Disney Takes a Hard-Earned Victory Lap
This past week has been one of THOSE weeks for The Walt Disney Company.
CEO Bob Iger and his team announced several new deals, one of which was long-rumored.
The other was a shocker, with analysts connecting the dots only after the fact.
To a larger point, despite Disney’s stock falling more than $3 after its earnings report, everything fell into place.
Photo: Bank rate
Disney is taking a hard-earned victory lap this week, and I’m about to tell you several reasons why.
The Best Quarter Ever
Photo: Deadline
That’s the headline that Disney CFO Hugh Johnston wanted you to know about Walt Disney World.
After at least six years of people swearing that Universal Epic Universe would wipe out Disney, the facts showed otherwise.
Photo: PepsiCo
The Disney executive gleefully bragged that Walt Disney World enjoyed its best fiscal third quarter ever.
As a reminder, Epic Universe was open for a good deal of that quarter, but it didn’t matter at all.
So, a LOT of people missed the boat on the impact of a new Universal Studios theme park in Orlando.
Before the earnings call, Johnston appeared on CNBC and gleefully stated the following:
Photo: CNBC
“We really blew away the quarter, 8% revenue, 13% operating income, and Walt Disney World had its biggest Q3 ever.
“We certainly feel good from the perspective of those businesses. Traffic was solid, up a little bit, and then per caps (per capita incomes) were up very, very solidly.
Photo: Disney
“I know there are lots of concerns about the consumer right now in the United States. We don’t see it. Our consumer is doing very, very well.”
That’s as gleeful as a financial executive can physically sound. You get the job by being deadly dull.
Photo:visitorlando.com
Johnston and presumably everyone else at Disney were savoring the moment.
In Mortal Kombat terms, it was a Flawless Victory. To a larger point, Johnston’s words matter.
Photo: Disney World
The United States currently finds itself in a trade/tariff war, which has created a shaky economy.
Johnston’s words can be interpreted as either the economy being better than expected or Disney simply being above it all.
I suspect it’s the latter, and there’s a second reason why I feel that way.
Disney Cruise Line Is CRUSHING
I perform an exhaustive amount of prep work for these earnings reports.
One of the things that became clear during my research this time was the strength of Disney Cruise Line (DCL).
Photo: Getty
Benjamin Swinburne at Morgan Stanley suggests that DCL could have $10 billion in revenue and $3 billion in EBITDA by 2031.
The respected analyst went so far as to say that Disney’s cruise business in 2031 could be as strong as ESPN in 2024.
Disney Wonder
And 2024 was a record-setting year at ESPN in any number of ways. So, the future is bright for DCL.
As proof, consider that Johnston said the following about future cruise bookings:
“Forward bookings look great, we’re running at very high occupancies in terms of the cruise ships…
As we sit here today, we’re already basically half booked out for all of next year, and the newer ships are even higher in that regard.”
DCL
Yes, DCL has already sold half of its cabins for the next year. That’s a stunning showing of strength.
Johnston knows it, too, and he sounds genuinely fascinated by this aspect of Disney’s business.
DCL
Remembering that the CFO is relatively new and curious about Disney’s inner workings, he mused:
“(Disney has) discovered that many of the people who sail on our current ships have such a great experience that they are the first to wanna sail on our new ships.
DCL
“So, interestingly enough, what we’re getting is, in effect, repeat visitation onto new ships.”
Me. He’s talking about me. My wife and I were on a Disney cruise for all of six hours before we were talking about our next one.
DCL
Once you experience DCL, odds are VERY good that you’ll want to go back. Disney cruises are spectacular.
The Streaming Plan Comes Together
(Photo by Jerod Harris/Getty Images for Vox Media)
“I love it when a plan comes together.” Hannibal Smith’s words never rang truer than this week.
Nearly a decade ago, Bob Iger awakened in a cold sweat and experienced an epiphany.
He realized that Disney was weaponizing Netflix by licensing content to the enemy.
At that moment, even though the words hadn’t come to being, Disney+ was created.
Photo: Getty
Iger’s plan called for Disney to transition its entire linear television content library onto streaming.
Over time, Entertainment division executives realized that they’d need more, which drove the entire Fox acquisition.
Photo: Deadline
During the pandemic, consumers’ love of live sports crystallized Iger’s thinking on the missing component.
Disney needed a three-pronged strategy to perfect its digital conversion.
Hulu
The Hulu acquisition represented a key step in that mission, with Disney confirming it’ll consolidate apps.
Soon, you’ll be able to do everything Hulu-related on Disney+. Also, Hulu will replace Star internationally.
Photo: Disney
Disney couldn’t do that as long as Comcast owned a piece of Hulu. So, that’s why Disney waited until 2025.
Then, Disney gained Red Zone and NFL+ rights from the NFL and extended its license for more years to boot.
NFL
Finally, Disney outmaneuvered Netflix (and Peacock, I guess) to gain the rights to stream WWE events like WrestleMania.
In the process, Disney deftly laid the groundwork for a smooth launch of ESPN as a streaming service.
NFL
Former Peacock subscribers will sign up to watch WWE’s Premium Live Events (PLEs).
NFL fans will sign up to watch the NFL+ and Red Zone content as well as seven exclusive NFL games.
Photo: Washington Post
Even better, Disney has indicated that existing Disney Bundle subscribers can sign up for just $6 more.
Currently, the Disney Bundle costs $29.99, but it’ll be $35.99 with ESPN. That is a LOT of content for $36.
Disney Wins with Content
Photo: Disney
During his CNBC appearance, Johnston made a point that I found profound.
Disney makes most of the content it puts on its streaming services, whereas competitors rent content via licensing.
Image: Disney
Johnston views that as a crucial differentiator for Disney since it’ll possess its content forever.
That Flywheel Walt Disney wrote on a napkin 70 years ago is still a stunningly effective business model today.
Disney
As proof, we can simply take a look at Disney’s upcoming release schedule.
On the heels of Andor, Daredevil: Born Again, Ironheart, and The Bear, the company will release Alien: Earth next week.
Photo: Disney
Let’s just say that one of the reviews describes this show as “Alien’s Andor.” Yeah, that’s pretty good.
Theatrically, Disney has Tron: Ares following Freakier Friday, which is out this Friday.
Photo; Disney
Then, the year ends with two absolute titans, Zootopia 2 and Avatar: Fire and Ash.
So, all the good news that came out from Disney this week is just the start to an amazing second half of 2025.
Photo: Getty
You can understand why Disney’s taking a hard-earned victory lap. All of Iger’s plans are coming to fruition.
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