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

[TP2000]

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?

What I can't understand is how Disney makes any money when they spend $150 to $250 Million per film (not including marketing), then sends them to Disney+ for $15 a month just 30 or 45 days later. An American family of four now spends $15 to watch that big-budget tentpole film as many times as they want, where just a few years ago that same American family would have spent $50 in movie tickets to see that same film once.

How does charging $15 to see a film in 2023 make more money than charging $50 in 2018? On top of the huge costs needed by Disney to keep the server farms and data centers all pumping out this stuff on demand to America's family rooms?

No wonder Burbank is losing Billions and Billions on Disney+.

Memories of a Cable TV Early Adopter: It's funny you mention 1975 and Cable! I understood Cable TV, and adjusted for inflation it was much more expensive per month than streaming. When I think back to the condo I was living in when I first got Cable, it must have been around 1978 or '79 as I moved to a new place in 1980. I was an early adopter! I also distinctly remember that my first cable subscription came with an overwhelming 36 channels! There was this crappy beige plastic box that sat on top of the TV and it had this cheesy illuminated sliding selector that click-click-clicked into one of the 36 channel options. I remember hating how it looked because the beige plastic clashed with my Disco living room decor of the time. I wish I had a photo of my first cable box to share!

 

[TP2000]

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.

I watched Gutfeld! last night and he had a big segment on that Disney+ offering. OOF! That was painfully alarming to watch.

That's gonna leave a mark, for sure.

Markets have now closed for the week. Here's where Disney stock landed after Iger's big announcement on February 8th.

It's down 1.83% for the week.

 

[CastAStone]

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

Yep. One thing that is undoubtedly true is that from a business perspective, they historically have done better on various “return on” metrics than they’re doing now.

But - Another thing that is true is that they told us all that they were intentionally breaking their business model for their largest segment 4 years ago and everything is still basically going to plan despite a global pandemic and a misguided short term CEO.

In any case, a third thing that is true is they’re making more than enough money to continue to pay down their debt and apparently to fight off hostile outsiders.

All in all a fair and reasonable assessment of the company would be that it’s healthy, that it is spending deeply on investment in the company’s future, hurting current margins, that while that expense is not without risk, they are hitting the metrics they’ve set out to hit so far, and that it is reasonable to expect operating income substantially moving forward.

 

[Disstevefan1]

I watched Gutfeld! last night and he had a big segment on that Disney+ offering. OOF! That was painfully alarming to watch.

That's gonna leave a mark, for sure.

Markets have now closed for the week. Here's where Disney stock landed after Iger's big announcement on February 8th.

It's down 1.83% for the week.

View attachment 697681

 

[flynnibus]

What I can't understand is how Disney makes any money when they spend $150 to $250 Million per film (not including marketing), then sends them to Disney+ for $15 a month just 30 or 45 days later. An American family of four now spends $15 to watch that big-budget tentpole film as many times as they want, where just a few years ago that same American family would have spent $50 in movie tickets to see that same film once.

How does charging $15 to see a film in 2023 make more money than charging $50 in 2018? On top of the huge costs needed by Disney to keep the server farms and data centers all pumping out this stuff on demand to America's family rooms?

1- stop splitting money with others
2- stop spending millions to market in other people's theatres and platforms
3- collect that $15 from the family every month, not just when they went to the theatre a few times a year
4- collect that data on your viewers directly
5- start collecting money from others including your subscribers (ads)

Disney was spending too much on some projects - that's an easy fix. It doesn't make DTC somehow broken or unfeasible.

 

[TP2000]

1- stop splitting money with others
2- stop spending millions to market in other people's theatres and platforms
3- collect that $15 from the family every month, not just when they went to the theatre a few times a year
4- collect that data on your viewers directly
5- start collecting money from others including your subscribers (ads)

Disney was spending too much on some projects - that's an easy fix. It doesn't make DTC somehow broken or unfeasible.

I sold the last of my Disney stock off a couple years ago, so I'm actually quite content to sit and watch until Disney+ actually starts eeking out a profit for Burbank.

I'll just wait here...

 

[CastAStone]

One other random note; most of the time when companies make massive investments they capitalize them so that the investment is counted proportionally into the years it benefits, rather than all at once.

While most of the hardware and certain elements of the software development for D+ could be capitalized (and presumably were), spending against people, content, and marketing cannot be capitalized. That content counts the day it first airs, even if it makes them money for a decade. Over-investing in marketing and content to get people hooked has cost them billions of dollars paid all at once (vs like SWGE which they’re “paying for” on their financial statements just ~$13M per quarter).

 

[BrianLo]

What I can't understand is how Disney makes any money when they spend $150 to $250 Million per film (not including marketing), then sends them to Disney+ for $15 a month just 30 or 45 days later. An American family of four now spends $15 to watch that big-budget tentpole film as many times as they want, where just a few years ago that same American family would have spent $50 in movie tickets to see that same film once.

How does charging $15 to see a film in 2023 make more money than charging $50 in 2018? On top of the huge costs needed by Disney to keep the server farms and data centers all pumping out this stuff on demand to America's family rooms?

For what it is worth, I think Iger largely agrees with you. He said the company became infatuated with their streaming success and subscriber growth (which was obviously nothing but beyond expectation)... BUT, at the loss of some platforms that really were not as dead as they were made out to be. Theatrical specifically he mentions.

I do think the 45 day window, or day and date release experiment is now over under Iger.

Now I do think Turning Red is a success, despite never having a box office return. Bob has particularly pointed that movie (and Encanto - which is a bit less deniable) out on multiple occasions and interviews. Likewise he clearly acknowledges the most recent releases from both studios were big misses.

 

[BrianLo]

One other random note; most of the time when companies make massive investments they capitalize them so that the investment is counted proportionally into the years it benefits, rather than all at once.

While most of the hardware and certain elements of the software development for D+ could be capitalized (and presumably were), spending against people, content, and marketing cannot be capitalized. That content counts the day it first airs, even if it makes them money for a decade. Over-investing in marketing and content to get people hooked has cost them billions of dollars paid all at once (vs like SWGE which they’re “paying for” on their financial statements just ~$13M per quarter).

Agreed! Also exceptionally relevant when you understand how much money Disney makes on some of these things post-theatrically.

Sure something like Encanto will never have a box office to gloat about, but maybe one day they'll join this list. If they birth a Frozen on that platform, its single IP can completely pay off the the entirety of this loss period in merch alone down the road.

List of highest-grossing media franchises - Wikipedia

en.wikipedia.org

I do think Mando has already paid for itself in multiples in this way.

 

[TP2000]

For what it is worth, I think Iger largely agrees with you.

Well, he should!

He said the company became infatuated with their streaming success and subscriber growth (which was obviously nothing but beyond expectation)... BUT, at the loss of some platforms that really were not as dead as they were made out to be. Theatrical specifically he mentions.

I do think the 45 day window, or day and date release experiment is now over under Iger.

That 45 day window part is a big chunk of why I find Disney+ so baffling. Who the heck thought that was a good idea?

Even if a movie bombs so disastrously like Strange World, do NOT release it onto Disney+ for at least 90 days. Releasing these big budget studio tentpoles on Disney+ at the 30 to 45 day mark is just really bad business long-term. A stunningly bad decision, in my opinion.

Now I do think Turning Red is a success, despite never having a box office return. Bob has particularly pointed that movie (and Encanto - which is a bit less deniable) out on multiple occasions and interviews. Likewise he clearly acknowledges the most recent releases from both studios were big misses.

I'm happy to write off and set aside any movie released in 2020 through about mid 2021, due to Covid closures in many highly populated media markets. I do not envy anyone in big business in any industry trying to navigate those panicky and unprecedented times.

But for Hollywood, after Spiderman did gangbusters in movie theaters for Christmas '21, the Covid excuse ended.

 

[Tha Realest]

I watched Gutfeld! last night and he had a big segment on that Disney+ offering. OOF! That was painfully alarming to watch.

That's gonna leave a mark, for sure.

Markets have now closed for the week. Here's where Disney stock landed after Iger's big announcement on February 8th.

It's down 1.83% for the week.

View attachment 697681

Iger’s had one heck of a week.
His company’s stock lost 1.8% of its value and he lost 100% control of RCID

 

[Lilofan]

Iger’s had one heck of a week.
His company’s stock lost 1.8% of its value and he lost 100% control of RCID

He's still worth around $1B.

 

[BrianLo]

Iger’s had one heck of a week.
His company’s stock lost 1.8% of its value and he lost 100% control of RCID

I think you mean Chapek had a heck of a week. We just had Chapek's final quarter and the results of a fight Chapek had last year with Florida finally play out.

Iger on the other hand had a proxy fight, which started and now subsequently ended during his new tenure.

As for 1.8%.... Seriously? Can people STOP thirstily reporting every time there is a minor fluctuation in the stock price that is in line with the market. Which by the way was better than a 4% WB loss, or 4.5% Netflix loss, or 3% Comcast loss, or 11%(!) Paramount loss last week.

The lack of financial literacy on this forum is starting to drive me more wild than the backseat epidemiologists of 2020.

 

[MisterPenguin]

As for 1.8%.... Seriously? Can people STOP thirstily reporting every time there is a minor fluctuation in the stock price that is in line with the market.

To be fair, they only report changes in the stock when it goes down.

Oh, no... wait... that's not fair at all!!!

 

[TalkingHead]

That 45 day window part is a big chunk of why I find Disney+ so baffling. Who the heck thought that was a good idea?

Seems like nearly every studio is struggling to figure that out. The M. Night Shyamalan picture that opened last weekend to modest numbers (but enough to be the top movie of the weekend) will be streaming in a few days. Universal had Fabelmans streaming a couple/few weeks after it opened killing any chance it had to generate word of mouth. Babylon was in theaters for exactly month and then went immediately to streaming.

In general, consumers have been conditioned to expect movies to be available for rental or on a streaming platform so quickly that box office sales have to be affected negatively. Selling a $15/mo package that can be canceled any time means not selling $15/ticket to each member of the family, and multiple times for repeat business.

Still believe the whole streaming business model is unsustainable long term unless the studios are willing to commit to making stuff on shoestrings with no attention to quality or star power in which case streaming originals may become this century’s version of cheapo drive-in fodder.

 

[Indy_UK]

They really need to push the cinematic releases to 3 months before going onto Disney+. It won’t be detrimental to the service

 

[doctornick]

They really need to push the cinematic releases to 3 months before going onto Disney+. It won’t be detrimental to the service

Heck I would do 90 days, then a 1-3 month gap where you release physical media then streaming. I don’t really get the rush to put stuff onto streaming. The content buffs it whether it’s in 3 months or in 6 months or even a year.

 

[Indy_UK]

Yeah I am not against them going back to a proper physical release timeframe either. There’s really not a huge reason to rush the content to Disney+. Maybe 6 months later, the movie may be a bit stale but I don’t think it would affect subscriber numbers too much?

 

[MadderAdder]

Heck I would do 90 days, then a 1-3 month gap where you release physical media then streaming. I don’t really get the rush to put stuff onto streaming. The content buffs it whether it’s in 3 months or in 6 months or even a year.

Or rent/buy virtually in addition to physical, then all access D+ streaming.

 

[GhostHost1000]

Or rent/buy virtually in addition to physical, then all access D+ streaming.

I’m shocked they haven’t implemented something like large new releases pay per view/own on D+ a year before it’s released to all on D+. Something like that.