THB #436: The Disney Vilification

“I hear Disney is in TROUBLE!!!!”

Disney is an $87 billion-plus a year revenue company.

Parks is about $32 billion a year (which is almost what Netflix now makes in total revenue) and is very stable.

Linear Networks (ABC & cable nets, aside from ESPN) is about $10 billion a year and threatened.

DTC (streaming) is about $20 billion and likely to grow as assets are restructured to do so.

Movies (inc ancillary sales) is about $8 billion and will shift depending on execution of content and marketing.

ESPN (now separated on the spread sheet) is about $17 billion a year and in play.

The company’s operating income (after expenses specific to these segments) is about $13 billion a year.

So why is the media crapping itself, seemingly daily, about the horrors of Disney and its allegedly precarious future?

Today happens to be the 1st anniversary of Bob I taking back control of the company from Bob II. So I am okay with stories focusing on the year.

But the stories and the endless jabbering about Disney’s troubles are both too simplistic and overreach to much.

Parks, Streaming (DTC), and Movies are quite stable and there is plenty of reason to expect them to improve (especial;y DTC and Movies)… even if the 2 movie releases underperform this month. That’s $60 billion of the $87 billion-ish total.

Linear and ESPN are the ones vulnerable to cable cord cutting (and satellite air cutting). And the challenge Bob Iger & Co are stirring up stomach acid daily trying to solve is how to transition that $27 billion in revenues from their current delivery methods to Streaming.

As I referenced Netflix earlier, I will mention them again… because Disney needs to try to transition $27 billion, most of the entire amount of revenue that Netflix grosses, from Broadcast, Cable, and Satellite to Streaming… even though Disney is already grossing $20 billion on Streaming.

In other words - saying it over and over - Disney is looking to generate - as things currently stand - a Streaming/Linear combination that is 30% bigger than Netflix has or will likely generate anytime this decade.

The alternate is cutting ongoing costs… even after Iger spent the last year cutting spending within the company.

Disney’s operating income from Linear, DTC, and Sports was only about $4 billion in the last year, whereas Netflix has increased its operating income to $8 billion.

Disney was over that $8 billion a year operating income figure in just these segments back in pre-COVID, pre-Chapek 2019, even with the weight of a $1.8 billion loss on Streaming.

$6.7 billion of that operating revenue was from Linear and Cable/Satellite, segments which added up in the 2023 fiscal year to $6.4 billion.

So… the big question… how does Disney make this transition to almost-completely-Streaming without losing, say, half that $27 billion in gross revenue that is currently coming from non-DTC/Streaming?

I’m not sure they do.

“I need all these arms for all the Mergers & Acquisitons I MUST do!!!”

But here is the rub… the “glory days” of Disney generated a lot less revenue, but made more profit. So there is obviously a path in which Disney loses a bunch of gross revenue in this segment from continued cord cutting and changing viewing habits, but gets a better return on content investment.