Author | Zu Yang
This morning, Disney released the first quarter of fiscal 2022 earnings, and the overall higher than the market expectations made Disney successfully turn over.
According to the earnings report, Disney achieved revenue of $21.819 billion in the first quarter, up 34% year-on-year, higher than the market expectation of $20.904 billion; achieved operating profit of $3.258 billion, compared with $1.332 billion in the same period last year, an increase of 144%; net profit of $1.15 billion, a net profit margin of 5.27%; adjusted earnings per share reached $1.06, higher than Wall Street's expectation of 63 cents.
The number of subscribers to streaming platform Disney+ grew by only 2.1 million in the last quarter, and the record low growth rate also made the capital markets lose confidence for a while. However, in the quarter, the number of Disney+ paid subscribers increased by 11.7 million to 129.8 million, and the total number of subscribers on Disney's streaming platforms, including ESPN+ and Hulu, reached 196.4 million, a step closer to the goal of 300-350 million paid users of streaming services in fiscal 2024.
Thanks to higher-than-expected earnings per share and the number of subscribers to the streaming service, Disney shares rose 7.6% after hours after the earnings report, saving the decline of 8.01% since the beginning of the year and a six-month decline of nearly 20%.
However, Disney, which has come out of the overall revenue rise of the epidemic haze, still cannot be taken lightly.
Theme park blood back
Disney's total revenue is divided into four segments, namely cable network, direct to consumer (Disney+, Hulu, ESPN+), content sales, licensing business, and theme park revenue.
First, let's scan the revenue of each segment:
Wired network revenue for the quarter was $7.706 billion, unchanged from the same period; the direct-to-consumer business (streaming) achieved revenue of $4.69 billion, up 34% year-on-year, but the operating loss increased by 27% to $600 million, and the earnings report also mentioned that the increase in operating loss was mainly due to the increase in loss of Disney+, to a lesser extent, the loss of ESPN+, partially offset by the improvement in Hulu's performance, which also reflected the increase in content, technology and marketing costs of the three major platforms.
Content sales and licensing business (formerly the film and television entertainment segment) generated revenue of $2,433 million in the quarter, up 43% year-over-year. The division's operating results fell from $188 million to $98 million, driven by lower theater performance and marketing costs produced at the time of release.
As mentioned in the earnings report, during this period, seven films were mainly released, including "Spider-Man: Heroes Of No Return", "West End Story", "Magic Full House", "Ace Agent: Origin", "Eternals", "Jade Face Love Demon" and "The Last Duel". Among them, the finale of the hero series "Spider-Man: Heroes Of No Return" cooperated with Sony reached a global box office of $1.777 billion, with an IDMb rating of 9.0, and the high box office and high reputation injected a lot of money into Disney.
Disney theme park, experience and derivatives revenue was $7.234 billion in the quarter, doubled from the same period and higher than analysts generally expect at $6.4 billion, and division operating results increased by $2.6 billion to $2.5 billion, compared to a loss of $100 million in the year-ago quarter. The sharp recovery of theme park revenue set a record for Disney's second-best quarterly performance in history.
With the normalization of the epidemic and the improvement of prevention and control capabilities, Disney parks and resorts around the world are open in the quarter, and the passenger flow and per capita consumption income are gradually getting closer to the right track. The earnings report also mentioned that the increase in the number of visitors to Disneyland Paris in France and Hong Kong Disneyland in China has also led to an increase in the park's international revenue.
In addition, at the end of September last year, The new character Ling na Belle launched by Shanghai Disneyland quickly occupied the topic list of major domestic social platforms, and the top effect of "Chuansha Daji" also led to the increase in the number of visitors to the park and the consumption level of the park.
However, Disney theme parks that have come out of the haze of the epidemic still have "internal worries".
Some time ago, Disney heir Abigail Disney called for consumers to stay away from companies that treat employees badly, including Disney's theme parks. In her opinion, "pushing prices up to ridiculous levels, charging incredible prices for hamburgers, etc., and depriving them of service." Advise people to "not spend money on companies that exploit people" and "if you feel like traveling [to Disneyland] doesn't reflect your values, you really don't need to travel."
This isn't the first time Abigail has denounced Disney, saying "what the hell is this" after suspending the day-to-day work of low-paid employees at Disney Parks in April 2020 and saying that Disney often "squeezes" employees.
The New York Times has reported that 75% of Disney employees are not paid enough to cover basic living expenses, and after Lingna Belle exploded last year, the positive connection also mentioned that Lingna Belle's puppet actor's monthly salary is about 6,000 yuan, which is the highest salary among front-line employees; some puppet actors have only risen by more than 700 yuan in three years. To maintain a full mood of up to 8 hours a day, the monthly income can only be difficult to maintain life, and it is difficult to say whether the payment is proportional to the income.
In contrast to the low salaries of employees is the high salaries and high increases of executives. According to executive compensation disclosures, Disney CEO Bob Chapec's total compensation in 2021 is $32.5 million.
Streaming money
Disney's streaming business has been pinned on high hopes, and the increase in the number of subscribers to the overall streaming platform in this quarter's earnings report has once again revived market confidence.
According to the financial report, the overall streaming media platform has increased subscribers by 17.4 million, totaling 196.4 million. Among them, espn+ subscribers were 21.3 million, an increase of 76% year-on-year, while Hulu's user growth was slightly limited due to bundle price increases, with a total number of payers of 45.3 million, an increase of only 15% year-on-year.
Disney+ saw its new Asia-Pacific markets in November, driving up the number of users, adding 11.7 million new subscribers and nearly 130 million subscribers in the quarter. According to forecasts from analyst firm Media Partners Asia, these three markets are expected to generate nearly 5 million subscribers and $330 million in revenue for Disney+ by the end of 2022.
The addition of nearly 12 million subscribers has also allowed Disney+ to regain its advantage again with its old rival Netflix in the comparison of subscriber traffic. Last month, Netflix added 8.28 million new subscribers, down from an expected 8.5 million, and in Q1 2022, it is expected to add 2.5 million, also well below the 5.9 million expected by analysts, a slightly dismal earnings report that caused after-hours stock prices to fall by nearly 20% and also led to a decline in Disney shares.
The competition between Disney+ and Netflix for user increment also indicates that the competition in the entire streaming media market is intensifying, and major platforms are increasing their investment in content and marketing on the basis of maintaining their core advantages. For example, Amazon has a healthy information flow by advertising revenue, Apple has hardware facilities, and is increasing its own IP content library storage; Netflix has prepared no less than 80 movies of various types, according to the Financial Times report, Netflix is estimated to invest more than $17 billion in content in 2022.
Disney is also frequent in the streaming business and has begun to grab the cake from Netflix.
Reorganized the management of the streaming media business and established a new international content creation center. Michael Polway is president of the streaming business, and Rebecca Campbell is the head of the International Content Creation Center, which mainly expands the regional content of streaming, focusing on local content production in overseas markets, which is also seen as imitating Netflix, and disney currently has more than 340 works in various stages of development and production.
Disney Chief Financial Officer Kristen McCarthy mentioned on yesterday's conference call that a significant investment in streaming in the second quarter is expected to increase programming and production fees for the direct-to-consumer business by $800 million to $1 billion.
Disney's content copyright and "storytelling ability" are indisputable, and they also have full advantages in expanding overseas markets. However, as one of the most potential overseas markets, Disney's "connection" with the Chinese market is not as close as before, and it vaguely shows a situation of "decoupling".
Marvel's first Chinese hero movie "Shangqi and the Legend of the Ten Rings" was originally aimed at the Chinese market, and starred by Chinese Liu Simu and starred Liang Chaowei, but before the introduction, it fell into controversy and lost the potential of China; "Black Widow" and "Eternal Family" also had no chance to meet domestic audiences for various reasons; Disney Animation's 60th animated feature film "Full House" was launched in China on January 7 this year, with a Douban score of 6.5 and a box office of less than 80 million and a sharp split with the reputation and box office of the North American market.
The time lag in content production, higher content spending, and uncontrollable public opinion in overseas markets are all challenges for Disney. However, Disney used the first quarter of fiscal 2022 to make a good start for itself, but also let the capital market regain confidence, despite the intensification of streaming media competition, but the "big brother" can still use diversified revenue, rich content advantages continue to attract global attention.