Disney released their Q4 earning statement today, and our team was on the call and reviewing financials to see what Disney thinks is going on at their own business. The results seemed a bit all over the place, with answers to some questions while new ones were raised.
Yes, Attendance is Down
We’ve been saying it for a while, and Disney confirmed it – attendance is still down at Disneyland Resort.
“Growth at Disneyland Resort was primarily due to higher guest spending, partially offset by Star Wars Galaxy’s Edge expenses, and to a lesser extent, lower attendance”
Guest spending means “higher ticket prices and higher average spending on food and merch” (that’s price hikes folks).
We wonder how long this strategy remains viable as multiple callers from investment banks with significant Disney stock holdings questioned Disney’s CEO about whether the market can continue to support these increases.
Later in the call, executives were asked how they know the attendance decline is just temporary. Disney pointed to higher hotel booking rates for the current quarter and high uptime and middling ridership on Millenium Falcon, but even Bob Iger seemed a bit shaky answering these questions.
At Walt Disney World, attendance and hotel occupancy was slightly up but not enough to cover Galaxy’s Edge expenses. Executives on the call continued to discuss that while the lands are “performing better than is being reported”, the company believes people are still putting off their trips until Rise of the Resistance opens.
“We believe guests are deferring visits until Star Wars: Galaxy’s Edge and the second E Ticket are fully open”
A concerning number: Per-room spending was only up by 2%. Considering the price increases mentioned on the call, this result is definitely worrisome for the company.
Overall, Parks, Experiences and Consumer Products made its money mainly from the Consumer Products side, a variety of initiatives at Disneyland, and an $88 million quirk of accounting related to the Riviera DVC location in Florida.
Earnin’ Around The World
International parks was a mixed bag of results.
- At Shanghai Disneyland, attendance was down but revenue was up due to higher ticket prices. This really isn’t a desired result for the newest park in the Disney family
- Disneyland Paris attendance grew! It’s great to see this park flourish due to the quality investments and refurbishments Disney is putting into it
- Hong Kong Disneyland is on track to lose quite a bit of money due to political strife which has scared away tourists. Visitation from mainland China has dropped significantly.
Disney+ or Disney-?
Most of the investor questions focused on the absolutely massive behemoth of Disney+. Disney remained very coy on their product that launches next week, but here’s a quick summary of the discussion points:
- The big revenue driver this quarter was Media and Direct to Consumer – so expect even more of a push as Disney+ launches.
- The company expects to take an $850 million loss in costs and delayed recoupment related to Disney+. A similar financial situation occurred when the Disney Channel launched way back when, so this isn’t unprecedented.
- Executives seemed pleased with the Netherlands based test of Disney+ and mentioned a couple of things they learned, such as brand-centric navigation being a big hit.
- Disney+ Europe launches March 31st.
- While they didn’t give specifics, Iger did let it slip that presale numbers may have been lower than expected, but the company seems pleased with the reaction, especially to the D23 50% off offer.
“We activated all the creative engines across the company for Disney+”
Interestingly, Iger mentioned that Disney+ exclusive content could find its way to ABC and other Disney media channels down the line.
So, What Does All This Mean?
Overall, Disney presented the image of a great quarter. However, investors seemed concerned and somewhat confused on the Q&A section, not entirely believing what the company was saying.
For example, the very first question was about where the Star Wars and Marvel franchises go “now that the IP can’t be mined any further”.
The call as a whole painted Disney as waiting to see whether the risks it took over the past few months and years will pay off, and on the whole… that remains to be seen. Q1 & Q2 of next year will be interesting, to say the least.
Let’s Hear From You
Would you like to see more recaps of the business side of Disney here on MiceChat? Investor calls tend to shed a unique light on the parks we love, and we’d appreciate your comments and observations!