If you want to read The Walt Disney Company’s Fiscal Full Year and Q4 earnings report
The Walt Disney Company reported its earnings for quarter four. Earnings per share were 37 cents, which was expected to be 51 cents. Disney revenue came in at $18.53 billion compared to the $18.79 billion that was expected.
Disney+ now has 118 million subscribers. This means Disney+ only gained 2.1 million subscribers during Q4. I would say subscriber gains in Q1 2022 will be crucial especially after Disney+ Day. Disney+ last quarter added 12.4 million subscribers, so 2.1 million is a steep drop.
Disney CEO Bob Chapek stated that Disney’s goal of 230–260 million subscribers by fiscal 2024 is still happening. He also expects Disney to be profitable by then. Chapek didn’t seem too concerned about the lack of subscribers they added during Q4.
Chapek is thrilled that Disney+ is expanding to South Korea and Taiwan on Friday. He wants the service in over 160 countries by fiscal 2023. The company has its sights on countries in Central Europe, the Middle East, and South Africa for possible Disney+ expansions.
If you wanted Disney to sell ESPN you’re going to be disappointed.
Chapek and Co. seem to be all in on sports. They talked about live sports viewership, the NHL on Disney’s platforms, UFC’s success, and sports betting favorably.
Chapek then shifted to the parks where he says vaccinations of children and the reopening of international borders are important milestones for the Disney Parks. Chapek also revealed the reactions to Disneyland’s Magic Key program and Walt Disney World’s Genie have been overwhelmingly positive.
40% of Magic Key sales are to folks who weren’t passholders. Over at Walt Disney World, 1/3 of guests have bought Disney Genie+ which is $15 per guest, per day. Guests’ spending has also jumped 30% to pre-pandemic levels.
Chapek also commented that the first four months of Star Wars: Galactic Starcruiser is basically sold out. Then speaking of real-life cruises, he mentioned that prices are higher but capacity and bookings continue to soar. Chapek is excited for the Disney Wish in June 2022, and the following two other ships in 2024 and 2025.
Chapek gave an update and said that Disney is almost done with its reduction of Disney Stores. They are pivoting to e-commerce and will focus on relationships with stores like Target, which there will be triple the amount of Disney Stores in Target by the end of the year.
Chapek ended his final remarks with a bold declaration. That Disney plans to blend the physical and digital worlds and make their own…
Disney Metaverse.
Parks, Experiences, and Products
Disney Parks, Experiences, and Products revenues for the quarter increased to $5.5 billion compared to $2.7 billion in the prior-year quarter. Segment operating results increased $1.6 billion to an income of $640 million.
The rise in revenue and operating income is largely in part due to the fact all of the Disney Parks were open for this quarter. The prior year had a mix of which parks were open.
Lower results at the consumer products business were driven by lower royalties from the licensed game titles, Marvel’s Avengers and Twisted Wonderland.
Media and Entertainment Distribution
Direct-to-Consumer revenues for the quarter increased 38% to $4.6 billion and operating loss increased from $0.4 billion to $0.6 billion. The increase in operating loss was due to higher losses at Disney+, and to a lesser extent, ESPN+, partially offset by improved results at Hulu. The higher loss at Disney+ was due to various factors including higher programming and production, marketing, and technology costs, it was partially offset by increases in subscriptions and Premier Access revenue.
Total (so far): 179 million subscribers
Disney’s ARPU this quarter saw Disney+ at $4.12 which is a decline from the previous quarter where the ARPU was $4.52. ESPN+ ARPU increased to $4.74 from $4.54. Hulu’s ARPU increased $12.75 compared to last year’s $12.59. Hulu’s Live TV +SVOD ARPU rose 18% year over year from $71.90 to $84.89.
Final Thoughts
Disney CEO Bob Chapek wants to build the Disney Metaverse. We’ve actually written about Disney’s Metaverse quite a bit, both on our newsletter Boardwalk Times: Stories from the Seashore, and in our piece discussing the end of the Disney Stores.
Chapek says the key to the Disney Metaverse will be Disney+ but it also will be Disney Parks. Disney Parks, Experiences, and Products Chairman Josh D’Amaro has discussed a “theme park metaverse” on numerous occasions. But it’s clear that the Chapek administration has a plan to blend the physical worlds (Disney Parks) with the digital worlds (Disney+).
So, hypothetically in the far future, we may see Disney+ become home to much more than just films and TV series, it may become a hub that features VR experiences and shopping. The possibilities are endless and with the “Metaverse” in its infancy, it will be fascinating to see Disney’s approach.
Disney CFO Christine McCarthy then discussed how the attendance trends at the domestic parks have strengthened, and that they are looking forward to having international guests return. But they don’t see international guests returning until late 2022 due to long-term vacation planning. I think this will be big in the park’s recovery which is going well already.
Disney also expects to spend more on capital expenditure in 2022 with Disney Wish, other parks projects, and corporate initiatives. Cruise Line and EPCOT expansions will be a reason why it increases along with pressure from rising inflation. I hope Disney stays true and reinvests heavily into their moneymaker — the parks.
Disney+ will fully be unleashed in Q4 2022 (July through September). Disney expects content from Disney, Pixar, Marvel, Star Wars, and Nat Geo all to debut in the quarter. Notable titles revealed by CFO Christine McCarthy include Ms. Marvel, Andor, and Pinocchio. This is huge as it signals that Year Three (2022) of Disney+ will show it coming into its own. This should give us some better expectations for Disney+ Day as well.
The question segment provided a lot of interesting answers from Chapek and McCarthy. Chapek admitted that the theatrical recovery is a long road but that most of Disney’s core franchises have been made in theaters.
Chapek noted that the recovery is going well and that’s a good thing for everyone. But Chapek’s comments about family films caught my eye. He said the team at Disney is watching closely to see if families are comfortable going to see traditional family fare at theaters yet.
Disney’s first major test is Encanto. It has a 30-day exclusive theatrical window then it hits Disney+. It’s a small test but the result of Encanto will likely determine Turning Red’s status as it’s the next family animation film.
McCarthy was also asked about inflation pressures that the entire country (world) is facing. McCarthy discussed how mobile food ordering, mobile check-in, and virtual queues are improving experiences and lowering costs. McCarthy also said if Disney faces inflation pressures at the parks they will change vendors, smaller portion sizes, etc. But McCarthy was adamant they wouldn’t raise prices or make across-the-board changes if these inflation pressures occur. The inflation pressures are likely coming though.
Disney+’s didn’t meet expectations but I expect a strong bounceback next year. If Disney continues to put Disney+ in new markets, diversify its content offerings, and pump out new content constantly… Disney+ will reduce churn and gain a ton of subscribers.
To end this analysis/recap… I’m going to hit a few points in a lightning round.
That’s it for today. Disney+ slows but the theme parks continue to grow.
See you at the Q1 2022 earnings call!
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Zach Perilstein is the Editor-in-Chief of the Boardwalk Times
