- Disney reported results with adjusted non-GAAP earnings per share (EPS) of $1.03, beating the expected 95 cents per share. The company incurred one-time charges and impairments, leading to a net loss of $460 million. The losses were from content impairments at streaming platforms and ending third-party licensing agreements.
- Revenue came in at $22.33 billion, slightly below the expected $22.5 billion. The disappointing revenue outcome was primarily due to streaming metrics missing market expectations, with the Disney+ subscriber base losing members once again.
- Disney+, the streaming service, saw subscribers fall to 146.1 million, missing the 151.1 million analysts had expected, due to the loss of the Hotstar business in India, including its streaming rights to the Indian Premier cricket league.
- The return of CEO Bob Iger has led to significant changes to the group’s business model, with a cost-efficiency, coordination, and a focus on streamlining. This should enable the company to reach its initial target of a cost reduction exceeding $5.5 billion, while also growing direct-to-customer income by approximately $1 billion. This strategy has already led to a reduction of 7,000 jobs, positively impacting earnings.
- The parks division saw a 13% revenue increase, reaching $8.3 billion. Strength in international parks saw revenues increase by 94.4% as global economies reopened Parks after Covid-related shutdowns. Domestic parks, specifically Walt Disney World, experienced a slowdown in attendance and room purchases, with revenues up only by 4.2%.
- The film studio’s performance has been mixed, with some movies underperforming. Iger emphasized improving film quality and reducing the number and cost of released titles. TV networks, excluding ESPN, may not be core to Disney’s business.
Other changes in the group’s transformation include the launch of online sports betting, teaming up with an outside operator. - Disney is also raising prices on its streaming offerings and cracking down on password sharing to boost profitability. The commercial-free Disney+ and Hulu plan will increase 27% and 20%, respectively (Iger aims to take full control of Hulu, at an expected cost of at least $9 billion). This pricing positions Disney+ competitively against Netflix, and Warner Bros. Discovery’s Max.
- Disney’s US ad-supported service gained 3.3 million subscribers since its December launch. According to CEO Bob Iger approximately 40% of new Disney+ subscribers have chosen the ad tier.
- Disney continues to face challenges, including subscriber losses and restructuring costs. But the company is undergoing a transformative period that should prove successful under new/old management.
- CEO Bob Iger is strategizing for growth in key areas and says the future focus of Disney is film studios, parks, and streaming.
- The share price has already reflected improved prospects, increasing by 5% after the results were released.
- As long-term investors, we see value in this high-quality share, especially as the exciting tools of artificial intelligence begins making inroads into the entertainment industry.By Ron Klipin and Lee Kern
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