing one of its tentpole movies digitally.
At the time, Disney+ had proven viable at a much quicker pace than analysts had predicted.
With so many people trapped at home during the pandemic, I championed the idea of debuting a movie like Mulan on Disney+.
Disney’s movie division understandably chose not to do that, assuming that society would recover quickly from the pandemic. Alas, that hasn’t happened.
Nearly five months later, movie theaters remain closed. They will reopen later in August, but nobody knows how many customers will brave the environment.
So, Disney has adjusted accordingly. For the first time ever, Disney+ will introduce Premier Access, which is a fancy way of saying you can buy Mulan this way.
To avoid confusion, let me clarify that I mean the 2020 live-action film. The animated version of Mulan is available on Disney+ already.
The $200 million 2020 production hasn’t debuted in theaters yet. However, Disney will still release it that way.
Mulan will employ a day-and-date strategy wherein you can watch the film in movie theaters, at least ones that have reopened.
Simultaneously, Disney+ customers may purchase Mulan for $29.99. These buyers will own the movie for as long as their Disney+ subscription remains valid.
More about Mulan
The ramifications of this deal are far-reaching, even though Disney claims it’s a one-off situation.
Should Mulan sell well on Disney+, it’ll establish a new standard for theatrical releases.
This sort of simultaneous release could become the new normal in the industry.
Universal Pictures recently persuaded AMC Theatres to reduce the release window down to 17 days, a landmark change for the movie industry.
Disney’s at least threatening an even more dramatic step.
With this one gesture, the company hints that it could release its movies whenever it wants.
So, this maneuver works as a purpose pitch to exhibitors like Regal, Cinemark, and AMC Theatres.
With Mulan, Disney establishes the perception that it doesn’t need anybody else, even though it does.
Simultaneously, Disney just punished a competitor. Warner Bros. recently announced a Labor Day release date for Christopher Nolan’s next film, Tenet.
Guess when Mulan’s Disney+ release date is! Yup, Disney slotted it for the same weekend.
Audiences will decide whether to watch a blockbuster Nolan movie in theaters or a Disney live-action remake at home.
The Upshot for Disney
The $29.99 price point has sparked debate online. However, I think it’s brilliant.
Other studios have offered rentals for $19.99 during the pandemic, and the films aren’t exactly classics.
We’re talking about The Hunt, The Invisible Man, and Trolls World Tour. People willingly paid that money to skip the danger of the movie theater setting.
Parents know that $29.99 represents a great deal of savings relative to watching a movie in theaters. Those get pricey for large families.
Also, Disney threatens digital movie retailers with this move, too. Mulan is apparently exclusive to Disney+, meaning you can’t buy it on Vudu.
If Disney does maintain this strategy, it won’t split revenue from Mulan with anyone during its early digital release.
When a service like Vudu sells a digital movie like Mulan, it splits the revenue with the film’s owner, i.e., Disney.
In this way, Vudu works as a middleman, siphoning revenue without selling a product of its own.
By selling Mulan on Disney+, Disney steps on the neck of that. In fact, it’s simultaneously telling exhibitors and digital vendors that it doesn’t need either of them!
So, this is a quietly aggressive move by Disney. They may have just introduced a new version of the Disney Vault.