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 82 cents per share compared to the 70 cents that were expected. Disney’s revenue came in at $21.2 billion compared to the $21.33 billion that was expected.
Disney+ now has 150 million subscribers, beating out the Wall Street expectation of 148 million subscribers.
Disney CEO Bob Iger kicked off this earnings call by discussing his excitement over Hugh Johnston from PepsiCo joining the Walt Disney Company as CFO. Fun fact, Johnston has experience dealing with activist investor Nelson Peltz. Back in 2014, Peltz’s Trian was calling for PepsiCo to break up, and Johnston, the CFO of PepsiCo during that time, fended him off. Even Iger doesn’t know what Peltz is currently after from Disney, yet it’s good that Disney now has a CFO with direct experience with Peltz. Iger also thanked Interim CFO Kevin Lansberry for all his hard work as he returns to his previous position at Disney as the CFO of Disney Parks, Experiences, and Products.
Iger also mentioned how Disney is on track to have $7.5 billion in cost reductions. Originally it was only expected to be $5.5 billion. It’s clear Disney made some thorough cuts during this latest cost reduction which included 8,000 job reductions. Lansberry confirmed that Disney doesn’t expect any more job reductions to take place.
When it came to Disney+’s growth this quarter, Iger touted Disney’s recent theatrical titles like Elemental, Little Mermaid, and Guardians of the Galaxy Vol. 3. Iger also acknowledged Ahsoka and the Korean original series Moving as series that were making an impact. Disney+ now sits at 150 million subscribers, and it added over 7 million core Disney+ subscribers during quarter four.
Iger also announced that Disney’s fixing period is shifting into a building period. Iger acknowledged that they still have work to do but they can begin building their businesses back up again. Iger then unveiled Disney’s building opportunities:
When it comes to streaming, a one-app experience for Disney+ & Hulu will roll out in December. The full launch will take place in early spring 2024. Disney is clearly looking towards a more unified streaming future, one that could encompass Disney+, Hulu, and ESPN.
Iger sees the film studios as a building opportunity from the standpoint of fixing the creative output and the economics. Despite criticism, Disney still has four of the top 10 highest-grossing films of the year at the global box office. Iger also took the opportunity to hype up The Marvels and Wish as well as the 2024 slate that will *likely* feature Deadpool 3, Kingdom of the Planet of the Apes, Inside Out 2, and Mufasa: The Lion King.
It seems like Iger is determined to make 2024 a year for Disney to build its businesses again.
The first half of the call felt like Iger explaining how Disney had to rebuild itself on the fly. We can assume that the structure of the company under former Disney CEO Bob Chapek wasn’t as stable as it seemed, and Iger took the painful but necessary steps to course correct.
Obviously, the growing pains when it comes to content and business developments will continue but it seems like 2024 could be the year things go back to somewhat normal for the Mouse House.
Parks, Experiences, and Products
Experiences was up 13% at $8.1 billion in revenue. Operating income rose by 31 percent to $1.8 billion.
The increase in operating income at the domestic parks and experiences was due to growth at Disney Cruise Line resulting from increases in passenger cruise days and average ticket prices and an increase at Disney Vacation Club.
Lower results at Disney’s domestic parks and resorts were from a decrease at Walt Disney World Resort due to the accelerated depreciation of the Star Wars: Galactic Starcruiser and inflation, and to a lesser extent, lower guest spending driven by a decrease in average daily hotel room rates.
This quarter didn’t break out Consumer Products results. Which is a shame because I always like to see what franchises are trending up in sales, and which ones are trending down.
Disney Streaming
Total (so far): 224.5 million subscribers
ARPU = average revenue per user
Domestic Disney+ ARPU increased from $7.31 to $7.50 due to higher advertising revenue. International Disney+ (excluding Disney+ Hotstar) ARPU increased from $6.01 to $6.10 due to an increase in average retail pricing, partially offset by a higher mix of subscribers to promotional offerings. Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.59 to $0.70 due to a lower mix of wholesale subscribers and higher advertising revenue.
Hulu SVOD Only ARPU decreased from $12.39 to $12.11 primarily due to lower advertising revenue and a higher mix of subscribers to multi-product offerings. Hulu Live TV + SVOD ARPU decreased from $91.80 to $90.08 primarily due to lower advertising revenue.
Streaming losses narrowed to $387 million for the quarter. A year-over-year improvement of 74% from a loss of $1.4 billion in Disney’s Q4 2022.
Final Thoughts
Overall this was a very upbeat call for Disney. Earnings per share were up and it was only a slight miss on the revenue. Despite the constant negativity surrounding Disney, it seems like things are getting back in order. It looks like the fixing period is almost done and we will see a Disney that is focused on building out its businesses.
Disney+ is starting to get some of its shine back. The ad tier added 2 million subs in Q4. Although Interim Disney CFO Kevin Lansberry did warn that Disney+ may experience some churn in Q1 2024. Lansberry also reiterated that the growth of Disney+ remains non-linear (it will continue to have good growth quarters and bad growth quarters). Disney still expects Disney+ to reach profitability by fiscal Q4 2024.
Lansberry also noted that Disney will spend around $25 billion in content in fiscal 2024, down from $27 billion in 2023, and down from $30 billion in 2022. The strikes definitely played a part in the lower content spending. Disney is going to continue to look at its cost base as well. We could possibly see more cost savings in 2024 as Iger and Co. continue to restructure the company.
Lansberry also mentioned that the massive $60 billion investment in the Disney Parks will likely ramp up towards the end of the decade. Lansberry is expecting capital expenditures to gradually rise but the major investments will likely begin towards the end of the decade. So it is safe to say D23 2024 may be the place where we get some concrete news on the future of the Disney Parks.
One of the more intriguing parts of this call was when an analyst openly asked about Disney’s creative struggles, and Bob Iger gave his honest thoughts. “In addition, at the time the pandemic hit, we were leaning into a huge increase in how much we were making and I’ve always felt that quantity can be actually a negative when it comes to quality. And I think that’s exactly what happened. We lost some focus,” said Iger, “We’re all rolling up our sleeves, including myself to do just that. We have obviously great assets, great stories to tell from the assets that we either have or that we purchased. And I feel really optimistic about the slate going forward, which is going to be a balance between some really strong sequels to some very, very popular titles, as well as some good original content starting with Wish, which comes out Thanksgiving weekend. So I feel good about the direction we’re headed. But I’m mindful of the fact that our performance from a quality perspective wasn’t really up to the standards that we set for ourselves.”
Iger gave a candid answer and it seems like Disney will be taking the right steps to address the quality issues across all its studios. Iger mentioned that they are going to focus on fewer projects around their core brands while also continuing efforts to create fresh and compelling original IPs. Iger is dedicating a lot of his time to these efforts. If Iger can turn things around creatively at the studio his legacy will once again soar to new heights.
Iger also remains high on ESPN as an asset and how the direct-to-consumer launch has various parties interested. Iger also made it clear that the ideal partners in an ESPN joint venture would be a tech company and the sports leagues themselves. I’m calling my shot now but I think this may be where we get a Disney/Apple deal on a smaller scale. If Apple wants to get more involved with sports having the ESPN brand and talent attached could be a smart move.
Towards the end of the Q&A, Iger dropped some mini news that Disney has been engaging in conversations with Netflix about licensing some titles that aren’t their core brands. Some of those written-off Disney+ shows finding a second life on Netflix could be a win-win-win for Disney, Netflix, and the talent involved. I guess we will have to wait and see on all of that.
Before the earnings call, Bob Iger was on CNBC and he discussed the SAG-AFTRA strike. He had a way different tone than his infamous Sun Valley interview. Iger said he was optimistic a deal would be done relatively soon and that if the strike went on too much longer the summer 2024 theatrical slate would be in massive danger. Well, just shortly after the earnings call, news broke that SAG-AFTRA reached a tentative agreement with the studios.
Disney still has challenges and plenty of obstacles ahead, but it seems like Iger is setting an optimistic path forward for The Walt Disney Company. Now will Wall Street and Disney fans have the patience to see his plans through? Only time can tell.
Lightning Round
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Zach Perilstein is the Editor-in-Chief of the Boardwalk Times
