Disney’s Q3 FY22 Earnings Results Webcast

[VJ]

Bob just described Disney+ ad tier to be "margin accretive."

What that means in plain language is that, given the choice, Disney would rather someone take the cheaper ad tier option than upgrading to ad free.

that... seems like the opposite of what they'd want? more income, right? weird

 

[flynnibus]

Also they are struggling to clean them in a timely manner which is why guests at all resorts are often finding their rooms not available until well after checkin time. Sometimes as late as 7pm

So if they aren't getting rooms done in time - even with limited housekeeping - Do we believe Disney is paying unlimited union overtime at all cost to get all rooms available week after week.. or do we think they will reduce inventory so they can achieve the required room turnovers without bleeding out paying unbudgeted union overtime?

If they can't get rooms turned over, even with other reductions in service, clearly they are bouncing off the rev limiter with the staff they have.

 

[peter11435]

So if they aren't getting rooms done in time - even with limited housekeeping - Do we believe Disney is paying unlimited union overtime at all cost to get all rooms available week after week.. or do we think they will reduce inventory so they can achieve the required room turnovers without bleeding out paying unbudgeted union overtime?

If they can't get rooms turned over, even with other reductions in service, clearly they are bouncing off the rev limiter with the staff they have.

I don’t think you realize how much overtime Disney pays out on a regular basis. It is not uncommon at all for Disney cast members to work 50-60 hour weeks.

If the choice is pay housekeeping overtime or turn away demand they will absolute pay the overtime. Paying 30 minutes of OT to clean an addition room is absolutely worth it when that room is going for several hundred dollars a night.

 

[peter11435]

that... seems like the opposite of what they'd want? more income, right? weird

They anticipate they will make more than the $3 a month you’d pay for the upgrade in ad sales.

 

[mikejs78]

And you are completely ignoring the billboards.

I'm ignoring people speculating about what they don't know anything about.

 

[esskay]

that... seems like the opposite of what they'd want? more income, right? weird

It's a win win to have the ad tier and a new higher tier. The ad tier is the same as the current pricing so:

• Some people will switch to the ad tier. So the income will be whatever it currently is + ad revenue
• Some people willswitcg to the higher tier, meaning more monthly income

They'll get more income with this as everyone across the board brings in more revenue.

 

[VJ]

It's a win win to have the ad tier and a new higher tier. The ad tier is the same as the current pricing so:

• Some people will switch to the ad tier. So the income will be whatever it currently is + ad revenue
• Some people willswitcg to the higher tier, meaning more monthly income

They'll get more income with this as everyone across the board brings in more revenue.

very diabolical! guess i'm not surprised though

 

[Lilofan]

Pre Covid they provided daily housekeeping unless guests declined. Currently it’s generally every other day and even then it’s not the full service the was previously provided. The level of housekeeping provided currently is significantly below what was provided when they were at 100% staffing. So no, they do not have the same number of rooms to service. And the service itself is scaled back. Previously every occupied room needed serviced every day. Currently only check in rooms and a percentage of occupied rooms need serviced each day. And occupied rooms recieve a cliff notes version of service. Also they are struggling to clean them in a timely manner which is why guests at all resorts are often finding their rooms not available until well after checkin time. Sometimes as late as 7pm.

7pm to check into a room? I’d be looking for some compensation for that inconvenience.

 

[peter11435]

7pm to check into a room? I’d be looking for some compensation for that inconvenience.

Agreed. Look around many resort lobbies between 3-5 and you’ll see countless frustrated families waiting for their room to be ready. Particularly on the weekends.

 

[CaptainAmerica]

that... seems like the opposite of what they'd want? more income, right? weird

The ad revenue more than offsets the lost subscription revenue.

 

[HauntedPirate]

It's a win win to have the ad tier and a new higher tier. The ad tier is the same as the current pricing so:

• Some people will switch to the ad tier. So the income will be whatever it currently is + ad revenue
• Some people willswitcg to the higher tier, meaning more monthly income

They'll get more income with this as everyone across the board brings in more revenue.

They're also assuming people will keep the service A) after he initial 3-year D23 subscriptions come due, and B) after they switch to the new pricing scheme. But I'm sure Bob will say there are plenty of people willing to subscribe if some of those drop.

If they move the bundled D+ to be the ad-supported service instead of the ad-free tier, I'm cancelling even though I get it via my cell phone provider currently. My family will be just fine without it, and Hulu, and ESPN+. We can subscribe for a month and binge things like Mando when the next season is fully available.

 

[flynnibus]

This is absolutely true. One thing I think they have learned (based on conversations I've had with some people here) is that, after gate prices, there's diminishing marginal returns on adding people to the parks - once you get to a certain point, revenue per guest starts to decline while costs go up. That's why they're limiting capacity still.

Only part of the story. Stuffing bodies in the door and eyeballing the gate admission has never been the main draw -- that's why they've happily severely discounted admission to extend stays. Admissions are really just 'opportunities', but something they can also monetize. The real meat is daily spend of each guest. Admissions are a pay once thing... and their value only goes down with upsells. SPENDING is where the best revenue growth opportunity is.

Adding capacity requires large capEx spending and becomes more overhead to maintain. While extracting more dollars per guest per day can be done much cheaper, or even 'for free'.

Attendance can drive grosses pretty linearly, but doesn't drive margins nearly the same. The park overhead is not linear, it has stepped minimums and then costs escalate as you approach extremes. So pushing attendance as a growth driver is not unlimited.. you actually want attendance to be in your 'sweet spot' and consistent... not just 'mawr mawr mawr'.

When you are overcrowding Revenue per guest starts to decline because of dissatisfaction and time constraints the guests have. Overcrowded parks are also more expensive to operate as it takes higher levels of staffing just to manage the excess.

This is why Disney's model has been to drive revenue growth through higher prices and optimization -- not primarily through more capacity.

Disney has focused on driving higher per guest spending and optimizing their existing capacity.

1) Raising prices
2) Adding monetization
3) Adding upsells
4) optimizing their costs by reducing overhead (run only what is necessary)
5) shaping demand by moving guest loads to other periods
6) improving optimization of existing capacity by keeping guests distributed across parks to Disney's benefit. (They aren't going to NOT open one of the parks.. so its better to keep people trapped longer to get that park capacity utilized more)


Disney won't really see capacity as the 'needed' thing until the two strategies above are saturated and nothing more can be squeezed out.

 

[HauntedPirate]

$DIS opened at $122/share (a nearly-$9/share spike overnight), peaked at $122.92/share this morning. Currently sitting at $118.50/share. Let's see where it ends.

 

[CaptainAmerica]

If they move the bundled D+ to be the ad-supported service instead of the ad-free tier, I'm cancelling even though I get it via my cell phone provider currently.

In the bundle, your D+ tier will match your Hulu tier. Pricing on the ad free bundle is not increasing.

 

[HauntedPirate]

In the bundle, your D+ tier will match your Hulu tier. Pricing on the ad free bundle is not increasing.

I saw that pricing isn't changing, but the ad-free price (which is currently included in the bundle, since it's obviously the only tier currently offered) is. So if the bundle includes ad-supported Hulu, and I'm pretty sure it does, that means the D+ will become the ad-supported tier as well, if what you're saying is true. If their goal is to boost bundle subs, then keeping the ad-free D+ in it will be beneficial to that goal.

 

[CaptainAmerica]

So if the bundle includes ad-supported Hulu, and I'm pretty sure it does, that means the D+ will become the ad-supported tier as well, if what you're saying is true. If their goal is to boost bundle subs, then keeping the ad-free D+ in it will be beneficial to that goal.

There are two bundles, one with ad free Hulu and one with normal Hulu.

The ad free Hulu bundle is $20 and will stay $20 with ad free D+.

 

[el_super]

$DIS opened at $122/share (a nearly-$9/share spike overnight), peaked at $122.92/share this morning. Currently sitting at $118.50/share. Let's see where it ends.

Forget about all that... did you see Chapek's new look on CNBC?

 

[HauntedPirate]

There are two bundles, one with ad free Hulu and one with normal Hulu.

The ad free Hulu bundle is $20 and will stay $20 with ad free D+.

Oh, I didn't realize there were two bundles. So the current $13.99 bundle (which is available through Verizon) will change from ad-free D+ to ad-supported D+?

Forget about all that... did you see Chapek's new look on CNBC?

I did not, I prefer to keep my breakfast in my stomach. And my TV intact.

 

[CaptainAmerica]

Oh, I didn't realize there were two bundles. So the current $13.99 bundle (which is available through Verizon) will change from ad-free D+ to ad-supported D+?

That's my understanding, yes.

 

[el_super]