Disney’s Q2 FY23 Earnings Results Webcast

Tha Realest

Tha Realest

Well-Known Member
The Moles Family said:
Hang on, why are Disney removing them when they’ve already been made and added to Disney+

I’d understand not making any new series but I don’t get this?
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The general explanation when these moves have happened elsewhere is it saves them from having to pay residuals to the producers/writers/creators. Even though those series massively underperformed, they’re not a complete “sunk cost” as there are ongoing fees and costs incurred with continued streaming. Locking them in the vault (forever?) takes care of that problem.
 
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doctornick

Well-Known Member
EPCOT-O.G. said:
The general explanation when these moves have happened elsewhere is it saves them from having to pay residuals to the producers/writers/creators. Even though those series massively underperformed, they’re not a complete “sunk cost” as there are ongoing fees and costs incurred with continued streaming. Locking them in the vault (forever?) takes care of that problem.
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Or shifting them to something (e.g. digital downloads, being used on a FAST service) where they generate some revenue directly if watched which can cover the residuals costs and make them worthwhile to be offered.
 
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Tha Realest

Tha Realest

Well-Known Member
doctornick said:
Or shifting them to something (e.g. digital downloads, being used on a FAST service) where they generate some revenue directly if watched which can cover the licensing fees and make them worthwhile to be offered.
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Yes. The WB/Batgirl stuff was a bit more unique as that was a pure tax write off that I think they could take advantage of given the M&A aspect. That may require them to memory hole it fully. Other shows getting pulled don’t have that aspect at play. For example, I think WB hinted at licensing out shows to other streamers as a way to recoup more costs externally.
 
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DCBaker

Premium Member
Original Poster
From a new 8-K filing.

Item 2.06 Material Impairments.

As previously announced, The Walt Disney Company (together with the subsidiaries through which its various businesses are actually conducted, the “Company”) is in the process of reviewing content, primarily on its direct-to-consumer (“DTC”) services, for alignment with a strategic change in approach to content curation and as a result is removing certain content from its platforms. On May 26, 2023, the Company removed certain produced content from its DTC services. As a result, the Company will record a $1.5 billion impairment charge in its fiscal third quarter financial statements to adjust the carrying value of these content assets to fair value. The Company is continuing its review and currently anticipates additional produced content will be removed from its DTC and other platforms, largely during the remainder of its third fiscal quarter. As a result, the Company currently estimates it may incur further impairment charges of up to approximately $0.4 billion related to produced content. The Company does not expect any material cash expenditures in connection with the impairment charges related to produced content. In addition, the Company may terminate certain license agreements for the right to use content on its platforms, which would result in the removal of licensed content from its platforms and lead to impairment and/or contract termination charges as well as cash payments. The Company currently expects that any such charges and payments related to licensed content would be meaningfully less than the impairment charges related to produced content.

Link to the filing below.

 
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Trauma

Well-Known Member
DCBaker said:
From a new 8-K filing.

Item 2.06 Material Impairments.

As previously announced, The Walt Disney Company (together with the subsidiaries through which its various businesses are actually conducted, the “Company”) is in the process of reviewing content, primarily on its direct-to-consumer (“DTC”) services, for alignment with a strategic change in approach to content curation and as a result is removing certain content from its platforms. On May 26, 2023, the Company removed certain produced content from its DTC services. As a result, the Company will record a $1.5 billion impairment charge in its fiscal third quarter financial statements to adjust the carrying value of these content assets to fair value. The Company is continuing its review and currently anticipates additional produced content will be removed from its DTC and other platforms, largely during the remainder of its third fiscal quarter. As a result, the Company currently estimates it may incur further impairment charges of up to approximately $0.4 billion related to produced content. The Company does not expect any material cash expenditures in connection with the impairment charges related to produced content. In addition, the Company may terminate certain license agreements for the right to use content on its platforms, which would result in the removal of licensed content from its platforms and lead to impairment and/or contract termination charges as well as cash payments. The Company currently expects that any such charges and payments related to licensed content would be meaningfully less than the impairment charges related to produced content.

Link to the filing below.

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For anyone who doesn’t speak financials this basically means there is a drastic reduction in the value of the asset.

In this case I believe that asset is content.

I’m sure I will be corrected immediately if I’m wrong.
 
flynnibus

flynnibus

Premium Member
Trauma said:
For anyone who doesn’t speak financials this basically means there is a drastic reduction in the value of the asset.

In this case I believe that asset is content.

I’m sure I will be corrected immediately if I’m wrong.
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I think it shows why they removed what looked like otherwise harmless content... the tax advantage.

It wasn't 'storage space' or other non-sense... it was because they could get WAY more value from the write-down then the content itself offered.

Seems a bit of a gimmick, but they are really focusing on making the financials look better for q3 and q4
 
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Trauma

Well-Known Member
flynnibus said:
I think it shows why they removed what looked like otherwise harmless content... the tax advantage.

It wasn't 'storage space' or other non-sense... it was because they could get WAY more value from the write-down then the content itself offered.

Seems a bit of a gimmick, but they are really focusing on making the financials look better for q3 and q4
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Well they know better than anyone what attendance and D+ subscriptions are looking like.

Maybe they sense trouble on the horizon.
 
flynnibus

flynnibus

Premium Member
Trauma said:
Well they know better than anyone what attendance and D+ subscriptions are looking like.

Maybe they sense trouble on the horizon.
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I think it's all back to the fiscals that ultimately ran chapek out. They are rearranging all the chairs and trying to establish what the new baseline is... and taking fat write-offs along the way to make the top line numbers look more attractive. They want the annual numbers to show more than what they will achieve in just the last 6months in terms of changing course. Massive write-offs help that... but they are also easy to look past.

TLDR - Looks like a massive corporate yard sale to help the annual report to me.
 
Tha Realest

Tha Realest

Well-Known Member
flynnibus said:
I think it's all back to the fiscals that ultimately ran chapek out. They are rearranging all the chairs and trying to establish what the new baseline is... and taking fat write-offs along the way to make the top line numbers look more attractive. They want the annual numbers to show more than what they will achieve in just the last 6months in terms of changing course. Massive write-offs help that... but they are also easy to look past.

TLDR - Looks like a massive corporate yard sale to help the annual report to me.
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Does this mean this content is not just going away in a vault, but rather locked in a box, covered in cement, and dropped in a deep trench in the ocean? Seems more than just not wanting to pay residuals and licensing for a short period of time.
 
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seascape

Well-Known Member
The deleted content was purchased from the various studios for use over a certain time frame. Since Disney+ and Hulu no longer want it, they cancelled early and have to pay the studios a portion of the money. The content is now returned to the studios for them to decide what to do with them. The studios are now free to sell the rights to another streaming service or tv service. Given the writers strike it is possible some of the shows could appear on ABC this Fall.
 

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