Disney Headlines for October 29th, 2024
This week: Apple and Disney are on a break, Disney Cruise Line foots the bill, and Premier Pass may pay for it all.
It’s money that matters in this week’s Disney Headlines.
Disney Ghosts Apple
Walt Disney Company
For many years now, a rumor has circulated regarding The Walt Disney Company.
No matter how many times Disney CEO Bob Iger refutes the story, the rumor won’t die.
Photo: Deadline
Some Wall Street investors remain convinced that Apple will eventually purchase Disney.
Some of them have felt that way since Apple’s co-founder, Steve Jobs, sold Pixar to Disney in 2006.
Photo: Kevork Djansezian/Getty Images
Jobs became a kind of mentor to Iger, with the two staying close until the former’s death.
Under the new Apple, Iger has continued his relationship with CEO Tim Cook and other top executives.
Photo: Apple
Perhaps the best example of the strength of their relationship occurred with the release of the Apple Vision Pro.
Last June, I discussed how it might look, and so-called Web 3.0, aka metaverse content, was instrumental to it.
Photo: Marvel
Those expectations hinged on the success of Apple’s upcoming hardware release at the time.
Disney provided plenty of support for the Apple Vision Pro, with some analysts arguing that if the product succeeded, it would be because of that content.
Photo: Marvel
Apple asked for Disney+ content and movies, with Marvel even creating a What If…? story for the hardware.
These are ostensibly the kind of products that could secure a device’s future.
Photo: Apple
Well, we’re nearly 18 months down the line, and the Apple Vision Pro has failed.
Apple has reduced production on a product that has proven too expensive for mainstream consumers.
Photo: Apple
Disney did everything it could to elevate the appeal of the Apple Vision Pro. Sometimes, an Edsel is just an Edsel, though.
Since Disney was licensing to Apple, it’s not out anything with the failure of the Apple Vision Pro, though.
Photo: Apple
However, there is a way that Apple is hurting Disney financially.
The Battle over Subscriber Fees
Photo: Playbuzz.com
Did you know that Apple generated $47.2 billion from e-commerce sales in 2023?
The Apple Store acts as a funnel for this revenue stream by taking a cut of all the transactions.
Photo: Wikimedia
When you subscribe to a streaming service via Apple, it takes up to 30 percent of the revenue.
In the past, companies like Disney didn’t worry about such lost revenue, prioritizing subscribers.
Photo: apple
After all, Apple hosts a massive global platform. So, the thought process is that a streamer makes it up in volume.
Under this logic, 70 percent of something is vastly superior to 100 percent of nothing.
(Photo Illustration by Sheldon Cooper/SOPA Images/LightRocket via Getty Images)
Alas, the mad dash to build massive subscriber bases, no matter the cost, led streaming services into a pit of financial ruin.
That’s one of the reasons why Bob Iger returned to Disney.
Photo: AdWeek
Former CEO Bob Chapek couldn’t make the streaming numbers work.
Iger has spent the past two years trying to accomplish the same goal, and he’s had more success.
Photo: LA Times
Part of the reason why is that Iger is unwilling to share. The latest example occurred last week.
Disney stopped accepting streaming subscriptions from Apple.
Photo: CNN
When you try to sign up on the Apple Store, it redirects you to Disney’s official site.
That small change reflects big money for Disney. When you sign up this way, Disney claims 100 percent of the revenue, not 70 percent.
Photo: Disney
So, this one small change adds 30 percent to Disney’s bottom line, albeit at the risk of angering Apple.
The two parties may yet work out a compromise, but these two issues in combination show that cracks have formed in the Disney/Apple relationship.
Disney Cruise Line’s Bill Arrives
Photo: Wikimedia
In two weeks, Disney will report its fiscal 2024 annual revenue and update investors on the most recent quarter.
Disney had previously revealed that the Disney Experiences division wouldn’t have the best quarter.
While the media locked onto the story of theme park attendance flattening, there’s a simpler explanation.
Disney “warned analysts during its third-quarter earnings call that its fourth-quarter results would reflect pre-launch costs for two of its new ships.”
Photo: Disney
Yes, the bill has come due for Disney Cruise Line’s expansion, with the company paying the remaining balance on completed ships.
Just the other day, the Disney Treasure officially joined the Disney Cruise Line (DCL) fleet.
Photo: Disney
This vessel cost at least $1.1 billion to construct, and now Disney must close its tab. That’s not Disney’s only ship coming soon, either.
Not coincidentally, an investment firm’s analysis suggested that:
Photo: Disney
“Disney’s capital expenditures (will) rise 27% to $7 billion companywide next year, an increase driven primarily by final payments for the new ships.”
We’re at that stage now. So, when Disney reports its earnings, please remember this fact.
Mickey and the Gang – Sail Away Party
Disney Experiences includes the theme parks, but Disney Cruise Line is a part of this division, too.
Chairman Josh D’Amaro and his team chose a time when they felt that the division would have enough revenue to pay for cruise ships.
Sail Away Party
So, that’s what we’ll track in a couple of weeks, and I’m confident it’s a point that Iger and Disney CFO Hugh Johnston will make.
Disney Experiences may report stagnant numbers, but that’s because everyone knows that the cruise ships quickly pay for themselves.
Photo: Disney
In fact, the same investment firm believes that DCL earns $3 billion in revenue already.
You can imagine how much more money Disney will make once it expands its fleet with even larger ships coming soon.
Premier Pass Will Earn HOW Much?
This is a money-focused week of Headlines, partially because the earnings report is right around the corner.
Much of what Disney does in October reflects the fact that the new fiscal year has started.
Photo: Disney
Haven’t you ever wondered why the parks announce price increases every year around this time? It’s not a coincidence.
One of the most recent announcements is the controversial Lightning Lane Premier Pass.
Photo: Disney
This upsell option is already available for purchase at Disneyland Resort, and it starts this week at Walt Disney World.
I previously discussed Disney’s thinking here, but now I have some eye-opening numbers.
Photo: Bank rate
An analyst at Goldman Sachs recently bumped its estimate for the proper valuation of Disney stock.
At the close of business on Friday, Disney traded for $95.03 a share. However, Goldman Sachs believes it’s worth $125 a share.
Photo: Disney
One of the reasons for the bump is Premier Pass, as one of their analysts suggests that this one item is worth “$220 million to $230 million in revenue.”
According to the report, “one million total Lightning Lane Premiere Passes could be sold in 2025, broken down as 700,000 at Walt Disney World and 300,000 at Disneyland. The analyst estimates an average net revenue of $175 for Disney World and $308 for Disneyland.”
So, for those of you wondering what Disney is thinking here, you can now see the math.
Notably, across four Walt Disney World theme parks, Goldman Sachs estimates just under 2,000 Premier Passes sold daily.
Magic Kingdom crowds
That’s less than 500 per theme park, which supports Disney’s statement that supplies will be quite limited.
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