News, Analysis and Reviews of the Disney Entertainment Business
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Since attendance appears to have been on the light side at Walt Disney World recently, the Disney speculation machine has shifted into high gear. But let’s look at some actual developments in the economy. In particular, like other businesses, The Walt Disney Company faces challenges regarding consumer spending.
As DisneyBizJournal noted, during Disney’s May 2024 earnings call, CFO Hugh Johnston noted that the Experiences division – parks and resorts, cruise line and consumer products – “will face some challenges in the coming quarter, namely, higher wages, increased costs due to cruise line expansions, and some demand moderation due to a return to pre-COVID levels.”
Fair enough, but there’s more behind “demand moderation.” The latest retail and food services sales report from the U.S. Census Bureau makes clear that consumers have been reining in their spending overall. Retail and food services sales in June came in flat (+0 percent). For good measure, retail and food services sales have seen no growth from December 2023 to June 2024. However, since these numbers are in nominal dollars, once inflation is factored into the equation, real retail sales have declined this year. In fact, going back to the start of 2023, real sales are down.
Inflation, recession expectations, political uncertainty, and slowing economic and job growth have combined to make the consumer cautious. That, in turn, points to short-term challenges for companies like Disney.
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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, 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?
The Disney Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement and fun for Disney fans, including those who love Mickey, Marvel, Star Wars, Indiana Jones, Pixar, princesses and more.
Never miss any new book by Ray Keating by joining the Pastor Stephen Grant Fellowship with Ray Keating at
• The Alliance of Saint Michael novels – Cathedral and Subversion – are at Amazon.
• Order The Weekly Economist III:Another 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II:52 More Quick Reads to Help You Think Like an Economist, and The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist at Amazon.com.
The Walt Disney Company had a solid earnings report for its second quarter ending March 30, 2024.
Total revenues were up by 1 percent in the quarter versus the same quarter in the previous year, i.e., $22.8 billion compared to $21.8 billion. And diluted earnings per share excluding certain items beat expectation, rising by 30 percent, i.e., $1.21 versus $0.93.
A goodwill impairment issue having to do with Star India operations did hit earnings. As The Wall Street Journalreported: “The company took a roughly $2 billion charge in the March quarter related to the India deal and to its linear television networks and swung to a loss of $20 million, from net income of $1.27 billion a year earlier.”
The company’s earnings per share growth target for the full year stands at 25 percent.
On the streaming front, losses shrank notably in the quarter, and Disney+ core subscribers increased by 6 million to 117.6 million. Total Hulu subscribers increased from 49.7 million to 50.2 million. Meanwhile, ESPN+ subscriptions were down slightly (from 25.2 million to 24.8 million), though average monthly revenue per paid subscriber increased due to “retail pricing and higher advertising revenue.” The ESPN+ subs decline was attributed to “seasonality,” by Disney CFO Hugh Johnston.
Disney CEO Bob Iger was quoted in the company’s statement: “Our results were driven in large part by our Experiences segment as well as our streaming business. Importantly, entertainment streaming was profitable for the quarter, and we remain on track to achieve profitability in our combined streaming businesses in Q4.” The company acknowledged that the forthcoming third quarter will return to streaming losses, including a decline in Disney+ subscribers, but again, followed by a fourth quarter bounce back.
Iger also remained bullish on sports and ESPN, asserting that ESPN programming is solid for the coming decade.
The Experiences division – parks and resorts, cruise line and consumer products – stood out as a growth driver, “with revenue growth of 10%, segment operating income growth of 12%, and margin expansion of 60 basis points versus the prior year,” and the company continues “to expect robust operating income growth at Experiences for the full year.” Iger noted that “we are turbocharging growth in our Experiences business with a number of near- and long-term strategic investments.”
Revenue growth at domestic parks grew by 29 percent in the second quarter versus the same period last year, and operating income rose by 87 percent.
CFO Johnston noted that the Experiences division will face some challenges in the coming quarter, namely, higher wages, increased costs due to cruise line expansions, and some demand moderation due to a return to pre-COVID levels. Healthy, strong growth is expected, but there is some demand normalization, along with near-term one-time expenses.
Finally, it's also worth noting that Iger’s emphasis regarding Marvel looking ahead was on reining in content, that is, to two, perhaps three, movies per year, as well as a couple of streaming shows per year.
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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, 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?
The Disney Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement and fun for Disney fans, including those who love Mickey, Marvel, Star Wars, Indiana Jones, Pixar, princesses and more.
Never miss any new book by Ray Keating by joining the Pastor Stephen Grant Fellowship with Ray Keating at
• Cathedral: An Alliance of Saint Michael Novel is at Amazon.
• Order The Weekly Economist III:Another 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II:52 More Quick Reads to Help You Think Like an Economist, and The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist at Amazon.com.
Disney surprised the markets with a strong earnings report today, along with a boatload of announcements. Indeed, the first quarter 2024 earnings report was one to be appreciated by stockholders.
Let’s get to what I see as the key takeaways, and there are a good many.
First, diluted earnings per share (EPS) excluding certain items jumped by 23 percent versus the same period last year – from $0.99 to a $1.22. For good measure, Disney offered some rare earnings guidance, projecting that full year fiscal 2024 EPS excluding certain items would increase by at least 20 percent versus 2023, to approximately $4.60.
Second, the company announced a 50 percent increase in its semi-annual dividend to $0.45 per share, which will be distributed in July.
Third, Disney also announced a stock buyback of $3 billion during the current fiscal year, with further buybacks seemingly slated for the future.
Fourth, the company was bullish on its cost savings and efficiency undertakings, noting that it would hit or exceed the previously announced $7.5 billion cost savings for the year.
Fifth, the company confirmed, once more, that it was on track to arrive at streaming profitability by the end of the current fiscal year. CFO Hugh Johnston pointed out that the objective on the streaming front is to achieve double-digit margins. According to Johnston, the path to such levels of profitability lies with growing subscriptions via paid sharing (which got a good deal of attention), lower churn, and international growth, as well as pricing and assorted efficiencies. Iger noted that the company is “working toward” what Netflix has achieved.
In terms of streaming subscriptions, Hulu saw subscribers increase by 1.2 million in the quarter. Meanwhile, as largely expected, Disney+ subscriptions decreased by 1.3 million, but Disney also projected Disney+ core subscribers to increase by 5.5 million to 6 million in the second quarter.
Sixth, Disney announced that it entered into a partnership with Epic Games, with a $1.5 billion equity investment in the gaming enterprise. This partnership will result in the creation of a Disney Universe existing alongside and interconnected with Epic’s Fortnite. Disney CEO Bob Iger noted the need for the company to tap into demographic trends regarding gaming, and the opportunity to leverage the company’s intellectual property (IP) accordingly. He also highlighted the opportunity in this Disney digital world to purchase digital goods and perhaps in the future physical goods.
Seventh, since Taylor Swift seems to be everywhere, Disney announced that her “Eras Tour” concert film will come exclusively to Disney+ on March 15, with additional content not in the original release.
Eighth, it was noted that 70 percent of the announced plan to invest $60 billion on parks over the coming decade will go to increased capacity, with every park location and the high seas being affected. Annual announcements are expected to come from the company each year starting in 2025.
Ninth, a full-slate ESPN standalone streaming option will be launched in August 2025 or the fall of that year. This ESPN streaming option will include all ESPN programming, and will integrate betting, e-commerce, stats and personalization. In addition, the previously announced streaming sports joint venture with Fox and Warner Bros. Discovery is scheduled to launch this fall.
Tenth, all parks were profitable in the quarter, with growth in international parks particularly strong. And it was repeated that the company is expecting to “turbocharge growth” in the parks. The cruise line got notable attention in terms of expanding opportunities. It was noted in the earnings report: “At Experiences, we generated all-time records in revenue, operating income, and operating margin in the first quarter…” As for key sources of profitability on the Experiences front for the quarter, four were highlighted: Shanghai Disneyland, Hong Kong Disneyland, the Disney cruise line, and the latest Spider-Man video game.
Eleventh, on the movies and franchise fronts, it was announced that the planned Moana television show was being transformed into a theatrically released movie, set for November of this year. Meanwhile, it’s hard to say if something should or should not be read into the fact that the only Star Wars movie specifically mentioned by Iger was the one featuring The Mandalorian and Grogu. For good measure, Iger noted the slowdown in production on the Marvel front, declaring that there would a “focus on stronger franchises” going forward. In addition, the forthcoming Kingdom of the Planet of the Apes movie received a fair amount of attention. It has a release date of May 10, 2024.
Iger’s assessment was summed up in a statement in the earnings report: “Just one year ago, we outlined an ambitious plan to return The Walt Disney Company to a period of sustained growth and shareholder value creation. Our strong performance this past quarter demonstrates we have turned the corner and entered a new era for our company, focused on fortifying ESPN for the future, building streaming into a profitable growth business, reinvigorating our film studios, and turbocharging growth in our parks and experiences… Looking at the renewed strength of all of our businesses this quarter – from Sports, to Entertainment, to Experiences – we believe the stage is now set for significant growth and success, including ample opportunity to increase shareholder returns as our earnings and free cash flow continue to grow.”
Finally, regarding the activist investor challenges facing the company with the upcoming April 3 shareholder meeting, when asked about it on CNBC, Iger declared that those individuals didn’t understand the Disney business, nor the Disney brand. He also spoke of the company “acting with a sense of urgency,” and that “all of us are optimistic.” When it came to streaming, Johnston also used the word “urgency,” that is, there is an “urgency to get to a good sustainable business.”
Why all the “urgency” talk? That’s what happens when activist investors lurk heading into a shareholder meeting, and people have been focusing on the under-performance of your stock.
In after-hours trading, at the time of this writing, Disney’s stock price was up by more than six percent.
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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, 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?
Support the Daily Dose of Disney with Ray Keating Podcast at https://www.buzzsprout.com/1724143. Subscribe at the $8 or $10 level, and get The Disney Planner: The TO DO List Solution by Ray Keating. Remain a supporter and you'll get a FREE BOOK by Ray Keating every six months going forward. Thanks!
The Disney Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement and fun for Disney fans, including those who love Mickey, Marvel, Star Wars, Indiana Jones, Pixar, princesses and more.
• The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks at RayKeatingOnline.com or paperbacks, hardcovers and Kindle editions at Amazon.com.
• Cathedral: An Alliance of Saint Michael Novel is at Amazon.
• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.
The Walt Disney Company announced this morning that Hugh Johnston, 62 years old, was appointed Senior Executive Vice President and Chief Financial Officer effective December 4.
Currently, Johnston serves as Vice Chairman and Chief Financial Officer of PepsiCo. He has served in a variety of roles at Pepsi since 1987, except for a brief stint at Merch, and has been the PepsiCo CFO since 2010.
Disney CEO Bob Iger said, “Hugh’s well-earned reputation as one of the best CFOs in America and his wealth of leadership experience in both financial and operational roles overseeing a diverse portfolio of top global brands make him a perfect addition to Disney’s senior leadership team. His expertise will serve Disney and its shareholders well as we continue the transformative work we are doing to drive growth and value creation.”
Johnston was quoted in the Disney statement: “Disney is such a storied company, with the most beloved brands in the world and a strong financial foundation to support the company of the future that Bob and his team are building. Very few companies have withstood the test of time that Disney has, making the company as rare as it is special. I share Bob’s enthusiasm for Disney’s future, and I am incredibly excited to join this management team in this moment of opportunity and possibility.”
Reactions in the market to the announcement seem to be positive, as Johnston is well-respected.
Disney had announced in June that the previous CFO, Christine McCarthy, would be leaving.
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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, 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?
Support the Daily Dose of Disney with Ray Keating Podcast at https://www.buzzsprout.com/1724143. Subscribe at the $8 or $10 level, and get The Disney Planner: The TO DO List Solution by Ray Keating. Remain a supporter and you'll get a FREE BOOK by Ray Keating every six months going forward. Thanks!
• Order The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist. Kindle editions and paperbacks via Amazon here and signed books here. And don’t forget the first book in this growing series, i.e., The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist at Amazon.com.
• Cathedral: An Alliance of Saint Michael Novel is at Amazon.
• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.
