Edit | Yu Bin
Produced by | Chaoqi Network "Yu see column"
The animated image sketched by Disney has created a fairy tale world that has long been deeply rooted in the hearts of the people, but this veteran "dreamer" is not living well today. Since the outbreak of the epidemic in late 2019, its unbalanced and low-resistance revenue distribution map has been exposed. The recent financial report released by Disney for the first quarter of fiscal 2022 is actually more intriguing.
According to the released financial report, Disney's revenue in the first quarter reached $21.819 billion, an increase of 34% compared with the same period in 2021, higher than market expectations. Operating profit was US$3.258 billion, up 144% compared to the same period, resulting in a net profit of US$1.15 billion and a net profit margin of 5.27%. But these numbers, which delight the stock market, make it impossible for investors to hide their worries.
Q1 revenue far exceeded expectations, Q2 may be unsustainable
Founded in 1923, the Walt Disney Company is about to enter its 100th anniversary. As a century-old dreamer, Disney's business territory has long been all over the world, and it has been added to the tiger after the high-profile acquisition of 21st Century Fox in 2019. At present, the business segments of Disney and its subsidiaries are divided into four major items: media networks, theme parks, experience and consumer goods, film and television entertainment, and DTCI.
The most well-known to ordinary consumers is naturally the theme park module, which mainly derives its income from theme parks and some licensed retail businesses. As mentioned earlier, because of the epidemic raging, most countries and regions around the world have adopted stricter epidemic prevention and control measures, and entertainment venues with relatively dense traffic such as theme parks are naturally the first to be disturbed. However, it is worth mentioning that because Tokyo Disney Resort adopts a franchise model, this part of the profit and loss does not need to be borne by Disney.
The Theme Parks, Experience & Consumer Goods segment generated revenue of $7.234 billion in the quarter, up almost 100 percent from the same period and higher than analysts' consensus estimate of $6.4 billion. Although the revenue figure has doubled, when the cycle is counted, compared with the same period in 2021, it is a loss of $100 million. Even Disney's second-best quarterly results of all time will not help.
As the second largest performance force of Disney, the film and television entertainment sector also occupies a very large investment in Disney. The earnings report mentioned: "The film and television entertainment segment generated revenue of $2.433 billion in the quarter, an increase of 43% year-on-year. The division's operating results fell from $188 million to $98 million, due to lower theater performance and marketing costs produced at the time of release of the film."
According to incomplete statistics, Disney Company in the revenue range, although the release of "Spider-Man: Heroes No Return", "West End Story", "Magic Full House", "Ace Agent: Origin", "Eternals", "Jade Face Love Demon" and other seven films, but only the hero series with Sony's finale "Spider-Man: Heroes No Return" earned $1.777 billion in revenue, and the rest was basically equalized costs.
It is not difficult to see that although Disney's financial report shows a steady upward trend, this is only the result of comparison with the dismal same period in 2021, and there is still a big gap compared with the same period before the epidemic. And to support a large number of theme park plates in this financial report, it will also reduce the heat with the arrival of the unsealing cycle, and Q2 wants to continue to rely on the re-popularity of theme parks to maintain the situation, I am afraid it is difficult.
Streaming media is hot, but it has become a company's gold-devouring beast
In Disney's revenue sector, DTCI is a special presence. Its literal translation is direct-to-consumer business as well as international business. Including but not limited to branded international television networks and channels, streaming services and other digital content distribution platforms, the familiar National Geographic Channel is among them. But in the Q1 earnings report, the most noteworthy is Disney's streaming service sector.
Disney's streaming services are made up of Disney+, ESPN+, Hotstar, Hulu, and the revenue of these businesses mainly comes from membership subscription fees, advertising revenue, technical service fees, and so on. In this earnings cycle, the number of new subscribers in Disney+ alone reached 11.8 million, far exceeding the record of 8.28 million set by Netflix. This indirectly led to revenue growth from $3.5 billion to $4.69 billion, up 34% year-over-year.
The reason why it can create this good result is also due to the "family fun + low price to seize the market" strategy played by Disney. Disney first considered that the epidemic is working from home, and there are more family activities, and the content of the "Family Fun" series is naturally very popular. Market feedback is also as Disney calculated, giving a positive answer: "Every day is Christmas", "Heavenly Magic Machine", "Little Devils" series and "Ice Age" and other series of the launch, so that consumers have a full consumption motivation.
The low price to seize the market is a move full of ambitions for Disney. Disney, which has a lot of money, did not rely on content to win more market audiences like Netflix, but chose to use the subsidy model to let users choose more about themselves, which is the reason for Hotstar's strong revenue.
Hotstar (one of India's mainstream media outlets) still gets subscriptions from 46 million new subscribers after increasing prices from $0.98 per month to $1.03, earnings reports. On the one hand, Hotstar has the highest market share in India due to a large number of high-quality local content, and on the other hand, because Netflix's price is still as high as $2.62 after the price reduction of 60% in India in the same period. In the case of content and cost performance are dominant, Disney can naturally make a lot of money.
However, Disney's set of combined punches down, but it is a thousand self-inflicted losses of eight hundred enemies, and most of the hematopoietic stage means losses. In the fiscal quarter, Disney's direct-to-consumer business lost $590 million, up 27 percent year-over-year. The overall streaming platform added 17.4 million subscribers, for a total of 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.
Although Disney+ just opened up a new market in the Asia-Pacific region last year, it also provided a new increase of 11.7 million users, but it was only a drop in the bucket. And Disney's chief financial officer Kristen McCarthy also mentioned on the conference call that Q2 will invest a lot of money in streaming, and it is expected that the program and production fees of the direct consumer business will increase by 800 million to 1 billion US dollars, which is likely to further expand the losses of the business unit.
Internal and external troubles are constant, and dreamers are in trouble
Disney was founded to create joy for children, and the company's vision is also blunt, saying that it is constantly committed to providing people with the most special entertainment experiences, and it has done so. But now Disney, the "happy manufacturing machine", is also about to usher in its own unhappiness.
In an interview, Disney heir Abigail Disney called for consumers to stay away from companies that treat their employees badly, including Disney's theme parks. Because as early as April 2020, Disney was exposed by the media that it often "squeezed" employees, and the New York Times reported that 75% of Disney employees were not paid enough to cover basic living expenses.
At Disney in China, the problem that the treatment of employees is not proportional to the actual payment has also been frequently exposed. After Disney's new character Lingna Belle exploded, according to insiders, the actor who played Lingna Belle's doll was paid less than 6,000 yuan a month.
According to the degree of popularity of the characters to delineate the salary to speculate, this is already in the park's front-line employees, in the ranks of a lot of income; even some tepid puppet actors for many years without salary challenges, not only to maintain up to 8 hours a day full of emotions, but also by some uncivilized tourists all kinds of teasing, physical and psychological are suffering from greater pressure. Ironically, Disney CEO Bob Chapec's total compensation in 2021 is $32.5 million.
(Image source: Hong Kong Disneyland)
Disney's internal worries are far more than this, as the "strongest legal company on the surface", Disney's rights protection fees and legal team are also fighting in all directions, in the continuous protection of rights, litigation, not only need to pay high judicial costs, employment costs, but also need to apply for various copyrights and patents, the expenditure can be described as an astronomical amount.
Disney's external problems, in addition to Netflix, a strong competitive rival, in the entertainment theme park, its market share has been repeatedly squeezed. Universal Studios, various popular attractions and cultural and youth hostel areas have become the preferred range for young people today, and the limitations of theme parks are also reflected. After going once or twice, the enthusiasm will diminish, and the speed of Disneyland's update iteration can keep up with the speed at which consumer enthusiasm retreats.
In addition to the overseas market firmly occupied by Disney, in fact, in the field of domestic theme parks, Disney is also one that has been criticized more. Not only because of its low cost performance, but also because it has only two parks in China: Shanghai Disneyland and Hong Kong Disneyland. Once the Chinese people have the right to choose, they will certainly compare the options, and the gap between the two will not be repeated here. How to win back more consumer attention and confidence may be Disney's next step, which needs to be considered more.
epilogue
The difficulties that Disney faces are actually the difficulties that many companies that started out in the entertainment industry need to face. Although Disney can rely on theme parks and copyright fees to support its cash flow, the retail stores that continue to close during the epidemic also indicate that this sweet cake has not been eaten for a long time, and how to continue to open source is also a question that Disney needs to answer.
The answer Disney gives at the moment is: streaming services. Disney in the use of money shells to bombard the market at the same time, in fact, is also in the gambling game, betting that Disney will usher in the next brilliant 100 years, if this attempt, or the layout is not accepted by the market, or even fail, I am afraid that the future will not be better.