What Did Disney’s Money Person Just Say?
The Walt Disney Company held its earnings report a week ago. However, a scheduling quirk meant that the company held a second media event today.
Photo: HOLLY BROBST, THE WALT DISNEY COMPANY
Disney’s Chief Financial Officer, Christine McCarthy, appeared at the MoffettNathanson 9th Annual Media & Communications Summit.
After last year’s event, Disney correctly determined that McCarthy needed some backup.
Image Credit: Disney Channel/Bob D’Amico
So, Rita Ferro, Disney’s President of Advertising Sales, also spoke with Moffett Nathanson. The two women took questions from the crowd.
Here’s everything we just learned.
About Disney+
McCarthy acknowledged some confusion during last week’s earnings call. For example, financial analysts didn’t quite understand Disney’s projections for 2024.
Source: Disney
Someone asked the CFO to clarify, which she happily did. According to McCarthy, Disney+ will claim between 230 and 260 million subscribers by then.
The executive took this opportunity to explain much of what happened at the upfronts this week.
Photo:nofilmschool.com
You don’t need to know anything about network or cable television to appreciate the significance of the annual upfronts.
That’s the time when broadcast networks sell their advertising for the coming year.
Source: techhive.com
Disney always claims a massive presence at these events, but the 2022 one is arguably its most significant ever.
For the first time, Disney wants to sell advertising on Disney+. The streaming service will provide advertisers with an unprecedented platform.
Photo: Google
You can evaluate this picture to appreciate what Disney is selling. The market penetration of 100 million homes reflects 71 percent of the population.
Obviously, introducing an ad tier on Disney+ will come with lucrative financial rewards for the company.
Photo: vecteezy.com
McCarthy explained a misconception from last week. Disney had indicated that the growth during the second half of the year wouldn’t be dramatic.
Some skeptics took this to mean that Disney was expecting to underperform. The CFO clarified that she meant the opposite.
Photo: measureupgroup.com
Disney’s advertising arm had performed so well during the first half of the fiscal year that its anticipated third/fourth quarter growth won’t appear dramatic.
Think of the situation in baseball terms. If you hit 20 homers by June 1st, you may say you cannot keep up that pace all season. You’re still likely to hit 50 homers, though.
Photo: D23
About Disney’s Current Dilemma
At the upfronts, the discussions center on linear television. That’s a fancy term for network and cable television, i.e., the old-school stuff.
For the body of a decade now, the slow death of linear television has raised questions with Disney investors.
Photo: simplemost.com
After all, Disney’s bread and butter during the 21st century have been advertising revenue from these services.
For the most recent fiscal quarter, Disney earned $7.1 billion from these forms of entertainment. That’s 37 percent of all Disney revenue!
Photo Credit: AP Photo/Richard Drew, File
Obviously, people wonder about Disney’s gradual transition to streaming. However, executives repeatedly state that it’s a streaming media company now.
However, Disney isn’t ready to walk away from $28 billion annually. Who would?
Source: CNBC.com
For this reason, analysts quiz Disney execs about how the transition will work.
The conference host asked about CEO Bob Chapek’s recent comments about Disney prioritizing Direct-to-Consumer (DTC) programming, even with live sports.
Photo: ESPN+
When people think about live sports, the first service that springs to mind is ESPN and its accompanying streaming product, ESPN+.
The question involved how Disney would address its valuable live sports licenses and whether they’d switch to ESPN+ soon.
Photo: Walt Disney Company
The CFO wasn’t about to take that bait. So instead, McCarthy offered substantial details about her company’s plans for the future.
Integral to Disney’s vision is the wording of its contracts. Disney has promised linear broadcasting for these live sports programs.
Image Credit: ESPN
However, the new language provides for streaming options as well. So, Disney can gradually wean viewers off linear television and onto ESPN+/Disney+.
You may have read that Disney signed a deal with Dwayne “The Rock” Johnson’s XFL football league. That contract includes a Disney+ component.
Photo: ESPN/Twitter
In other words, that deal signifies Disney’s future plans for live sports.
What about the Parks?
I’m sure you’re fascinated by park news, but there isn’t much of an update on this front.
Photo: Disneyplanning.com
The CFO primarily clarified how her company perceives park investments and expenditures.
Disney uses its own history and information to plot its future at the parks. Then, executives draw from this experience to make decisions.
Photo: Disney
McCarthy explicitly states that the park investments “drive long-term sustainable returns.”
That’s corporate-speak for “you gotta spend money to make money.” But, as you are painfully aware, Disney hasn’t spent as much money at the parks during the pandemic.
Photo: Disney Vacation Club
Instead, Disney has used most of its investment capital on content. The company has indicated its content costs are $32 billion for 2022.
Meanwhile, park fans lost nearly a billion in planned projects over the past two years.
Disney is currently working on three different hotel projects, one of which will go live next month. That’s the new Disney Vacation Club wing at Disney’s Grand Floridian Resort & Spa.
Disneyland Hotel is also gaining an expansion tower in 2023. Disney’s Polynesian Village Resort will add one the following year, too.
PhotoL Disney
So, most ongoing projects involve hotels, which can quickly make the company money.
Once the Moana water feature and Tron Lightcycle Power Run go live, Walt Disney World won’t have any announced park projects in the pipeline.
Photo: thecoasterkings.com
Analysts are wondering why. And this is where the CFO struggles. First, she brags about the power of Disney’s balance sheet, but then she cannot even say the name of Star Wars: Galactic Starcruiser.
McCarthy brags about the history of the parks and promises more Encanto soon. But, beyond that, she comes across as disconnected from the parks.
Photo: Disney
Friends, I just don’t think anything is happening with park expansion until D23. I hope to be proven wrong, though.
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