Notable notes from Disney’s earning call

Today, Disney released their 2019 Q3 result. Below are a few points that stood out for me

  • Hulu got 28 million paid subscribers while the figure for ESPN+ stood at 2.4 million
  • The integration of 21 Century Fox had negative impact on Disney’s earning, including the subpar performance of movies such as Dark Phoenix
  • Direct-to-Consumer & International segment expected to make $900 million loss in the next quarter, due to investment in the launch of Disney + and support for Hulu, ESPN+
  • Fantastic results for the studio as per Bob Iger

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.

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  • The leadership behind the studio will manage the film strategy for 21 CF as well
  • Deadpool, Fantastic 4 and X-Men will be part of Marvel Studios
  • Come this November, users can have access to Disney+, Hulu (ads-supported) and ESPN+ as a bundle for $12.99 a month, well below the total sum of all threes, if subscribed separately
  • “Hotstar had more than 300 million average monthly users, served an unprecedented 100 million daily users and delivered a high-quality streaming experience to 25.3 million simultaneous users, which is a new world record”
  • Disney is discussing deals with Apple, Amazon and Google as distribution partners, deals that are expected to close
  • Focus on marketing for Disney+, per Bob Iger

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.

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Quick Thoughts

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.

Avengers: End Game and The Acquisition of Marvel

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

Source: Boxofficemojo

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.