Streaming growth a silver lining in Disney earnings

The Drum pulls out some highlights from the call.

The numbers

• Disney saw an $8bn drop in overall year-on-year revenue, from $20.25bn to $11.8bn.

• Operating income is down from $4bn to $1bn.

• Theme park revenues have plunged 85%, from $6.58bn to $983m.

• Revenues from its movie studios have dropped 55%, from $3.8bn to $1.74bn.

• The company’s TV unit is stable, down from $6.7bn to $6.6bn.

• Disney+ has reached 60.5m subscribers.

The market conditions

• As a content maker, Disney’s productions are at a standstill and the pipeline still looks empty. The live-action Mulan remake, originally slated to hit cinemas in March, will now launch on Disney+ with a one-off fee of $29.99. Disney was hoping it the movie would land big in China, though will still launch in cinemas in nations Disney+ hasn’t reached.

• “We’re looking at Mulan as a one-off as opposed to trying to say there’s some new business-windowing model. That said, we find it very interesting to take a new offering to consumers at a $29.99 price point and learn from it,” said chief executive Bob Chapek.

• The theme parks were shut during the period, although its Florida sites reopened with a tepid appeal. The California site remains closed. Historically, parks have been Disney’s most profitable unit after television.

• The TV unit’s revenue held steady, but an increasingly empty pipeline could hurt it in later quarters.

• Disney+ has been growing well but the direct-to-consumer unit will not be profitable for years to come. It saw a loss of $706m for the quarter.

• Marketing spend was down in most units to offset diminished revenues. For the Disney+ business, Chapek made clear that content comes first. “One of the biggest things in terms of subscriber acquisition is having new, hot tentpole content to bring to the service, and you get that by making investments in new content. So we’ll be investing in content first and then try and grow the service both from a marketing standpoint and from an installed base standpoint.”

Reaction and analysis

• Mark Inskip, chief executive of Kantar Media Division, UK & Ireland, said: “The results have affirmed the success of the global launch of its streaming service Disney+, with the platform’s colossal growth going some way to compensate for the substantial hit to profits from the closure of parks in lockdown and falling ad revenue.

• “In the competitive streaming wars, Disney+ benefits from monthly subscription prices lower than rivals Netflix and Amazon Prime, as well as premium content with the strategic release of movies such as Frozen 2 and Hamilton just in time for the summer holidays. In lockdown, subscribers have flocked to engage with the new platform as a result, but the real challenge will come as restrictions lift. Some consumers may be tempted to direct their entertainment budgets elsewhere.”

• Paolo Pescatore, tech, media and telco analyst at PP Foresight, said: “The company smashed its own target for Disney+ four years ahead of schedule (60m-90m subs by 2024). Though it has been late to the streaming market, it is making good progress in a short period of time. This enables the company to have a closer and more meaningful relationship with the customer. Knowing more about a user's habits can give them the confidence to create more big blockbusters and franchises.”