by Ray Keating
News/Analysis
DisneyBizJournal.com
August 9, 2023
In its third quarter earnings report today, Disney beat expectations on some measures, while missing on others. This came across as the definition of a “mixed bag.”
Two points beyond the actual earnings report warrant attention. On the earnings call, Kevin Lansberry, Disney interim CFO, reiterated that a recommendation would be made to the board by the end of this calendar year to reinstate a “modest” dividend.
Also, Disney announced assorted streaming price increases. Those include commercial-free Disney+ going from $10.99 per month to $13.99; a 20 percent increase in Hulu without ads to $17.99; and the Disney bundle of Disney+ (no ads), Hulu (no ads) and ESPN+ (ads) increasing from $19.99 to $24.99. All three with ads will increase $2 per month to $14.99. These price increases will go into effect on October 12.
The Disney stock price immediately reacted positively in after-hours trading to these two announcements.
As for adjusted earnings per share for the quarter, Disney came in at $1.03, which beat market expectations of $0.95. However, it was down from $1.09 in the prior year quarter.
Regarding revenues, Disney earned $22.33 billion in the third quarter. That actually came up short of market expectations, which ran at about $22.5 billion. However, revenues were up by 4 percent compared to the same quarter last year.
Streaming
Streaming (or DTC) losses continued in the quarter, but the loss of $512 million was smaller than the market expectation of $759 million.
Disney+ subscriptions registered 146 million, which came in lower than the expected 151 million, and down from 157.8 million in the previous quarter. However, Disney+ Core (which excludes Disney+ Hotstar) subscriptions increased from 104.9 million to 105.7 million. ESPN+ and Hulu subscriptions were flat.
Streaming profitability continues to be expected by the end of fiscal year 2024. Iger pointed to a recent “reset” of the whole business “for sustained profitability.”
For good measure, Iger continued to make clear Disney’s enthusiasm regarding sports, noting once more that ESPN was destined to go fully streaming at some point. He said, “We believe in the power of sports.”
Parks
Strength in theme parks was noted for the international parks and in Disneyland. “Softer performance” was highlighted for Walt Disney World, though “well above pre-Covid levels,” according to Iger. He also mentioned strong demand for annual passes.
In the third quarter, the Parks, Experiences and Products division saw revenues increase 13 percent versus the same quarter last year, and operating income up by 11 percent.
Lansberry said the company expected some moderation of attendance at domestic parks in the near term. At the same time, though, Iger was very bullish on the company’s cruise line business.
Movies
Regarding the film business, Iger pointed to it as a key source of future growth (along with the parks and streaming). He was pleased with the results from Avatar: The Way of Water and Guardians of the Galaxy Vol. 3, but noted that other results were “disappointing,” and that was something “we don’t take lightly.” The Disney CEO emphasized a move to “better economics” on the studio front, including reducing costs per title.
Regarding overall cost-cutting efforts, Iger said that Disney was on track to exceed the goal of $5.5 billion in savings.
Iger assessed, “While there is still more to do, I’m incredibly confident in Disney’s long-term trajectory because of the work we’ve done, the team we now have in place, and because of Disney’s core foundation of creative excellence and popular brands and franchises.”
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Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and the Alliance of Saint Michael novels; and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.
The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?
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