If you want to read The Walt Disney Company’s Q1 earnings report
The Walt Disney Company reported its earnings for the first quarter. Earnings per share were $1.76 per share compared to the $1.45 that was expected. Disney’s revenue came in at $24.69 billion compared to the $24.62 billion that was expected.
Disney+ and Hulu have a combined 178 million subs. That’s an increase of 900,000 from the previous quarter. Disney+ was down 700,000 subscribers due to churn and the recent price hikes. Streaming for Disney was profitable this quarter, and Disney forecasts another dip in Disney+ subscribers for quarter two.
“In Q1 we saw outstanding box office performance from our studios, which had the top three movies of 2024; we further improved the profitability of our Entertainment DTC streaming businesses; we took an important step to advance ESPN’s digital strategy by adding an ESPN tile on Disney+, and our Experiences segment demonstrated its enduring appeal as we continue investing strategically across the globe,” said Disney CEO Bob Iger and Disney CFO Hugh Johnston in their executive commentary.
There wasn’t a lot of new ground covered this quarter. Disney highlighted its recent box office streak, its streaming growth, Disney Experiences’ reliability and stability, and ESPN’s digital strategy. Overall, the entire earnings felt muted. The results were strong but a lot of it felt like deja vu from previous quarters.
Iger also kept his opening remarks extremely brief as he mentioned the fires in Southern California. Iger also skipped his trademark rundown of Disney’s upcoming film and streaming slate. Which as an eagle-eyed observer like myself I felt was a bit strange, especially a day after Disney/Marvel Studios dropped The Fantastic Four: First Steps trailer which garnered a massive and positive reaction. Is there a new strategy here to make these calls as quick as possible so nothing negative can affect the stock price? That’s just speculation on my part.
Disney Experiences
Disney Experiences’ revenue in Q1 grew 3% and operating income was comparable to the prior-year quarter. Operating results at Disney’s domestic parks and experiences decreased compared to the prior-year quarter due to Hurricane Milton and Helene ($120 million) and $75 million in pre-expenses for the launch of the Disney Treasure. International Parks & Experiences operating income increased 28%.
Disney expects its experience segment to see operating income growth of between 6% and 8% in fiscal 2025.
Disney Streaming
Domestic Disney+ ARPU (average monthly revenue per paid subscriber) increased from $7.70 to $7.99 due to increases in pricing, partially offset by a higher mix of subscribers to promotional offerings.
International Disney+ ARPU (average monthly revenue per paid subscriber) increased from $6.78 to $7.19 due to increases in pricing and higher advertising revenue, partially offset by a higher mix of subscribers to promotional offerings.
Final Thoughts
The Q&A portion included some details on various developments surrounding The Walt Disney Company. The first question was about Disney+’s tech roadmap. Disney CEO Bob Iger acknowledged that new features are starting to roll out and will continue. Iger also cited more “personalization” and upping Disney’s game from “an algorithm perspective.” Iger also noted that Disney Entertainment and ESPN CTO Adam Smith is continuing to build out his team. Iger also shared comments on Disney+’s home screen that I thought were pretty illuminating. “Ours is elegant but fairly static in nature,” Iger said on the call, “The more dynamic it is, the more people are drawn into it.”
It feels like Iger is giving CTO Adam Smith and his team the full go-ahead to redesign Disney+ in a way he sees fit. Iger wants Disney+ to have a more dynamic display. It will be fascinating to see how the concept evolves. I’m expecting the home screen to incorporate the Top 10 list more, Streams, and the tiles and content layout to completely change.
Disney CFO Hugh Johnston was asked about Epic Universe by an analyst (who also noted it’s the top question he’s been getting when it comes to the parks). Johnston provided a similar answer but didn’t even reference Epic Universe by name. Johnston just made it clear that Disney has Epic built into their forecasts. I thoroughly believe Disney still has some levers to pull when it comes to Epic Universe. I think they are also watching Universal’s ticketing strategy and waiting until Universal offers one-day Epic Universe tickets before pulling additional levers for Walt Disney World.
The below quote came from Iger and Johnston’s executive commentary that was released on The Walt Disney Company’s website.
“We continue work on a robust slate of new projects as we bring our most popular IP to life in innovative ways and execute against a carefully designed and planned investment strategy.”
It’s great that Disney is working on a robust slate of new projects. Yet it’s unclear how robust this slate is. Are we basing this off of everything announced at D23? Will there be more announcements at Destination D23? What IP are they currently looking at to adapt into the Disney Parks or Disney Cruise Line? I also was asked in my mailbag about the return on investment strategy for the Experiences division, and I’d love to see that become a focus for the Wall Street analysts. Will Muppets Rock ’N’ Roller Coaster be a draw? Is it worth the costly construction of demoing the Rivers of America to build Cars?
Disney CEO Bob Iger also suggested live programming will become a bigger part of Disney+ as it becomes more of a one-app experience. I think the grand strategy here is 2027 when Disney/ABC will air the Super Bowl, Grammys, Oscars, and other sporting and entertainment events. I also think Disney needs to continue to invest in the Streams feature on Disney+. I think eventually Disney+ should create a home channel and that could be the place where your major premieres air live. It could be a savvy way to boost viewership as well.
Disney CFO Hugh Johnston was then asked about both the Disney Treasure and Lightning Lane Premier Pass, a shockingly good question that actually provided some new ground. Johnston said that the Disney Treasure cruise ship is off to a spectacular start. All the feedback that Disney has been receiving has been excellent. Johnston also expects the ship to be profitable fairly quickly as well. It seems like the all-in Disney Cruise Line strategy continues to pay off.
Disney CFO Hugh Johnston then answered the second part of the analyst’s question regarding the Lightning Lane Premier Pass. Johnston said that they just launched the premium product and that Disney is learning how to use it. He also noted that they are marketing it gently and that is is currently in line with expectations. I think Johnston was smart to avoid discussing pricing and potential ways to make more money from this service.
Speaking of making money, Disney CEO Bob Iger said on the call that Disney is very pleased where they are sub-wise for Disney+/Hulu. Iger noted that when you raise prices you lose subscribers but Disney has been able to hold pretty well. I think Disney has been able to display its pricing power the most and it will continue to do so. Especially if it can keep delivering and improving the service.
Iger also declared that the linear networks are “not a burden at all, they are an asset.” Iger also noted that they are programming them and funding them at levels that give Disney the ability to enhance their television business. I am pretty tired of the linear networks narrative that Wall Street continues to focus on. Disney utilizes its linear networks for synergy purposes and also their broadcast network is reliable and delivers. Disney having a bigger content ecosystem shouldn’t be a problem.
Now before we wrap up this Q1 analysis and recap. I want to discuss the most interesting quote and ironically it wasn’t on the call. It was during an interview with CNBC, where Disney CFO Hugh Johnston was talking about Disney+.
“The way to think about Disney+ in the future is it’s going to be a portal into all things Disney,” said Johnston. “Something you’re really going to want to turn on 24 hours a day, seven days a week when you’re not watching CNBC of course.” Johnston then continued on even more. “It delivers entertainment, it delivers news, it delivers sports, and in the future, it may deliver many other things as well.”
I think it’s pretty telling when Johnston says things like “a portal into all things Disney” and in the future, it may deliver many other things as well.” Could Johnston be referring to the possibility of Disney+ becoming more than a TV/Film hub? Could Disney+ one day also incorporate gaming, music, books, shopping, and other businesses that Disney works in? It seems like Disney has some lofty and ambitious plans for Disney+.
Lightning Round
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Zach Perilstein is the Editor-in-Chief of the Boardwalk Times
