Article | Geekmovie After Geekmovie released its third quarter financial report for 2024, Disney fell again. It is said that Disney’s financial data for this quarter are good. Revenue, profit and earnings per share have all improved significantly compared with the same period las

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After releasing the third quarter financial report of 2024, Disney fell again.

It is said that Disney’s financial data in this quarter are good. Revenue, profit and earnings per share have all improved significantly on the same period last year:

• quarterly revenue : 22.3 billion US dollars = 23.2 billion US dollars

• quarterly pre-tax profit : Loss of $100 million = Profit of $3.1 billion

• Quarterly diluted earnings per share (eps): Loss of $0.25 = Profit of $1.43

△ Disney’s 2024 third quarter financial report

Both financial and market performance exceeded market expectations. Why after the financial report was released? The stock price is still falling, is there any justice?

As I mentioned when I analyzed Netflix's financial report last time, this is a period that does not look at financial performance, and "market sentiment" has become a more important factor that affects the stock price.

If we look back at Disney's stock price this year, we will find that has been declining for four consecutive months.

△ Disney’s stock price has been declining for four months.

This decline is actually not directly related to Disney’s financial performance. is more directly related to external economic conditions. .

After adjusting its business structure, Disney is currently divided into experience business (experience, including theme parks and licensed products) , entertainment business (entertainment, including TV networks, streaming media and content licensing) , and sports business (sports) Three major parts of .

At the end of 2021, as the epidemic gradually passed, restrictions on going out and traveling were basically lifted. In addition, during the epidemic, governments relaxed their currencies and provided large subsidies to their citizens. As a result, consumer travel and entertainment consumption increased, and the demand for theme parks surged.

As of March 2024 (12 months of statistics), although global theme park revenue only accounts for 1/3 of Disney's revenue, theme parks contributed 52% of Disney's total profits..

Of course, this is also due to Disney’s crazy price increase of and in the past two years.

Compared with before the epidemic, Disney’s profits are extremely dependent on theme parks.

In the five years before the epidemic, Disney theme park operating profits accounted for only 26% of Disney's total operating profits; The theme parks reopened after the epidemic, contributing more than 50% of Disney's total operating profits..

Therefore, the business expectations for the theme park directly affect the profit forecast of the entire Disney group.

Entering 2024, inflation has caused consumers to reduce entertainment expenditures, and the risk of economic recession has always existed, so consumers have gradually reduced their spending and began to prepare for "hard times" . One of the typical signals of

is that fast food giants such as Burger King and McDonald's are rushing to launch the "$5 minimalist set meal" (also known as the poor man's set meal).

Disney is no exception. At this investor communication meeting, Disney warned that the revenue of the theme park business "has been affected by weakening consumer demand, and this impact has exceeded our previous expectations."

In the U.S. market, Disney expects slowing consumer demand for theme parks may continue into 2025.

Reflected in financial indicators, Disney theme park quarterly operating profit fell 3% compared with the same period last year to $2.2 billion ; theme park consumer product sales fell 5% year-on-year.

Another traditional business segment of Disney is also declining.

We know that users of traditional cable TV networks have been shrinking and revenue is declining. This is an industry-wide problem, and Disney is no exception.

In the latest quarter, Disney’s traditional cable TV revenue decreased by 7% year-on-year, which also affected the company’s overall revenue.

△ Disney’s third-quarter business income

is half sea water, half fire, Disney’s biggest bet in the future - streaming media business, this quarter’s revenue has officially turned red, and it has begun to make profits .

Disney Group’s streaming business had total revenue of US$6.38 billion and operating profit of US$47 million.

△ Disney’s streaming media business has begun to make profits.

The total revenue of the streaming media business includes the flagship platform disney+, the comprehensive entertainment service hulu and the sports-focused espn+.

In the same period last year, that is, in the third quarter of 2023, Disney's streaming media business operating profit lost 512 million US dollars;

followed one step at a time, from losses of 400 million US dollars, 200 million US dollars, to a flat profit and loss, to the current "profit of nearly 0.5 Billion dollars"...

It can be seen that Disney continues to "severely suppress expenses and marketing costs and improve streaming media profitability" is still effective.

If we further subdivide the profit of streaming media and carefully compare entertainment streaming media and sports streaming media, in fact, the most obvious improvement in is entertainment streaming media - it lost US$500 million the previous year and only lost US$19 million this year .

As for sports streaming media, it went from a loss of US$7 million to a profit of US$66 million in one year. At first glance, the results are not bad.

△ Comparative profit effects of Disney’s entertainment and sports streaming business will improve in 2023

However, the growth of streaming media espn+ is complementary to the decline of traditional espn TV.

espn TV operating profit fell by nearly $130 million to $740 million in the quarter from $860 million a year ago.

If we combine the operating profits of espn TV and streaming media together, the total decreases by 9%, indicating that Disney has not found an effective path to develop streaming media in the sports field . The profitability of

streaming media has improved, but will the user base continue to grow? This issue is also the capital market's greatest concern.

Just two years ago, at this time in 2022, Disney made bold statements that it would maintain the good growth rate of disney+ user growth, and predicted that by October 2024, disney+ global subscribers would reach 215-245 million (equivalent to netflix 2022 number of users per year).

But unfortunately, after reaching a historical high of 164 million, the number of Disney+ subscribers has declined instead of increasing, and has remained around 150 million.

△ Disney predicts that the number of Disney+ global subscribers in 2024 is quite different from the reality.

Friends who have been paying attention to the development of the streaming media industry for a long time know that as the impact of the epidemic has completely disappeared, the streaming media industry has moved from "rapid development" to "stock competition" "stage .

Everyone who should watch streaming media has already watched it, whether they are actually paying or not. If

streaming media wants to expand its user base, it must either "incite rebellion" from competitors or "tap potential" within its own customer base.

As can be seen from the figure, as of the second quarter of 2024, the growth rate of almost all mainstream streaming media platforms is close to a flat straight line - only Netflix except .

△ In the second quarter of 2024, the growth of mainstream streaming media platforms

Why can Netflix maintain sustained growth?

first relies on the new "advertising package" , and secondly relies on "combating account sharing" .

Since the leader Netflix's "crack down on account sharing" has been so effective, Disney+ will naturally follow the prescription and also start to "crack down on account sharing."

In late 2023, disney+ announced that it would limit password sharing for user accounts in Canada, the United States, and the United Kingdom.

disney+ began sending emails to U.S. users in February 2024 to notify them of policy changes in advance;

later confirmed that the new rules would take effect in some countries on June 1 and officially take effect in the United States in September.

This means that if you share your disney+ account with someone who doesn't live at the same address, you will either have your account blocked from September, or purchase an "extra membership" to be able to share (similar to Netflix's policy).

It should be pointed out that another streaming service owned by Disney, Hulu in the United States, will also launch relevant policies simultaneously.

So Disney is serious about cracking down on “account sharing” on streaming platforms this time.

Can Disney follow the prescription this time and achieve the same results as Netflix?

I am cautiously optimistic:

The market originally expected the number of Disney+ subscribers to decline in the third quarter, but the company unexpectedly added about 700,000 new subscribers. Is this related to the crackdown on "account sharing" that took effect on June 1? The connection is not visible yet;

However, it needs to be pointed out that whether the crackdown on "account sharing" in the next two quarters can promote the rapid increase of subscribers is the key to whether Disney's stock price can get out of the downward channel.

Of course, Disney itself is confident. The company expects that the profitability of its streaming media business and the number of Disney+ core subscribers will continue to grow in the fourth quarter.

Disney has recently used another trick to boost profitability - raising prices.

company will increase the prices of disney+, hulu and espn starting from October 17. The monthly fee of disney+ with advertising package disney+ will rise from US$7.99 to US$9.99; the monthly fee of

ad-free package will rise from US$13.99 to US$15.99. , the annual fee increased from $139.99 to $159.99.

△ The streaming media platforms of the Disney Group have all increased their prices.

hulu’s monthly fee increase for the ad-included and ad-free packages is similar to that of Disney+, while the monthly fee for the espn+ ad-included package has increased by US$1.

However, the price increase will be in the first quarter of 2025, so the financial performance of streaming media in the fourth quarter of 2024 will not be affected by the price increase.

Finally, let’s talk about Disney’s traditional entertainment skills- movie business .

Since its release on June 14, the ace movie " Inside Out 2" () has grossed nearly 1.6 billion US dollars at the global box office, making it the highest-grossing animated film in history.

The box office performance of "Inside Out 2" directly boosted Disney's third-quarter earnings and restored the company's confidence in Pixar Animation Studio (Pixar).

In its third-quarter financial report, Disney proudly listed the ten highest-grossing animated films in history, seven of which were produced by Disney.

△ The ten highest-grossing animated films in Disney history

Among these seven films, except for two "Frozen", the other five are from Pixar Animation Studio (two "Force" and three "Cars") ").

After the end of the third quarter, Disney's movie business continued to make rapid progress in the summer season.

The Marvel movie "Deadpool and Wolverine", released on July 26, has become another box office blockbuster. So far, the global box office has exceeded 1 billion U.S. dollars, ranking second in the global box office this year after "Inside Out 2" .

△ Top ten global box office movies in 2024, source: boxofficemojo

In addition, "Deadpool and Wolverine" has also been introduced to the mainland market, and as of today, the box office has exceeded 400 million yuan.

△ Movie creators came to China to promote

Looking forward to the future, Disney's profitability will further improve driven by "cost reduction and efficiency improvement" - after all, Disney's adjusted earnings per share in the latest quarter reached US$1.39 , much higher than the $1.03 in the same period last year.

In addition, Disney will add three new ships to its cruise business in the next 18 months.

Disney's cruise business currently has five cruise ships (disney magic, disney wonder, disney dream, disney fantasy, and disney wish).

△ Disney’s cruise product line

The entire cruise industry has performed well after the epidemic. After adding three new ships, it is expected that bookings will increase significantly in the next year. This part of the business income of

will drive the revenue and profitability of Disney’s experience business segment.

Overall, I think the days of Disney being "half sea water, half fire" are almost over. In addition to traditional cable TV, other businesses are developing in a good direction in the long run.Article by