Disney exhibits anxiety in more ways than one
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Jonathan Guilford
NEW YORK, Aug 7 (Reuters Breakingviews) -Walt Disney DIS.N boss Bob Iger’s primary responsibility is to keep the virtuous circle spinning. The feedback loop of popular characters, blockbuster movies, hit TV shows, theme parks and merchandise are what power the $160 billion entertainment conglomerate. As the latest financial results indicate, however, the kingdom has been losing some of its synergistic magic.
A tumultuous transition to streaming video gummed things up at Disney. It’s not alone: Warner Bros Discovery WBD.O, Paramount Global PARA.O and others also have suffered as they try to compete with Netflix NFLX.O. As rabble-rouser Nelson Peltz and his pushy fund Trian Partners emphasized earlier this year during their unsuccessful siege at Disney, however, Iger has fallen woefully short in many ways. Since their battle ended in early April, the shares have tumbled over 25%.
At least Iger has some fresh success to trumpet. Streaming services Disney+, Hulu and ESPN+ finally swung to a collective profit in the second quarter after burning through billions of dollars to attract customers and to develop the programs needed to do so. Moreover, after some disappointing cinematic duds, respective Marvel and Pixar sequels “Deadpool and Wolverine” and “Inside Out 2” became blockbusters this summer.
These turnarounds are helpful. Disney’s Hollywood slump was severe, with box-office sales in 2022 and 2023 running at less than half the company’s pre-pandemic norm, according to MoffettNathanson analysts. If the streaming momentum is sustainable, Iger might even be in position to justify the costly and distracting fight against Peltz.
Things are not so simple, though. Subscriber growth is practically at a standstill. Disney keeps jacking up prices and intends to do so again in October. Yet in the United States, revenue per streaming customer fell in the three months through June 29 as users opted for cheaper packages.
Penny-pinching travelers also hurt theme parks, cruises and merchandise, which now account for more than half of operating profit. The business segment’s revenue growth unexpectedly slowed to 2%, with operating profit dipping 3% and Disney cautioning that U.S. sluggishness might last a few quarters. Even as Iger furiously pedals, economic deceleration threatens to knock the company’s flywheel further askew.
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CONTEXT NEWS
Walt Disney said on Aug. 7 that it had generated more than $23 billion of revenue in the three months to June 29, with operating income at its various segments of $4.6 billion, which was 9% more than analysts had been expecting, according to Visible Alpha.
The entertainment conglomerate’s streaming services – including Disney+, Hulu and ESPN+ – collectively reported an operating profit, of $47 million, for the first time.
Operating profit in the division that houses Disney’s renowned theme parks fell 3% from a year earlier, to a little more than $2 billion. The so-called experiences unit accounts for more than half of the company’s operating profit.
Disney has underperformed since beating Trian https://reut.rs/4dxTfie
Editing by Jeffrey Goldfarb and Pranav Kiran
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