Disney shared their First Quarter results today, and given the ongoing changes in markets around the world, there’s a lot to talk about.
Disney+ or Bust
Last quarter included the launch of Disney+, so there was a lot for Bob Iger to talk about.
Overall, despite fantastic subscriber numbers (26.5 million subscribers already), this segment continues to be a money pit – a negative $800 million impact this quarter and an expected negative $900 million impact next quarter.
This isn’t unexpected (Netflix’s numbers are comparable) but still something to note.
Some of this is attributable to internal financial matters, like the sale of all content from various business units to Disney+. This may seem confusing, so it’s important to note Disney’s unique financial structure. Each department and sub-department charges each other for services and products rendered, so this is common within the company.
In the rest of the Direct To Consumer department, Hulu’s operations are being “reorganized to operate more efficiently” as they hold off international launch until the full rollout of Disney+ is complete in 2021.
And yes… Baby Yoda is returning in October.
What About Theme Parks?
Parks did OK this quarter! While Rise of the Resistance’s impact won’t be felt until Q2, Bob Iger decided to lead off the call with his excitement over that attraction and Star Wars Galaxy’s Edge as a whole.
Parks again earned more money based on increased guest spending due to higher prices all around. Attendance increased by 2%, and hotel occupancy was at a strong 92% occupancy.
Analysts appeared unconvinced – one question focused on if continued price increases were sustainable. Iger couldn’t really give a response, pointing to coronavirus concerns and the future Cosmic Rewind attraction at Epcot, along with a quick reference to the flexible date pricing. . . which was really just a dodge to the question being asked.
Expenses at the parks continued to increase due to finalized spending on Galaxy’s Edge and increased pay rates for Cast at both Disneyland and WDW. Of note, capital expenditures have dropped year over year for the first time in quite some time. SWGE is complete and there are fewer big long-term expenses, so it will be interesting to see where that number goes from here.
Coronavirus Comes in Q2
While it hasn’t affected visitation to the domestic parks, coronavirus was mentioned as a potential issue for Q2’s international park revenue. The current assumption based on a closure of the Chinese parks for 2 months is:
- Shanghai Disneyland: Negative $135 million impact
- Hong Kong Disneyland: Negative $40 million impact due to the virus,
- Negative $100 million impact due to lower visitation from mainland China
These issues are affecting those parks during what is generally their most profitable fiscal quarters. This one is going to hurt.
But What Does It Mean?
Overall, the company did well and beat expectations. But there are signs of slowing growth in the Parks department. And as the Fox company continues to integrate into Disney, there will likely be further complications and restructures of the business to accommodate those changes. It’s sure to be an interesting next few months for Disney as the company increasingly looks global and focuses on the evolution of its streaming services (Disney+, Hulu, and ESPN+).
What are your thoughts folks? Any of you Disney shareholders? Are you happy with current results and product pricing? Do you think that Coronavirus will have an even larger impact if it continues to spread globally? Has it made you rethink your travels? Let us know in the comments below.