Disney Just Made a Lot of Money. Here’s What We Know.
The worst is almost over for The Walt Disney Company. We’re 15 months into the pandemic, and the CDC just announced that it’s mostly over.
However, Disney must still recount the bad news during its annual earnings reports, and the fiscal second-quarter results for 2021 are in.
Yes, they’re down from last year, but they’re also getting compared to the pre-pandemic Disney numbers.
Still, Disney just made a LOT of money. Here’s what we know from Disney’s earning report announced Thursday afternoon.
The Good and the Bad
Anybody who follows earnings reports knows that Wall Street games the system.
Experts make guesstimates about earnings per share and revenue, even though they’re just speculating.
Then, once the numbers are in, the reporting determines that something is a hit or a miss based on how it compares to the guesstimates.
We try to do a bit better than that here at MickeyBlog, as these reports require nuance.
From Wall Street’s perspective, the headlines you’ll read are that Disney’s earnings per share (EPS) bested expectations.
Talking heads had estimated 27 cents per share on ESP. The actual number is 79 cents, which means that you’re happy if you own Disney stock.
Conversely, analysts participating in a Refinitiv survey predicted quarterly revenue of $15.87 billion.
Disney fell short of that total, managing $15.61 billion. What’s a quarter-billion between friends?
The most troubling data point, depending on your perspective, is probably Disney+ subscriber numbers.
In early March, Disney announced that the streaming service had crossed 100 million subscribers, a stunning feat.
Some estimated that Disney would claim a subscription base of 109 million today, which I found patently absurd.
This fiscal quarter counts revenue from January 3rd through April 3rd.
That estimate would have required Disney+ to gain nine million more subscribers in March.
Still, reports have indicated that Disney+ has suffered a setback because it managed a subscriber total of 103.6 million.
Effectively, Disney+ added 8.7 million subscribers for the quarter or 2.9 million per month.
Analysts are claiming this spells trouble for the service, not long after praising Peacock for a similar performance.
During that timeframe, Peacock added The Office and swallowed the WWE Network. Disney+ did none of that and was more mature in its cycle.
So, Disney+ subscription numbers are exceptional, no matter what you’ve heard.
Let’s Talk about Disney Theme Parks
I know that we’re theme park fans first and foremost. So, let’s talk about your favorite part of Disney first.
Park revenue fell 44 percent to $3.2 billion this quarter. That’s a mixed bag for Disney.
The drop is less than the fiscal first quarter’s 53 percent drop. However, Disney earned less revenue this time than the last one.
The fiscal first quarter, which covered the holiday season/final three months of 2020, included $3.6 billion in revenue.
Of course, the disparity should be higher since January and February are slower months at the parks, while November and December claim large crowds.
Overall, this performance is in line with expectations, albeit probably on the low side.
Notably, Disney only has one more pandemic quarter to go, though. The next fiscal earnings report will cover April through June.
Based on the recent CDC recommendations for vaccinated guests, Disney has already increased park capacity and will add even more soon.
Here’s how the CDC chart looks:
HELPFUL VISUAL AID via @CDCgov: pic.twitter.com/PYfmEbgwu1
— Ed O'Keefe (@edokeefe) May 13, 2021
Park officials may use this as a baseline for rolling back pandemic safety measures. That will dramatically increase attendance and thereby revenue.
Alas, half of the next earnings report, the one for the fiscal third quarter, will include the current constraints.
So, Disney faces one more rough earnings report before it returns to juggernaut status.
The Other Core Businesses
As a reminder, Disney streamlined its business model recently. The company attains revenue from four core businesses, one of which is the theme parks.
The most lucrative arm of the Disney machine remains its advertising via Linear Networks.
This division earned $6.7 billion for the quarter. Remarkably, that’s down only four percent from the first quarter of last year, which was pre-pandemic.
Disney combined its old media companies into a single entity, which still flexes its earning muscle to this day.
During the earnings call, which I will recap tomorrow, Disney indicated that the dates of several high-profile events worked against the company.
If not for those scheduling quirks, Linear Networks would have earned more than during the fiscal second quarter of 2020!
Of course, objects in the rearview mirror are closer than they appear. I say this because the new media enterprise, Direct-to-Consumer, overperformed.
Disney’s three streaming services comprise the heart of DTC, and they all increased subscriber numbers this quarter.
For this reason, DTC earned $4 billion, a massive 59 percent spike from the $2.52 billion during the same quarter in 2020.
CEO Bob Chapek’s decision to switch Disney to a streaming media company is already paying dividends.
Earlier projections had indicated that Disney+ et al. wouldn’t claim that kind of revenue for another two or three years. It’s a staggering success.
In this earnings report, Disney listed a category for Content Sales/Licensing and Other.
This newish core business stems from shoving together the misfit parts during the organizational restructuring.
Comparing apples to apples, this division fell 36 percent from $3 billion in 2020 to $1.9 billion in 2021.
However, that total represents an increase from the fiscal first-quarter total of $1.7 billion.
Overall, Disney has been in survival mode since last March. And they’ve done that!
The CDC declaration all but officially declares the end of the pandemic in the United States.
From now on, the parks can return to their 2019 revenue levels, and Disney cruises will do better than ever once the Disney Wish debuts in 2022.
You may read some negative comments about the revenue, but here’s the headline nobody will write because it’s too optimistic.
Disney just earned more during the second quarter of 2021 than it did during the same timeframe in 2019! Here’s my analysis from then.
Yes, Disney claimed $14.9 billion in revenue then but somehow managed $15.6 billion during a pandemic.
Bob Chapek deserves a great deal of credit for weathering this storm and keeping Disney afloat against seemingly impossible circumstances.