Disney's FY20 Q3 Earnings (8/4/20)

[brianstl]

They’re not “lying”...for sure...but setting up angles/twists.

That’s why watching the markets has become boring? Nothing really affects anything anymore.

They weren’t lying and they aren’t working angles. They are following accounting rules. That is why they give you the continuing operations number that tells you the actual performance of the company. They lost money and aren’t trying to hide the fact they lost money. It isn’t their fault people aren’t reading the report properly.

 

[PirateFrank]

Let's say you saved your money and bought a car for $30,000.

Seven years later, when you go to sell it, you can only get $5,000.

Do you go around telling people you lost $25,000?

If you're a business, you do. You take depreciation into account and you post the full extent of loss of value. If your business isn't making enough of a profit to cover that depreciation, then, yes, the value of your business is reduced. And it can be troubling to know you're not creating enough profit to replace depreciated infrastructure.

With respect, this isn't a clear description of how depreciation is used in business accounting. Modern accrual accounting requires a matching of expenses and revenues within the period - and depreciation is a necessary component of that. Depreciation allows you to spread out the cost of an asset over its useful life so that the revenue earned in a given period with that fixed asset can match a small portion of the asset's initial expense. It's not categorized as a loss, as you describe above. It's an adjustment.

The word has been used by non-accounting folk to categorize the drop in the resale value of the asset....and while the textbook definition of depreciation fits for lay people needing to refer to the devaluing of their car, or whatnot - businesses use depreciation differently for the purpose I outlined above.

 

[Sirwalterraleigh]

They weren’t lying and they aren’t doing working angles. They are following accounting rules. That is why they give you the continuing operations number that tells you the actual performance of the company. They lost money and aren’t trying to hide the fact they lost money. It isn’t their fault people aren’t reading the report properly.

My point is it’s not really an accurate picture to the public that isn’t discerning...not SEC violations.

It’s a PR game as much as anything. You seem to be an accountant...so you’ll dig deep. But they know that doesn’t get picked up in he click bait. The stock should tank...it won’t

 

[flynnibus]

So Disney+ finally goes international... and only adds like 3million subs??

And they pop their cherry on charging PPV on top of subscription prices? That's coming a lot earlier than expected

 

[BlindChow]

I highly doubt I would watch Mulan if it wasn’t an upcharge (I’ve yet to watch any of the live action remakes) but I think it was a mistake to create the pay per view model and connect it to the Disney+ brand. To me that confuses what Disney+ is in the mind of the consumer.

I suspect consumers will understand what is going on in the movie & theater industries right now and will have no problem seeing this move as a direct response to it.

This "pay per view" model would not have happened if theaters were running as usual. This will be presented as a way to see a theatrical film early that viewers would otherwise not be able to see on Disney+ for another three to six months.

(Not sure it'll be profitable, but I don't think it will cause confusion.)

 

[easyrowrdw]

FWIW, I've thought Disney would weather the *crisis* better than most. I just expect them to lag during the *recovery*. I just don't see Disney as being adaptive enough to capitalize on the great global reset. Chapek talks about their great content, but it's all existing stuff, repackaged. That can be comforting during the crisis. I just think when we're finally freed, people are going to be all, "I've been stuck with the same stuff for the last 2 years, give me something NEW!" And others will be better positioned to deliver.

That could be my personal displeasure talking too. Honestly, I'm sick of my TV screen already. Yeah, we're watching a lot of new stuff we have been meaning to try out, and there's some good stuff. But after another 9 months of this until Spring...whatever comes out on streaming better be 10x Baby Yoda. I want to go to a movie, just to go to a movie. Plus, Alamo Drafthouse's popcorn is really good.

Yeah, I figure we all have our opinions - positive, negative, and in between.

If Chapek said they had plenty of reservations before the numbers started going crazy in Florida, then I can see that being interpreted as a good sign. It would also seem to fly in the face of what some folks have been saying. That's more of what I was getting at.

I do think they'll need new stuff to get going again. Like you said, after being cooped up for so long, another on-demand movie is definitely not what I want.

 

[DVCakaCarlF]

It is amazing the amount of people that actually think Disney eked out a profit. Disney isn’t even trying to pass that off as a story. The way accounting rules work meant the posted paper revenue this quarter, just as in previous quarters they had to post paper costs. Neither are real money.

They lost $4.8 billion on continuing operations. That is there financial performance for the quarter. They lost a massive amount of money.

Your forgetting to match expenses with revenues...your describing a P&L. That’s why the other statements are so important.

All of those capex expenditures? The cash value of the payments to the contractors is expressed now as cash out on the asset side, but the depreciation will be capitalized over the next 20 years.

 

[Sirwalterraleigh]

FWIW, I've thought Disney would weather the *crisis* better than most. I just expect them to lag during the *recovery*. I just don't see Disney as being adaptive enough to capitalize on the great global reset. Chapek talks about their great content, but it's all existing stuff, repackaged. That can be comforting during the crisis. I just think when we're finally freed, people are going to be all, "I've been stuck with the same stuff for the last 2 years, give me something NEW!" And others will be better positioned to deliver.

That could be my personal displeasure talking too. Honestly, I'm sick of my TV screen already. Yeah, we're watching a lot of new stuff we have been meaning to try out, and there's some good stuff. But after another 9 months of this until Spring...whatever comes out on streaming better be 10x Baby Yoda. I want to go to a movie, just to go to a movie. Plus, Alamo Drafthouse's popcorn is really good.

Excellent...all time great post.

People are desperate for content...and access. Im
So geeked that Netflix got Kobra kai...

But Disney has had a slowly rolling storytelling collapse.

When’s the last time they produced anything semi original outside of marvel???

It’s been forever. Can’t remake everything a third time

 

[Sirwalterraleigh]

Your forgetting to match expenses with revenues...your describing a P&L. That’s why the other statements are so important.

All of those capex expenditures? The cash value of the payments to the contractors is expressed now as cash out on the asset side, but the depreciation will be capitalized over the next 20 years.

Capex is used over time to exhaustive lengths. It’s one of the reason they don’t build either efficiently or frequently anymore

 

[flynnibus]

Do you have the same complaint about going to see new Disney releases in the theater? Should all new Disney releases be included in your $5/month subscription?

Have no fear... There will be a Disney++ product before too long where you get 'club level' access to new content... while the people paying for just Disney+ will get the handme downs.

Oh wait.. I mean Star+ lulz

 

[Sirwalterraleigh]

So Disney+ finally goes international... and only adds like 3million subs??

And they pop their cherry on charging PPV on top of subscription prices? That's coming a lot earlier than expected

Don’t worry...they’ll get a few bucks when paid fastpasses roll out next year too

 

[Animaniac93-98]

I highly doubt I would watch Mulan if it wasn’t an upcharge (I’ve yet to watch any of the live action remakes) but I think it was a mistake to create the pay per view model and connect it to the Disney+ brand. To me that confuses what Disney+ is in the mind of the consumer.

Imagine paying for a year or three upfront, only to find out you need to spend more $ to watch certain content.

 

[brianstl]

Your forgetting to match expenses with revenues...your describing a P&L. That’s why the other statements are so important.

All of those capex expenditures? The cash value of the payments to the contractors is expressed now as cash out on the asset side, but the depreciation will be capitalized over the next 20 years.

That isn’t what happened here. They posted almost $5 billion in accounting revenue related to their purchase of Fox. They did this because now they can take the almost $5 billion in accounting cost related to the purchase of Fox off the books. Neither are real cost or real revenue.

 

[MisterPenguin]

Imagine paying for a year or three upfront, only to find out you need to spend more $ to watch certain content.

Not if you wait a few months more you don't.

 

[Ninja Mom]

Doesnt really matter, he's right. Remember that many of the locals are making them next to nothing if they enter on an AP right now so its a very valid point.

I'm angrily returning the cream cheese pretzel I've been hoarding in my freezer until I break off small bits to take to the parks and eat fancy like the 7 day ticket holders do.

~NM

 

[TrainsOfDisney]

Imagine paying for a year or three upfront, only to find out you need to spend more $ to watch certain content.

Well... I don’t have to imagine that. I did it!

It feels like the hotel parking charge to me... it’s not “wrong” and “others are doing it” but it comes across as a money grab.

 

[DVCakaCarlF]

Capex is used over time to exhaustive lengths. It’s one of the reason they don’t build either efficiently or frequently anymore

I know how capex works, I was giving an example.

 

[flynnibus]

They weren’t lying and they aren’t working angles. They are following accounting rules. That is why they give you the continuing operations number that tells you the actual performance of the company. They lost money and aren’t trying to hide the fact they lost money. It isn’t their fault people aren’t reading the report properly.

Maybe they'll keep buying new content companies every year and changing products so they can bury any real numbers in countless exclusions and credit as a regular strategy to their public reporting... It's never ending...

 

[DVCakaCarlF]

That isn’t what happened here. They posted almost $5 billion in accounting revenue related to their purchase of Fox. They did this because now they can take the almost $5 billion in accounting cost related to the purchase of Fox off the books. Neither are real cost or real revenue.

Again, I was giving an example. They have to use the cash now, hence the cost, but the value is expressed over its use...this is for any long term asset.

 

[ParentsOf4]

It is amazing the amount of people that actually think Disney eked out a profit. Disney isn’t even trying to pass that off as a story. The way accounting rules work meant the posted paper revenue this quarter, just as in previous quarters they had to post paper costs. Neither are real money.

They lost $4.8 billion on continuing operations. That is there financial performance for the quarter. They lost a massive amount of money.

Disney's operations did manage a small profit.

What went down the toilet was their International Channels business. They spent billions to get it going but the business model fell apart. They are dumping it and switching to Direct-To-Consumer (DTC).

Previously, they valued their Asia-Pacific channels as worth $5 Billion. They are now saying it's a loser and they are dumping it. As a result, they have to write off that asset as an impairment. An impairment is a permanent reduction in the value of a company asset. That's written off against the company's profits. As a result, corporate Disney as a whole lost money, a lot of it.

Operating margin (profit or loss) has to do with revenue taken in by the company versus what it cost to generate that revenue. By this measure, Disney achieved a small profit.

Let's say you run a cab business and you have a fleet of 10 cabs. You collected $100K in revenue and it only cost you $90K to operate those cabs, then your operations were profitable by $10K.

But now let's say one of those cars was destroyed by a Kraken and you didn't buy Kraken insurance. That cab was worth $20K so you have to write it off. As a result, your business lost $10K.

This is what happened to Disney. Disney's operations made a little bit of money but corporate Disney lost a boatload.