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Tuesday, February 4, 2020

Disney Earnings Beat Expectations and More Coming from Marvel and Star Wars for Disney+

by Ray Keating
February 4, 2020

The Walt Disney Company beat market earnings expectations for its first-quarter fiscal year 2020 (ending on December 28, 2019), as reported today. There were interesting facts reported on a variety of fronts, including regarding Marvel, Star Wars, streaming services, and theme parks.

Consider some key points that emerged from the earnings call, the earnings report, and an interview that Disney CEO Bob Iger did with CNBC:

• Disney+ subscriptions hit 26.5 million at the end of 2019, and registered 28.6 million as of Monday, February 3. That nicely beat market expectations of between 20 and 25 million. In terms of sources, 50 percent of Disney+ subscribers have come from the Disney+ website, 20 percent from Verizon and its one-year-free offer, and the other 30 percent from additional sources/partners.

• ESPN+ subscriptions showed impressive growth as well. As of November 7 of last year, ESPN+ had 3.5 million subscribers. That grew to 6.6 million at the end of 2019, and hit 7.6 million on February 3. That’s more than double where it stood in early November. Clearly, the Disney+/ESPN+/Hulu package has been a hit.

• Hulu subscribers registered 30.4 million at the end of 2019, and came in at 30.7 million on February 3. Consider that Hulu had 22.8 million subscribers at the end of 2018. FX content and production is going to play a big part for Hulu content going forward, and Iger noted that the company plans on making an international push on Hulu in 2021, after the big initial push for Disney+.

• Iger noted that in addition to three Marvel Disney+ shows coming soon – The Falcon and The Winter Soldier (debuting in August), WandaVision (coming in December) and Loki– there are seven more Marvel shows in various stages of production. And yes, they will tie in with the Marvel movie universe and future films.

• As for Star Wars, Iger reiterated that the short-term emphasis is on Disney+ shows – noting the expectation for spinoffs from The Mandalorian (season 2 coming in October). However, future feature films are in development as well.

• On the theme parks front, it was noted that traditionally 18 percent to 22 percent of domestic park attendance comes on the international front, though attendance from Asia is “not significant,” with only Japan breaking into the top five nations in terms of attendance at Disneyland.

• Revenue at Disney’s domestic parks was up 10 percent in the quarter, with income up 6 percent. There was a 2 percent income gain in attendance, 10 percent in per capita spending, and four percent via hotels. As noted in the earnings report: “Growth at our domestic parks and resorts was due to higher guest spending and, to a lesser extent, increased attendance, partially offset by higher costs. Guest spending growth was primarily due to higher average ticket prices and an increase in food, beverage and merchandise spending. Higher costs were due to new guest offerings, driven by Star Wars: Galaxy’s Edge, and the impact of wage increases for union employees.”

• Iger highlighted an increase in Disney brand popularity among younger people thanks to the success of Disney+.

• The Walt Disney Company had earnings per share of $1.53 in the first quarter, which beat market expectations that were around $1.44. Total revenues were up by 36 percent compared to the same quarter in the previous year, with operating income up 9 percent.

That was a strong first quarter for Disney. The big questions looming in the short run are tied to how long the Shanghai and Hong Kong theme parks will be closed due to the coronavirus. Meanwhile, streaming promises to get an added boost with Disney+ going live in late March in much of Western Europe and in India.

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of The Disney Planner 2020: The TO DO List Solution and the Pastor Stephen Grant novels. He can be contacted at  raykeating@keatingreports.com.

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