If you want to read The Walt Disney Company’s Q2 earnings report
The Walt Disney Company reported its earnings for the second quarter. Earnings per share were $1.21 per share compared to the $1.12 that was expected. Disney’s revenue came in at $22.08 billion compared to the $22.11 billion that was expected.
Disney+ now has 153 million subscribers. Disney+ Core gained 6 million subscribers in Q2. However, Disney expects Q3 to cool down for streaming before a pickup in Q4.
Disney CEO Bob Iger kicked off the call, and sadly despite the early morning start time, there weren’t any classic Iger announcements. Iger focused on the fact that Disney’s transformation is working, citing results from the parks and streaming. Iger, however, warned that streaming profitability wouldn’t be linear and that Q3 it could backslide before recovering in Q4.
Iger then announced that ESPN would get its own tile on Disney+. It seems like Disney+ is finally taking the next step in its evolution as it will now have integrations with Hulu and ESPN. Iger noted that it would be a modest selection of content. There is already some ESPN content on Disney+ but with a branded tile it should make that content easier to find and access. Truthfully it seems like Disney is testing the “everything” approach for Disney+ now. I wouldn’t be shocked if this ESPN tile is the first step into a much larger picture where you have NFL/NBA games on Disney+ alongside Hulu originals, Disney+ originals, and live programming from ABC.
Iger then teased the 2024 and 2025 slate. The films he mentioned were Kingdom of the Planet of the Apes, Inside Out 2, Deadpool & Wolverine, Alien: Romulus, Moana 2, Mufasa: The Lion King, Captain America: Brave New World, Elio, The Fantastic Four, Zootopia 2, and Avatar 3. Iger was a bit lighter on the hype side he usually also mentions films way farther down the line like Toy Story 5, The Mandalorian & Grogu, Frozen III, and the Avengers films as a way to create hype. He kept his remarks incredibly short.
Iger also praised Shōgun, FX’s critically acclaimed global hit, which is on pace to be FX’s most-watched show ever on Disney’s streaming platforms. Iger also noted that Shōgun is driving the second-largest number of signups to Disney streaming services since 2022, behind only Black Panther: Wakanda Forever. I didn’t realize Wakanda Forever drove that many signups!
Iger also used it as an example of how Disney’s ecosystem of streaming services and linear channels could work together as Shōgun was watched on FX, Hulu, and Disney+. Iger has to be happy about having FX. That’s a feather in the cap from the Fox deal, it can provide award-winning programming but also can deliver commercial hits like this as well.
DisneylandForward was the focal point of Iger’s Disney Parks remarks. “That includes our DisneylandForward initiative — the first step in our expansion plans at Disneyland Resort, which received unanimous preliminary approval by the Anaheim City Council last month,” Iger said on the call. “We’re incredibly excited for the many potential new stories our guests could experience at Walt’s original theme park, including the much-anticipated opportunity to bring Avatar to Disneyland.” So hopefully that DisneylandForward vote passes tonight and Disney can announce some plans for it. I think we’re all curious to see the actual plans besides Avatar.
Disney Experiences
Disney Experiences brought in $8.3 billion in Q2. The increase in operating income at the domestic parks and experiences was due to higher results at Walt Disney World Resort and Disney Cruise Line, partially offset by lower results at Disneyland Resort.
For the International Parks, Hong Kong Disneyland did well with an increase in operating results due to higher guest spending and the opening of World of Frozen.
The increase in consumer products operating results was driven by higher game licensing revenue. Disney in its earnings results didn’t elaborate on exact titles or IP’s but it does seem like this is just the start of Disney sharing more gaming results with Wall Street ahead of its Epic Games partnership.
Disney Streaming
Total (so far): 227 million subscribers
Domestic Disney+ ARPU decreased from $8.15 to $8.00 due to a higher mix of wholesale subscribers, partially offset by increases in retail pricing. International Disney+ (excluding Disney+ Hotstar) ARPU increased from $5.91 to $6.66 due to increases in retail pricing and a lower mix of subscribers to promotional offerings. Disney+ Hotstar ARPU decreased from $1.28 to $0.70 due to lower advertising revenue.
Hulu SVOD Only ARPU decreased from $12.29 to $11.84 due to lower advertising revenue, partially offset by increases in retail pricing. Hulu Live TV + SVOD ARPU increased from $93.61 to $95.01 due to increases in retail pricing and a lower mix of subscribers to promotional offerings, partially offset by lower advertising revenue.
Final Thoughts
Disney CFO Hugh Johnston provided insights on the Disney Parks and Disney Cruise Line. Johnston revealed during Q3 that the Experiences division will be impacted by three additional factors: higher wage expenses, Disney Treasure & Disney Adventure cruise ship expenses, and the opening costs of Lookout Cay at Lighthouse Point.
Johnston said that the Disney Cruise Line remains an enormous opportunity. Disney in recent months has been hyping the Disney Cruise Line and it seems they are eager to invest more in the cruising space. Johnston said despite slower bookings, people still have a strong desire to go on Disney vacations. He also pointed out that Disney Parks have a lot of opportunities to grow attendance domestically and internationally.
Iger then answered a few questions about the NBA which currently has its TV rights up. Iger feels confident about the potential package Disney may receive. He’s confident and optimistic that they will end up with the NBA long-term. As an observer of both Disney and the NBA, I’m quite nervous about the potential financials of this TV deal. The NBA is a great sport and live product but it’s nowhere near the excitement or ratings of the NFL. I hope Iger and Co. look long and hard at the NBA deal and realize that the NBA Playoffs are more valuable than these regular season games where stars sit out. Could Disney end up overpaying for the NBA? It’s a legitimate possibility.
Iger then answered a question on Marvel Studios and if certain IP’s can lose their luster. “We’re slowly going to decrease volume and go to probably about two TV series a year instead of what had become four, and reduce our film output from maybe four a year to two or at the maximum three,” Iger said. “And we’re working hard on what that path is, we’ve got a couple of good films in ’25 and then we’re heading to more Avengers, which we’re extremely excited about.”
I still don’t know if rushing to Avengers films is a good idea after the rocky roads that Marvel Studios has traveled but it may work. I think this approach of going back down to two to three films a year, and two Disney+ series a year will work. Marvel Studios has a lot in its pipeline so I’m expecting some binge drops a la Echo to clear the pipeline. We also have to assume anything under Marvel Animation won’t be included in this total. It seems like Iger and Feige are banking on Deadpool & Wolverine lighting a spark that can carry them through Captain America: Brave New World, Thunderbolts*, The Fantastic Four, and beyond. Marvel Studios does have some tough choices ahead regarding Blade, Ironheart, Wonder Man, Armor Wars, and other projects that haven’t been announced.
Iger announced that the Disney+ password-sharing crackdown begins next month in certain markets. Iger made it clear Disney is going after subscribers who have engaged in improper sharing. I’m assuming that means someone sharing with multiple people outside their family/home. I’m sure Disney will release more details in the coming months but paid sharing was a strategy that helped Netflix and it may bound well for Disney.
Speaking of Netflix, Iger brought them up again. The Disney CEO has made it clear that Disney is chasing Netflix’s gold-standard tech. Iger although did make sure to note that he believes Disney has the top programming. So reading in between the lines, who from the Netflix tech side will leap over to the Mouse House? I feel like it’s almost a given that Disney’s next CTO will be from Netflix and they will lead an overhaul of Disney+’s UI/UX to make it on par or even better than Netflix’s UI/UX.
Iger kept things brief when asked about succession. He just said he believed the board would choose the right person at the right time. I think Iger doesn’t like talking about succession! Disney is in his DNA, and he probably feels a bit of a sting despite all the recent good news that his time is running out from running the Mouse House. However, Iger has to realize he has the ultimate chance to rewrite his ending. If he can pull off this comeback and Disney transformation alongside naming a great successor. He will finish his storybook career on a high note.
Iger also dived into more questions about Disney’s abundance of IP. Iger stated that Disney has started to balance sequels with originals, particularly in animation. For example, Walt Disney Animation Studios had a run of four original films, that will now be followed up by four sequels (hypothetically unless dates change). In a similar timeframe, Pixar has six original films, one spinoff, and two sequels. So, I’d expect more Pixar sequels to be announced if I’m reading in between the lines correctly.
Iger also acknowledged 20th Century Studios which sometimes feels like it’s forgotten about within the Disney Studio equation. Iger said they are looking at the library to see what can be mined. He then mentioned Alien, Avatar, and Planet of the Apes. Disney however needs to look hard at 20th Century Studios. They need to make some new originals and create new properties. Those three franchises that Iger listed aren’t strong enough to carry a brand/studio. Then again, Iger and Co. may find some properties within the 20th Century Studios library that they can make new.
The Q&A ended with Iger answering a call about licensing content. Iger said that after doing some licensing with Netflix they are looking at other possibilities. Iger then said he didn’t want to give more details but they are thinking about it. My take is they should try to license the stuff that they were writing off or removing from Disney+. I believe it should be a last resort for a studio to write something off. I think Disney’s licensing will be mostly non-branded content. You don’t want consumers getting the wrong idea and believing you no longer need Disney+ & Hulu if you have Netflix and Max.
Overall despite the early time slot, this earnings call was pretty chill. It seems like Disney continues to make progress in their business transformation. Yet if you were hoping for epic announcements this wasn’t your call.
Lightning Round
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Zach Perilstein is the Editor-in-Chief of the Boardwalk Times
