For the First Time in Ages, Disney Wins Big
Okay. Let’s get straight to it. The Walt Disney Company posted its earnings report for the quarter, and it was grrrrrrreat!
One business organization used the word “outperformance,” which is a fancy way of saying Disney crushed it.
Yes, for the first time in ages, Disney has won big. Here’s what executives had to say about these successes.
The Big News
Sometimes, a negative sounds like a positive in business. On other occasions, the reverse is true. And I don’t know where this topic falls on the spectrum.
Disney announced staggering streaming service numbers for the quarter. Disney+, Hulu+, and ESPN+ combined for 15.5 million new customers.
Notably, 14.4 million of them came from Disney+. That service claimed 31 percent more subscribers than a year ago.
Conversely, Disney wrote off losses of $1.1 billion for its streaming services…in just three months. That’s a loss of nearly $400 million per month.
Not coincidentally, Disney announced price hikes for Disney+. The service will increase in price from $7.99 to $10.99 per month.
For annual subscribers, the price goes up to $109.99. Similarly, Hulu+ will change its pricing structure from $6.99 to $7.99 for viewing with ads.
The ad-free version increases from $12.99 to $14.99. Disney is doing this to mitigate those revenue losses caused by the rising cost of streaming content.
However, Disney’s other plan involves the more lucrative ad-based subscription model.
Disney+ will remain $7.99 per month for guests willing to watch commercials during the programming.
Disney clarified that its initial ads won’t interrupt programming as frequently as Hulu. The company wants to indoctrinate viewers into this new model.
Watching programs for a monthly cost and sitting through ads may sound like a familiar tactic. That’s because it’s just the modern equivalent of cable television.
Disney would prefer its customers to watch all the streaming services AND the advertising. This approach maximizes profit for the company.
Executives expect this different approach to come at a cost, though. Disney has cut its subscriber forecast for the end of 2023 from 230-260 million to 215-245 million.
By taking this approach, Disney expects its streaming services to turn a profit in 2024.
Let’s Talk Disney Parks
Disney’s CEO and CFO answered questions during yesterday’s earnings call. They also announced some new information about the parks.
The CEO, Bob Chapek, trumpeted the return of several beloved park amenities. He singled out…
“Character Meet and Greet, Nighttime Spectacular at Disneyland and Theatrical Performances. These offerings are not only big hits with guests, but also enable us to welcome more people into our parks each day.”
That last point doesn’t earn enough attention. Disney calculates its daily Park Pass inventory based on how many guests it can satisfy.
Each new theme park attraction/amenity adds to the number of guests Disney may allow into the parks.
So, all these comebacks we’ve tracked on MickeyBlog matter a great deal.
Just as importantly, all six Disney theme parks are operational. That fact enabled this division to report record earnings.
Technically, that statement is a bit misleading, though. Shanghai Disneyland only opened for the final three days of the quarter.
As such, there’s more room for growth in the current quarter!
Chapek also pointed to three significant milestones for its Parks division. Those are:
- Avengers Campus at Disneyland Paris
- The Disney Wish
- Guardians of the Galaxy: Cosmic Rewind
Disneyland Paris especially pleased Chapek, as revenue there increased by 30 percent compared to the same timeframe in 2019.
In fact, that trend held up across Disney parks. Per capita spending went up by more than 10 percent compared to the same quarter in 2021.
Overall, guests pay roughly 40 percent more than in 2021. And they do so happily. American Disney resort occupancy reached 90 percent this quarter.
Disney’s CFO added that the cruise industry remains hardest hit by the pandemic’s aftermath.
However, 40 percent (!) of guests on the Disney Wish indicated that they wouldn’t have gone on a non-Disney cruise.
Other Disney Updates of Note
The word “disciplined” cropped up repeatedly during the earnings call. Disney has lost the streaming IPL cricket rights, a sore spot with investors.
Also, the day before the report, word leaked that Disney wouldn’t renew its rights for Big Ten athletics. It’s a relationship that dates back 40+ years.
So, the analysts wondered why Disney wasn’t bidding more for these products. And the answer comes down to financial “discipline.”
Disney expects its content losses to max out at some point in 2022, which means either the current quarter or the following one.
However, for Disney to turn its Direct-to-Consumer service into a profitable venture by 2024, it cannot hand out blank checks to everyone.
Disney has made some hard choices about what’s worth the money. Humorously, one caller asked about the upcoming NBA rights. They’re…gonna be expensive.
Nobody asked about NFL Sunday Ticket, though. That’s the more pressing matter right now.
Disney also provided some fascinating insights about the struggles within the annual pass program.
One executive hinted that Disney would alter its rules and be more accommodating if the economy grows shakier.
That’s a confession that Disney feels no need to offer discounts at the moment.
To the surprise of no one, international travelers haven’t returned to the parks at the same levels as before the pandemic. Not every country is as lucky as America right now.
Disney perceives park attendance for international travelers as somewhere in the 17-22 percent range. We’re apparently nowhere near that in 2022.
Disney wants those park guests to return because they stay longer and spend more while there.
Finally, Chapek added that Disney’s future bookings remain especially strong.
In other words, the theme parks are going stronger than ever, and that’s not likely to change anytime soon.
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Feature Photo: Encyclopedia Brittanica