The Walt Disney Company is one of the largest media and entertainment companies in the world.
DisneyDecember 20, 2020
Thesis - Disney is perhaps one of the most loved brands in the world. Founded in 1923, for many years they have created characters and stories that have lasted through time. In addition to their own characters, they have acquired Pixar, Marvel, LucasFilm (Star Wars), ESPN and Fox’s assets, making them one of the largest Intellectual Property owners in the entertainment world. They monetise through 4 core segments: studio entertainment (think cinema), parks, experiences and products (think Disneyworld and merchandise), media networks (sports and TV) and finally direct-to-consumer. It’s this last segment that represents Disney’s most recent change in strategy. As streaming becomes a standard expectation amongst consumers, Disney have launched Disney+, its rival streaming product to Netflix. This represents a significant change to Disney, who will now attempt to build one of the largest subscription businesses in the world.
Financials & Performance - In its last quarter, Disney announced revenues of $14.7b, which was down 23% year on year. Splitting by segment; media networks represented 50% of revenues, parks and experiences 17%, studios 10% and direct to consumer 32%. This presents an abnormal picture for Disney, with parks and studios down 61% and 52% respectively, forced into closures and delays of movies due to covid-19. Whilst Coronavirus has clearly provided huge headwinds to Disney’s existing business lines, it has also enabled huge growth in its direct-to-consumer channel. In a special investor day, Disney announced huge numbers across its streaming platforms: 86.8m subscribers on Disney+, 38.8m on Hulu and 11.5m on ESPN+. These numbers beat targets initially set for 2024! They also announced growth into several more international markets and some marginal price increases. Once coronavirus is behind us, expect this company to return to growth.