What I wrote last week
What I find interesting
What I wrote last week
What I find interesting
In Q3 2020, Disney reported a drop in revenue of more than 8$ billion, down 42% YoY due to the negative impacts from the Coronavirus. Most of the revenue loss came from Parks, which is historically a reliable source of revenue and profit for Disney. In the most recent quarter, Parks brought in a little less than $1 billion in revenue, compared to $6.6 billion in the same quarter last year. As a consequence, Parks recorded a loss of approximately $2 billion, compared to $1.8 billion in profit in Q3 2019. Despite the challenges that Covid-19 brought onto Disney’s operations, the company actually had a small profit from its operations, if you exclude the $5 billion in impairments.
Disney reported that as of 27th June 2020, there were more than 100 million paid subscribers on their platforms, including 8.5 million for ESPN+ (up from 2.4 million from a year ago), 35.5 million for Hulu (up from 27.9 million from a year ago) and 57.5 million for Disney+. On the earnings call on 4th August 2020, Disney’s CEO revealed that the subscriber base for Disney+ rose from 57.5 million 5 weeks ago to 60.5 million. The updated figure means that Disney already surpassed its lower target for 2024, a full four years ahead of schedule. While it’s definitely a good sign, it can be argued that Disney is usually conservative in its forecast and that Covid-19 has been an unexpected boost to its streaming service. It’s also worth pointing out that Disney+ Hotstar, launched in India only up to Q3 2020, made up 25% of Disney+ subscriber base at the end of the quarter.
A major announcement regarding content for Disney+ is the upcoming rollout of Mulan. Disney will make the movie available to Disney+ subscribers at an additional price of $30, meaning that you first have to have an active subscription and pay another $30 on top of it as a one-time fee to see the movie.
This one-off strategy is an interesting move in my opinion. Due to the impacts of Covid-19, Mulan’s schedule premiere has been postponed a couple of times. As the US is still struggling to handle this pandemic, folks won’t visit cinemas any time soon. Hence, Disney either would have to keep delaying the movie’s debut or put it on its streaming service. If the latter is the better option, what is the reason for the additional charge?
Bob Chapek, the CEO of Disney, labeled this move as a test and I tend to agree with him. There are three likely reasons behind Disney’s decision:
In the near future, Disney will be one of the companies wishing for things to go back to normal as quickly as possible. Their streaming service should be fine. They have a lot of geographical footprint to grow into, boosted by a formidable library content, legendary marketing prowess and a household brand name. What they really want to add is feet inside theaters and the walls of their branded parks, hotels or resorts. That’s why they opened up parks in the US to some extent despite the Covid-19 warnings; which I fervently disagreed with. Given how the situation has progressed for the past few weeks, I won’t be surprised that it will take them at least a couple of quarters to regain the Parks business. Nonetheless, the business has shown resilience and I think the bull case for them is stronger than a bear case.
Disclaimer: I own Disney stocks in my portfolio.
America’s Safety Net Is Failing Its Workers. A chilling read on some of the major social issues in the US.
Visa saw 13 million cardholders in Latin make their first e-commerce transaction in the second quarter
Barriers to entry become liabilities
For the past few weeks, I have seen people claim that Disney is doomed because it reported millions of loss due to the closure of its parks and resorts which, in normal times, bring a lot of revenue and margin to the table. In the same vein, airlines are called a horrible business since there are a lot of costs involved and it’s capital intensive, making it extraordinarily vulnerable in the face of a pandemic like the one we are going through.
They have a point.
However, it’s also important to remember that the current liabilities are what make barriers to entry in their industries so high. Restaurants have low barriers to entry, so it’s not unusual to see a new restaurant in town every day. How often do you see a new airline come up? Because the barriers to entry are so high, airlines at least don’t have to worry too much about a new competitor enter the fray often. Similarly, operating a park like Disneyland is no joke. It requires employing hundreds of employees and a tremendous fixed cost as well as maintenance expenses. How many parks at the same scale as Disneyland enter the market every week/month?
This crisis will blow over. It has to. It’s unfathomable to think that we will be in this self-quarantine forever. Once we get back to normal, whatever it may be, people will fly and go to Disneyland again. Although I don’t deny that what reduces new competition for those businesses now becomes sort of liabilities, it’s worth remembering that nothing good comes easy. The same logic applies to business
Plenty of discussion online has been about how people will adjust their working style post-Covid19. Even in my company, talk has been going around on how folks will continue to work remotely for a while and how preparation should be looked into to accommodate that need. Personally, I think there will be a mixed working style moving forward. Indeed, working remotely saves everyone time from having to dress up and driving to work. Nonetheless, there is also value in face-to-face and human interaction. There is a reason why companies design common areas, hoping that folks will randomly bump into each other and creativity will spark. Plus, speaking from personal experience, I am sick of sitting at my desk, staring at the screen for hours and putting more time into work. I miss my workplace, my coworkers and casual conversations at work. So, even though folks will prefer working remotely 100% in the short term, in the long run, I expect it to be a mix.
Disney+, the biggest initiative and priority in the near future of the iconic company, went live today in the US and Canada. I have been using it for 2-3 hours and below is the summary of my experience so far.
The sign-up is pretty standard and smooth. Nothing major. Even though there was some reported difficulty in finding the app on Apple Store
Fairly expectedly, the app encountered some technical issues which users widely reported here. I have had my fair share as well
That led to Disney+ Help twitter page issued the statement below
In addition to the technical mishaps, I was a bit frustrated by the User Interface. While you can download episodes from the mobile app, I couldn’t find the feature on the browser version. I am not sure if that was intended to limit the downloads, but I was under impression that it was possible.
At the end of a movie, you are presented with a suggestion like the screenshot below, but there is no way to get back to the homepage or the category page
There is an “Extras” tab under the main banner of a movie/episode. They can be never-seen-before clips that viewers will appreciate. However, they could have made the tab more visible or added it to the end, in my opinion
There are some Extras clips on the mobile app that are not available on disneyplus.com.
At the bottom of the website, there is a tab called “Interest-based ads”. On that page, you can choose to opt out of behavioral targeting by ads companies on disneyplus.com
In terms of content, I am excited about National Geographic and Marvel. But to succeed, I do think Disney Plus has quite a long way to go and much to improve if they want to augment user experience
Disclaimer: I own Disney stocks in my personal portfolio
Apple TV, Apple TV, Apple TV, and Apple TV+. I have to say Apple could and should have done better with all these silly names
Global electric car sales and market share, 2013-18
The poor in America pay a higher tax rate than the rich. I guess the tax cut is doing what it is supposed to? (I am being sarcastic)
TurboTax’s decade-long war to prevent Americans from filing taxes online for free. I was angry when I read this article. Billions of hours and dollars are wasted every year on filing taxes and only a handful of people benefit at the expense of millions
Sleep Deprivation Shuts Down Production of Essential Brain Proteins. The sleep deprivation pandemic is real in our society and there doesn’t seem to be signs of its abating.
Boeing lead pilot warned about flight-control system tied to 737 Max crashes, then told regulators to delete it from manuals. Frankly, this is just disgusting. Boeing is one of the two plane manufacturers that dominate the sky and it still has this kind of behavior
Today, Disney released their 2019 Q3 result. Below are a few points that stood out for me
The studio has generated $8 billion in global Box Office in 2019, a new industry record. And we still have five months left in the calendar year with movies like Maleficent: Mistress of Evil, Frozen 2 and Star Wars: The Rise of Skywalker still to come. So far this year, we’ve released 5 of the top 6 movies including four that have generated more than $1 billion in global Box Office. Avengers: Endgame is now the highest grossing film in history with almost $2.8 billion worldwide. Captain Marvel, Aladdin and The Lion King have each surpassed $1 billion. And with more than $960 million in Box Office to date, Toy Story 4 will likely cross that threshold in the coming weeks. And all of these movies will be on Disney+ in the first year of launch.SeekingAlpha
Disney+ marketing is going to start to hit in later this month, later in August. We’re actually going to allow members of D23 to be the first to subscribe. I’m actually going through a comprehensive marketing plan with the team next week. Comprehensive probably is an understatement. It is going to be treated as the most important product that the company has launched in, I don’t know, certainly during my tenure in the job, which is quite a long time. And you will see marketing both in traditional and nontraditional directions basically digital and analog also significant amount of support within the company on basically company platforms. And then of course all of the touch points that the company has, whether it’s people staying in our hotels, people that have our co-branded credit card, people who are members of D23, annual passholders, I could go on and on. But the opportunities are tremendous to market this. And I feel good about some of the creative that I’ve already seen. But you won’t start to see it until later this month.SeekingAlpha
I cannot wait to see the battle of the streamers and how well Disney+ will fare. As a student of business, I am fascinated to see the strategies and execution of Disney+ vs Netflix. Netflix has a huge subscriber base as advantage over Disney+, in addition to a household name (ever heard of “Netflix and chill”?) and some great original content. But Disney has its own strengths as well, including marketing expertise, household name, a great content library and additional revenue streams.
I am thrilled to see how fast Disney+ will be able to sign up folks. The emphasis on marketing, the aggressive pricing of the streaming service, the bundle and the focus on exclusive content in spite of loss from licensed deals show that Disney is dead serious. It will be interesting to see how viewers will react and whether there will be some market share loss by Netflix at the hands of Disney+ and other upcoming streamers.
I honestly don’t know how it will go. As a fan and a consumer, I cannot wait to see.
Disclaimer: I own Disney stocks in my portfolio.
Canada’s forgotten rainforest. Whenever I read something about deforestation, my heart sinks. We should be advanced enough as a race to stop deforestation.
Netflix Splurges on Big-Budget Movies. Some important details to note regarding Netflix offered in this article
I went to see the Avengers: End Game on Friday with a few friends. The movie is indeed worth the wait and the hype, in my opinion. Rest easy. I won’t give out any spoilers. I was floored by the attention to details and the extraordinary cinematography put in the film. The plot was as good as you could get. Of course, there is no plot that can satisfy all the fans out there, but it would be a tall order to beat what the writers put together. So kudos to them. If you haven’t watched it yet, do it before any spoilers come out. There are moments in the movie that I believe should only be watched in real time. If you can, watch the Marvel movies you haven’t beforehand. There are some details in the End Game that require some context to be understood.
The End Game is a great culmination of a tapestry of 21 or 22 movies in the Marvel Universe. Marvel has left quite a bit of cultural influence in our societies such as Black Panthers or Captain Marvel and become an established household name. It is now a great asset for Disney. This brought me back to the acquisition. The studio was bought by Disney for $4 billion back in 2009. Since then, the studio has churned out one blockbuster after another. Below is what Marvel movies have generated in revenue after 2009
It’s necessary to point out that The End Game has been out for only 5 days and the figure above is not updated yet. In a few months, the chart above will look different and you will likely have to look to the left hand side for The End Game
In terms of financials, the $4 billion outlay back in 2009 looks like a tremendous bargain now. In total, the studio has brought around $19-20 billion in revenue. I imagine it will be more profitable for Disney if it keeps the quality of the movies like it has been for the last 10 years. No one can know for sure, but a good sign is Star Wars and Disney movies which have been still popular even after many years.