Disney Just Reported Record Revenue. Here’s How.
From a financial perspective, The Walt Disney Company has experienced a befuddling 2022 thus far.
DIS stock started the year at $154.89 but recently dropped as low as $90. So, the company has struggled with revenue, right?
Not at all. The post-pandemic recovery is well underway, and Wall Street has started to notice.
DIS closed today at $112.50, which is more than $12 better than it finished on July 26th.
Investors suddenly recognized an impending opportunity with Disney due to report earnings today.
Sure enough, Disney has just reported massive revenue. Here’s what you need to know about it.
Disney Versus Expectation
I’ve previously mentioned that Wall Street expectations vary by source. Here’s someone from Yahoo Finance citing estimates:
The essential numbers are $21 billion in revenue, an earnings per share (ESP) of $0.96, and an increase in Disney+ subscribers of 10 million.
I find the first two estimates perfectly reasonable, while the other one irritates me.
Comcast’s Peacock reported zero subscriber growth, while Netflix lost subscribers, and HBO Max/Discovery (HDB)…well, someone should call the fire department. They’re in danger.
As HBD’s boss, David Zaslav, disavows the Disney+ streaming model, Disney CEO Bob Chapek embraces the apparatus set in motion by Bob Iger.
Meanwhile, theme parks continue their stunning recovery after the darkest two-year period in Disney history.
All these swirling parts led to a fascinating reveal by Disney. For once, optimism was running the show.
The most vital metric to Wall Street is Disney+, which we’ll discuss in a bit. First, however, I’m a meat and potatoes guy. I care about the money.
In this capacity, Disney just crushed its entire business model for the fiscal third quarter of 2022. Here’s the tweet:
— CNBC Now (@CNBCnow) August 10, 2022
Yes, Disney earned $21.5 billion, thereby besting estimates by $500 million.
Simultaneously, the earnings per share came in 13.5 percent ahead of Wall Street’s expectations.
Not coincidentally, Disney’s stock price spiked in the immediate aftermath of the announcement. It legitimately increased by $6 per share within five minutes.
Let’s Start with Streaming
Okay, we’ll take a different approach this time than usual. That’s because plenty just happened with Disney+.
In fact, MickeyBlog will probably track this story for several days, as it’s a dramatic overhaul.
For starters, that 10 million Disney+ estimate I found ludicrous…wasn’t ludicrous enough.
The streaming service added 14.4 million subscribers at a time when its competitors were either stagnant or in decline.
Overall, Disney+ now totals 152.1 million subscribers. As a reminder, Disney expects 230-260 million subscribers by the end of 2024.
Analysts had wondered whether Disney could legitimately achieve its stated goal.
Overall, Disney+ just added 45 million subscribers in a calendar year. So how will the company get more? Weeeeell…
Disney+ also announced a price hike of $3 per month. Current subscribers are paying $7.99 monthly, which will increase to $10.99.
However, on December 8th, Disney will introduce its new ad-supported tier…and that’s where the real money will come into play.
Ad-supported streaming services generate exponentially more average revenue per user.
So, what the company is making right now qualifies as chump change compared to what it’ll snare in calendar 2023.
As a reminder, the Disney Bundle remains the best way to control your subscription cost. That service includes ESPN+ and Hulu+.
Notably, Disney did NOT announce a price increase for it. However, Hulu had previously confirmed a price increase coming in October. It’ll cost $7.99 with ads or $14.99 without them.
Meanwhile, the ad-supported tier of the Disney Bundle will come in at $12.99, while the ad-free tier is $19.99 per month.
Obviously, we’re talking about some major changes coming to Disney’s streaming services in less than four months.
Notably, across all three platforms, Disney now totals 221 million subscribers. Netflix is at 221.6 million. So it’s almost time for a change at the top!
Disney by the Numbers
Revenue of $21.5 billion doesn’t mean much without context. So, let’s consider these factors.
During the same fiscal quarter in 2021, Disney managed only $17 billion, which was remarkable, all things considered.
For the fiscal second quarter of 2022, Disney tallied $20.3 billion. In other words, the company earned $1.2 billion or six percent more than last quarter.
Year-over-year, Disney spiked by $4.5 billion or 26 percent. That tells the whole story right there.
How did Disney achieve such growth? Much of the explanation comes from our beloved theme parks.
This past quarter, Disney earned $7.4 billion from Disney Parks, Experiences and Products. That’s an improvement of $742 million or 11 percent.
Compared to the same quarter in 2021, Disney climbed by $3 billion or 70 percent.
No matter what we think of Disney’s individual theme park decisions, the bottom line signifies that the strategy is working. This was a record-setting quarter at the parks.
Disney’s Grand Plan
In the other divisions, Disney claimed great news as well. For example, Disney Media and Entertainment Distribution garnered $14.1 billion, an increase from $13.6 billion last time.
Linear Networks remained steady but static, growing by only $60 million or so. Notably, Direct-to-Consumer (DTC) was similarly flat with its growth.
However, Disney’s streaming growth has effectively allowed the business model to modernize from network/cable television to the Disney Bundle.
Disney deserves a ton of credit for what it has achieved here. But, of course, the changes come at a cost.
During this past quarter alone, DTC lost nearly $1.1 billion. Somewhere, David Zaslav just screamed and doesn’t know why.
Unlike the competition, Disney doesn’t care about short-term losses in exchange for loyal subscribers. In other words, Disney is smarter than the competition.
This was a phenomenal quarter for Disney, and the future appears exceptionally bright.
We can say with confidence that Disney has survived the pandemic and come back even stronger from the struggle.
Feature Image: CNBC