Five Things We Just Learned About Disney
Disney news will fly fast and free this entire week.
On Wednesday, the company announced its quarterly earnings, but that was just the tip of the iceberg.


Walt Disney Company
Disney just revealed plenty about what it just did and where it’s going.
Here are five things we just learned about Disney.
Disney Streaming Is Profitable, But…


Photo: Disney
The trick is older than you and me. Whenever you deliver bad news, you should counter it with good news.
So, Disney confessed that A) their streaming plan was working better than expected and B) they were gonna pay for it.


Filmmaker magazine
Let’s start with the bad news. As Justin Hermes recounted on Wednesday morning, Comcast wants more for Hulu.
Frankly, they’re being jerks about it, too. Knowing full well that Disney was about to report quarterly earnings, Comcast timed the story.


Comcast
Comcast notified Deadline of the story so that it would go live between Disney’s earnings report and the earnings call.
In other words, they wanted it to go live when Disney executives were unable to defend themselves.


Image: The Wall Street Journal
Disney posted an 8-K SEC filing that acknowledged the story. The two parties remain as much as $5 billion apart on the Hulu valuation.
That means Comcast thinks Hulu is worth $15 billion more than the previously argued price of $27.5 billion.


Photo Credit: AP Photo/Richard Drew, File
This confirmation raised eyebrows since Disney’s free cash flow fell 48.6 percent from the previous quarter.
Disney indicates that the billing wouldn’t occur for at least three months, as an arbitrator must decide.


Disney/Comcast/Hulu
Still, Disney faces an odd situation here. It loves the higher valuation of Hulu but doesn’t want to pay the money.
Disney Puts Its Thumb on the Scale


Photo: ESPN
Seriously, though. Disney’s Direct-to-Consumer division is doing stunningly well.
ESPN+, which had been the lodestone the previous quarter, improved so much that it carried the segment to profitability.


Photo: Tamir Moore
Without ESPN+, Disney+ and Hulu actually would have lost a fringe amount of money for the quarter.
So, Disney has gotten its ducks in a row here, perhaps best demonstrated by the change from last year’s DtC loss of $505 million.


Photo: ESPN
In a calendar year, that division switched from a half-billion-dollar drag on the bottom line to fringe profitability.
While Disney expects a similar performance next quarter, it advised that DtC should be consistently profitable in fiscal 2024, which starts in two months.


Photo:GETTY IMAGES FOR ESPN
Part of the reason why is that Disney will increase the prices of its streaming services and bundles by as much as 25 percent in October.
Similarly, they testified in court that the current Venu price of $42.99 won’t stay that way for long.


Photo: Wikimedia
The calling card of Disney’s streaming services may be repeated price increases.
The Inside Out 2 Halo Effect
We’re only beginning to witness the impact of Inside Out 2 with Disney Entertainment.
That division reported revenue of $10.58 billion for the most recent quarter, four percent more than last year.


Photo: Wikimedia
What you might not realize is that Kingdom of the Planet of the Apes did most of the damage there. It was Disney’s primary theatrical release.
During this quarter, Inside Out 2 only had about two weeks of theatrical release. We’ll largely note its effect next quarter.


This Inside Out concept art features Shame standing next to Anxiety. Photo: Reddit
That’s not to say Inside Out 2 was invisible on the balance sheet, though.
Indeed, Disney executives went out of their way to highlight the overall halo effect that Inside Out 2 demonstrated.


Photo: Pixar
Disney indicated that Inside Out 2’s release drove 1.5 million subscribers to sign up for Disney+.
Since the movie won’t debut on Disney+ until the fall or winter, that seems odd…until you remember it’s a sequel.


Photo: Disney/Pixar
Fans signed up for Disney+ to rewatch the original.
In fact, Disney+ has tracked 100 million viewings of Inside Out since the sequel’s trailer debuted.


Image: Pixar
As much as we all complain about sequels and intellectual properties, consumers vote with their wallets on this stuff.
Similarly, Deadpool & Wolverine enthusiasts prepped for the third film by re-watching the first two.


Photo: Marvel
Without providing specifics, executives hinted that Deadpool’s full impact wouldn’t be felt until July, after the quarter ended.
However, they seemed confident that fans specifically paid for streaming subscriptions to rewatch their favorite Disney movies.
The Disney Flywheel works.
All the Divisions Improved


Photo: Washington Post
Last year, Disney suffered a modest operating income shortfall in the third quarter.
This time, Disney reported operating income of $3.1 billion. That statement alone underscores how far the company has come in a calendar year.


Photo: skillastics.com
For that sort of sustained growth, every division must do well…and they did.
You cannot really point to any of Disney’s core brands and say, “Well, that place had a bad quarter.”
Don’t get me wrong. People are doing precisely that with Disney Experiences, but it’s glorified doomscrolling.
Yes, Disney theme park revenue was flat year over year, but that was always expected.


Photo:visitorlando.com
As I mentioned with Comcast’s earnings report a few days ago, theme parks cannot trend up forever.
Past a certain point, you start competing with your own excellence. In Olympics terms, it’s like a Katie Ledecky race.


Photo: Disney
When you’re so consistently dominant, the minor discrepancies get blown out of proportion, while the casual excellence gets taken for granted.
With Disney, the “worrisome” numbers were increased profits of two percent from $8.198 billion to $8.386 billion.


Magic Kingdom
Yes, domestic theme park attendance declined slightly, while international theme parks slowed their recent explosive growth.
They, too, cooled off a bit after a comically great run. So, the numbers look flat, but let’s not get it twisted.


Photo: Disney
Five years ago in the same quarter, Disney Experiences was earning $6.575 billion. And Disney will add three new cruise ships soon.
Those vessels will boost Disney Experiences to unprecedented heights.


Photo: online.com
Similarly, we know that Disney Entertainment has finally righted the ship with historic Emmy nominations and twin blockbuster theatrical releases.
Disney has somehow survived and thrived as its Linear Networks have degraded at an unexpected speed.
Disney Finally Pays the Piper


Concept art for the Fantasyland Expansion
I’ve stressed this point for ages now, but it’s finally reached critical mass.
For years, Disney officials waited to announce expansion projects at the various domestic theme parks.


Photo: orlandoattractions.com
Instead, we’ve had a slow drip of new theme park announcements.
Now, that should change on Saturday, as I laboriously discussed the other day.


Crowds
Still, when Disney forecasted that domestic theme park attendance would remain flat for the next several quarters, it was a tacit admission.
Disney should have been more proactive with its expansion plans. New attractions and experiences are marketable.


Photo: D23
So, let’s go for it with the D23 Experiences panel this weekend, Disney!
And I’d strongly suggest that you prioritize indoor attractions…
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