During Disney’s third-quarter (Q3) earnings call, CEO Bob Iger ran through the winners and losers for the company, including the bantha in the room: Star Wars Galactic Starcruiser.
Bob said he believes three pillars will drive company growth over the next five years: the film studios, the theme parks, and streaming, all of which, he noted, are “inextricably linked to our brand’s franchises.”
1. The Film Studios
It’s no secret recent Disney films have not performed as well at the box office as expected, a problem Bob says would be corrected by “improving the quality of our films and…by not just reducing the number of titles we release, but also the cost per title.”
While acknowledging “some of our recent films have definitely been disappointing, and we don’t take that lightly,” Bob also took the opportunity to brag about Disney’s “tremendous run over the last decade,” going so far as to call it “the greatest run that any studio has ever had.” He did note that Disney is “focused on improving the quality of the films that are coming up.”
Disney also plans to leverage Disney+ to provide access to content in multiple ways, and Bob singled out “Avatar: The Way of Water,” which is not only the third-highest-grossing film of all time but is also on track to be Disney’s biggest domestic electronic home video release.
“By focusing on big franchises and tent pole films, we’re able to generate interest in our existing library,” Bob said. “For example, we’re seeing tremendous engagement on Disney+ with the previous ‘Guardians of the Galaxy ‘films, the original ‘Avatar,’ and the first floor ‘Indiana Jones’ movies.”
2. The Theme Parks
During the Q3 earnings call Bob noted Walt Disney World revenue decreased, which he attributed to a (predictable) decline in attendance following the resort’s 50th-anniversary celebration (although the Orlando resort’s revenue is still up compared to 2019). Bob also pointed to a decrease in international visitors, which accounts for a large percentage of Walt Disney World’s business (unlike Disneyland, which is considered more of a “local” park).
Regarding Galactic Starcruiser: According to Interim CFO Kevin Lansberry, the closure of “Chapek’s folly” after less than two years created an approximately $100 million “accelerated depreciation charge,” indicating the company will likely be paying for that decision for a long time to come.
In contrast to Walt Disney World, attendance and earnings were up for Disneyland Resort and way up for international parks (especially Shanghai Disney Resort and Hong Kong Disneyland), and Bob made a point to mention large projects that justify investment in those parks, namely new lands themed to “Frozen” at Hong Kong Disneyland and “Zootopia” at Shanghai Disney Resort.
“Our park experience segment has an overall impressive streak and will be a key growth engine for the company,” he said.
Worth noting is that Bob also reiterated his previous promise to “bring an Avatar experience to Disneyland,” which we reported on in our Disneyland Update on Feb. 13, 2023.
3. Streaming
When discussing streaming (AKA Direct to Consumer/DTC), Bob noted it’s still a relatively new segment for the company and acknowledged Disney launched the Disney+ service in November of 2019 before fully determining pricing strategies. Since then, he says, DTC has been restructured to prioritize the strength of Disney’s brands and franchises (plus making Hulu content available to bundle with Disney Plus).
Notably, Bob said pricing will increase for ad-free subscriptions but will remain unchanged for ad-supported subscribers. In addition, a new ad-free bundle subscription plan featuring Disney Plus and Hulu will be available in the U.S. on Sept. 6, 2023.
Password sharing was another topic addressed on the call, and while Bob didn’t elaborate on how Disney plans to address this “significant” issue, he did say the company plans to address it in 2024, so stay tuned.
And what about that ESPN sportsbook we reported on earlier today?
Bob mentioned that too.
“[The exclusive licensing arrangement with Penn entertainment] will offer a compelling new experience for sports fans that will enhance consumer engagement,” he said. “We’re excited to offer this to the many fans who have long been asking for it.”
He also said Disney is considering additional partnerships for distribution, technology, marketing, and content (though Disney will retain control of ESPN).
You can read more about ESPN BET here:
After being strongly criticized by SAG-AFTRA president Fran Drescher for his initial reaction to the ongoing WGA and SAG-AFTRA strikes, Bob had this to say:
“Nothing is more important to this company than its relationships with the creative community. And that includes actors, writers, animators, directors, and producers. I have deep respect and appreciation for all those who are vital to the extraordinary creative engine that drives this company and our industry. It is my fervent hope that we quickly find solutions to the issues that have kept us apart these past few months and I’m personally committed to working to achieve this result.”
The final question during the Q&A section of the Q3 earnings call addressed an ongoing rumor about Disney being sold to another company – which some speculate may even be Apple – and although Bob clearly stated he would not be among those speculating about the potential for Disney to be acquired by “any company,” he didn’t outright deny it either.
“Anyone who wants to speculate about such things would have to immediately consider the global regulatory environment,” Bob said. “I’ll say no more than that.”
Let’s Hear From You!
Prior to today’s earnings call, Disney’s share price dropped on the initial release of financials. However, after the numbers were put into context by Bob and company, the price spiked.
But what are your thoughts? Is Disney back on track with streaming? Are you happy to hear about an increased focus on quality over quantity for Disney films? Are you concerned about Walt Disney World’s performance? And what do you think the likelihood of a Disney merger with another company is? Let’s hear from you!
