Disney’s Q1 FY23 Earnings Results Webcast - Wednesday, Feb 8, 2023

[Magenta Panther]

So the website Cartoon Brew talked to Colin Tedards of the Investor Channel to walk people through Disney's earnings report. Here's a portion of his analysis:

Operating Income​

A fancy term for profit. Disney’s most recent report indicates that Disney Media and Entertainment lost $10 million over the quarter. That’s not great, but where things begin to look really bad is in the direct-to-consumer business. From $5.3 billion in streaming revenue, Disney actually lost $1 billion in just three months due to costs such as advertising, content spend, and streaming tech infrastructure.

See, I was wondering why some here are painting such a rosy picture over the earnings report, when headlines at news services suggested the opposite. Perhaps Tedard's analysis clears things up a bit...

Here's the link to the article: https://www.cartoonbrew.com/business/how-to-read-a-quarterly-earnings-report-225853.html

The comments underneath the article are pretty salient too. Especially the one about that notorious Proud Family episode.

 

[Magenta Panther]

Yeah I disagree there. I just watched two excellent people get dropped from our company because their business unit was merged and their new counterpart was also excellent. There’s always an element of luck.

That happened to a company I once worked for. After the new owners moved in, they eliminated a lot of middle management jobs. Now, middle management is like the connective tissue between departments and the employees of those departments. Cut away too much, and things start to fall apart. That's just what happened to my company. In the end, the new owners had to rehire people they'd laid off - at higher salaries - and try to hire new people, again, at a higher salary. It was hilarious and aggravating to watch. The excellent people CastAStone mentions aren't always at the top...

 

[fgmnt]

One other reason I wouldnt expect ESPN to leave the fold anytime soon: this reorganization reotreates to me that I would place a future bet on Pitaro to replace Iger over any other internal candidates. He's the guy heading up all but the absolute biggest rights negotiations the network manages (stuff like the NBA and NFL ultimately rise to CEO more expeditiously than other rights) and his executive experience is probably more analogous to the CEO than parks or entertainment.

 

[MisterPenguin]

Operating Income
A fancy term for profit. Disney’s most recent report indicates that Disney Media and Entertainment lost $10 million over the quarter. That’s not great, but where things begin to look really bad is in the direct-to-consumer business. From $5.3 billion in streaming revenue, Disney actually lost $1 billion in just three months due to costs such as advertising, content spend, and streaming tech infrastructure.

See, I was wondering why some here are painting such a rosy picture over the earnings report, when headlines at news services suggested the opposite.

OK... you think Cartoon Brew is a good source for your financial news headlines... lol.

Anyhoo, you point out two things as being bad:

1. DMED as a whole
2. and, DTC

Well, duh, DMED will look bad if DTC is bad because DTC is part of DMED. The rest of DMED outside of DTC is doing *very well.* So much so, it can pretty much nullify a $1B loss at DTC to just $10M in all of DMED.

So, it's not DMED that's an issue at all. It's just DTC.

And DTC's loss went *down* from last quarter.

And DTC is still projected to be profitable by 2024. The recent rate hikes and ad tier only kicked in for three weeks of last quarter. Next quarter's losses will continue to go down.

When DTC's losses went *up* last quarter under Chapek, Wall Street punished Disney with a cratering of its stock. Now Wall Street has pumped up Disney's stock to where it was before Chapek's last quarterly. There's your financial news headline.

 

[MrPromey]

So the website Cartoon Brew talked to Colin Tedards of the Investor Channel to walk people through Disney's earnings report. Here's a portion of his analysis:

Operating Income​

A fancy term for profit. Disney’s most recent report indicates that Disney Media and Entertainment lost $10 million over the quarter. That’s not great, but where things begin to look really bad is in the direct-to-consumer business. From $5.3 billion in streaming revenue, Disney actually lost $1 billion in just three months due to costs such as advertising, content spend, and streaming tech infrastructure.

See, I was wondering why some here are painting such a rosy picture over the earnings report, when headlines at news services suggested the opposite. Perhaps Tedard's analysis clears things up a bit...

Here's the link to the article: https://www.cartoonbrew.com/business/how-to-read-a-quarterly-earnings-report-225853.html

The comments underneath the article are pretty salient too. Especially the one about that notorious Proud Family episode.

This was expected, though.

Frankly, losing a billion on streaming and only haveing it amount to an overall loss of $10 million makes the rest of the company look pretty good. $10 million is like what? A week's worth of parking fees at WDW?

If their march towards profitability on D+ works the way they're predicting, they'll have no problem getting ahead of that.

That's a big "if", of course but Wall Street was expecting worse news so, combined with the plans to reduce spending, this is still good news to them.

We're of course, just an economic slip away from all these great plans falling to ruin but even if that happens, they'll get some runway for it since Disney will hardly be the only company impacted and it won't be attributed to their negligence.

I get what you're saying - $10 million is a big number to me, too - but the problem with the comments section on Cartoon Brew is the same problem here: People unhappy with the company want to project their emotions onto news like this.

I'm plenty guilty of it, too but I see where in this instance, it's not warranted. If things are looking worse rather than better over the next couple quarters, that's when Bob should start getting nervous.

... and of course, the audience on Cartoon Brew is going to have strong opinions when it comes to the cash-in sequels, news - can you blame them?

 

[flynnibus]

I will NEVER wrap my pea-sized Capitalist brain around how streaming makes any of these giant legacy studio companies any money. How on earth did they convince anyone they could make a profit with this model???

Did you also still think like 1975 and that cable tv was an impossible model too?

Why is streaming now less doable then having another provider broadcast your home content?

 

[flynnibus]

D+ was losing money because of
-intro promos
-priced too low
-too much high budget movie level content being made too quickly

Disney is already addressing all these points and they are all largely in their control. And all of those weaknesses were Intentional! Part of the rampup snd achieve critical mass and sexy sub counts.

The only flip-flop here is ghe market getting scared about profitability…, so disney adjusts the knobs and can dial that in.

-reduce promos
- raise prices
- ad tier
- adjust your slate

Not a problem for d+

The bigger issues is disney properly setting up and navigating their international markets…. So they have dominance and not just be a player

 

[HauntedPirate]

DIS at the open on Monday: $110/share
DIS right now after what many have called a good earnings report: $108/share (DIS peaked around $120/share in after-hours trading after the quarterly earnings report.)

Genuinely wondering if this was a not-so-good quarterly report once the dust settled and deeper details were digested.

 

[el_super]

Genuinely wondering if this was a not-so-good quarterly report once the dust settled and deeper details were digested.

No. It was still pretty good. Ended the proxy battle, restored the dividend, shows that they were accurate in stating last quarter would be the peak of DTC loses and shows real leadership and determination to create long term value. All around everyone wins.

I'm sure you're mostly seeing a dip due to day traders and Peltz maybe taking a little profit.

 

[JoeCamel]

DIS at the open on Monday: $110/share
DIS right now after what many have called a good earnings report: $108/share (DIS peaked around $120/share in after-hours trading after the quarterly earnings report.)

Genuinely wondering if this was a not-so-good quarterly report once the dust settled and deeper details were digested.

Over the years I've noticed the stock price and the quarterly results will often be uncorrelated as investors trade for what they think the future will bring and what the current results might mean for the future.
At $110 you might have people taking it off the table by selling out, ones who bought at $160+ and rode it down like Slim on the bomb might think this is their exit point. In any case stock price movement is not really an indication of a company's future.

 

[Magenta Panther]

OK... you think Cartoon Brew is a good source for your financial news headlines... lol.

Anyhoo, you point out two things as being bad:

1. DMED as a whole
2. and, DTC

Well, duh, DMED will look bad if DTC is bad because DTC is part of DMED. The rest of DMED outside of DTC is doing *very well.* So much so, it can pretty much nullify a $1B loss at DTC to just $10M in all of DMED.

So, it's not DMED that's an issue at all. It's just DTC.

And DTC's loss went *down* from last quarter.

And DTC is still projected to be profitable by 2024. The recent rate hikes and ad tier only kicked in for three weeks of last quarter. Next quarter's losses will continue to go down.

When DTC's losses went *up* last quarter under Chapek, Wall Street punished Disney with a cratering of its stock. Now Wall Street has pumped up Disney's stock to where it was before Chapek's last quarterly. There's your financial news headline.

OK...you're more of an expert than Mr. Tedards. Cool, cool. Would you care to present your credentials?

And Cartoon Brew was founded in 2004 by Jerry Beck, who is a famed cartoon historian, author and producer, and is on the board of ASIFA-Hollywood, which created the Annie Awards. He himself has won awards such as the June Foray Award, the Independent Book Publishers Award, and the Inkpot Award.

 

[JD80]

OK...you're more of an expert than Mr. Tedards. Cool, cool. Would you care to present your credentials?

And Cartoon Brew was founded in 2004 by Jerry Beck, who is a famed cartoon historian, author and producer, and is on the board of ASIFA-Hollywood, which created the Annie Awards. He himself has won awards such as the June Foray Award, the Independent Book Publishers Award, and the Inkpot Award.

I mean you can keep taking financial advice from a cartoon historian. More power to you.

 

[MisterPenguin]

Perhaps we should just say that the good news/bad news coming from the Disney earnings report are a matter of interpretation, and leave it at that.

When you lump a new loss-leading enterprise with a whole division and then complain that the division isn't doing well, that's just objectively bad analysis. That's not open to interpretation.

 

[Disney Analyst]

Just like many can make something sunnier than it is, many can also make it gloomier than it.

The truth of the matter is this, Disney is turning things around (in terms of what Wall Street wants), stock is going up, ARPU is going up, and profit is still predicted for streaming in 2024, as was always planned.

 

[doctornick]

Just like many can make something sunnier than it is, many can also make it gloomier than it.

Here is the thing I continue to not understand. Even with the large losses from streaming, Disney as a whole company is making significant profit. Why are people acting like the company is "in trouble" or somesuch?

 

[Disney Analyst]

Here is the thing I continue to not understand. Even with the large losses from streaming, Disney as a whole company is making significant profit. Why are people acting like the company is "in trouble" or somesuch?

The company is setup to handle the planned and known losses of starting up a new business. Streaming is essentially a start up for them, and they are well positioned to push through on the road to profit.

 

[doctornick]

The company is setup to handle the planned and known losses of starting up a new business. Streaming is essentially a start up for them, and they are well positioned to push through on the road to profit.

Exactly. That's my point. They are taking (expected) losses on streaming right now with an expectation of having that segment become profitable in the future. The other parts of the company are generally doing well including DPEP making over $3 billion in profit for the quarter. It seems to me the issue I guess is that it's not making "enough" of a profit? If so that's silly.

 

[Disney Analyst]

Exactly. That's my point. They are taking (expected) losses on streaming right now with an expectation of having that segment become profitable in the future. The other parts of the company are generally doing well including DPEP making over $3 billion in profit for the quarter. It seems to me the issue I guess is that it's not making "enough" of a profit? If so that's silly.

The issue is people seem to have forgotten Disney's own guidance on streaming from the get go.

 

[MisterPenguin]

Here is the thing I continue to not understand. Even with the large losses from streaming, Disney as a whole company is making significant profit. Why are people acting like the company is "in trouble" or somesuch?

Disney Corp only profited $1.3 Billion this last quarter!!

 

[JD80]

It's the same argument people use when discussing debt and deficits of the federal government vs. how a household balances it's checkbook.

Two things that are not completely relatable at all.