The Walt Disney Company (NYSE: DIS) announced its third-quarter earnings on Wednesday, revealing a 4% increase in revenues, reaching an impressive $22.3 billion. CEO Bob Iger, who has been at the helm for the past eight months, shared the company’s achievements and outlined the path forward during the post-earnings call.
Iger began by underscoring the transformation that “The Mouse” has undergone in recent months, with a renewed emphasis on creativity as the core of their business. This transformation has involved significant management changes, efficiency improvements, and aggressive cost reductions across the enterprise, surpassing the initial goal of $5.5 billion in savings.
“I’m pleased with how much we have gotten done in such a short period of time, but I also know we have a lot more to do,” Iger said. “As I’ve said before, our progress will not always be linear. But despite near-term headwinds, I’m incredibly confident in Disney’s long-term trajectory because of the work we’ve done, the team we have in place, and because of Disney’s core intellectual property foundation.”
He asserted that “moving forward, I believe three businesses will drive the greatest growth and value creation over the next five years. They are our film Studios, our Parks business, and Streaming – all of which are inextricably linked to our brands and franchises.”
A major area of focus has been the company’s direct-to-consumer (DTC) business, with notable progress. Disney has achieved a $1 billion improvement in DTC operating income over three quarters, as it moves steadily towards its goal of achieving DTC profitability by the end of fiscal year 2024, even in the face of a challenging environment.
Iger on the Strike
Iger delivered a message of hope and commitment during the company’s Q3 earnings call regarding the ongoing Writers Guild (WGA) and Screen Actors Guild–American Federation of Television and Radio Artists (SAG-AFTRA) strike. Iger expressed his sincere desire to swiftly find solutions to the issues that have caused division over the past few months, indicating a significant shift in his tone and stance compared to his previous comments.
He acknowledged the challenging circumstances surrounding the labor disputes, emphasizing his personal commitment to working toward a resolution that benefits all parties involved. This new approach starkly contrasts with his previous dismissal of the Writers Guild strike and the impending actors’ strike, which was looming just a month ago.
The CEO’s change in tone demonstrates a growing understanding of the gravity of the situation and the importance of finding common ground. The strikes have created a significant impact on the entertainment industry, leading to production delays, uncertainty, and affecting the livelihoods of thousands of professionals.
Disney+, Hulu and ESPN Subscription Increases
Iger revealed that Disney is refining its DTC strategy by offering ad-supported options for Disney+ and Hulu. This move has been met with strong interest, with 40% of new Disney+ subscribers opting for the ad-supported product. Additionally, a bundled subscription plan featuring Disney+ and Hulu will be available in the U.S. starting September 6, and the ad-supported Disney+ option will be launched in Canada and select markets across Europe on November 1.
“We’re prioritizing the strength of our brands and franchises, we’re rationalizing the volume of content we make, what we spend, and what markets we invest in,” he said. “We are deploying the technology necessary to both improve the user experience as well as the economics of this business. We’re harnessing windowing opportunities, perfecting our pricing and marketing strategies, maximizing our enormous advertising potential, and we’re making extensive Hulu content available to bundle subscribers via Disney+.”
The company also released details regarding upcoming subscription price changes for Disney+, Hulu and Hulu + Live TV, ESPN+, and The Bundle. Pricing for standalone ad-supported Disney+ and Hulu offerings will remain unchanged.
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Continued Strength at Disney Parks and Experiences
The CEO stressed the importance of three key businesses that will drive growth and value creation for Disney over the next five years: film studios, parks, and streaming. Iger highlighted the company’s focus on big franchises and tentpole films, leveraging the multiple distribution windows at their disposal.
The Disney Parks and Experiences segment has maintained an impressive streak, with upcoming openings of new themed lands at various international locations. Iger pointed out that both Shanghai Disney Resort and Hong Kong Disneyland have experienced stronger-than-expected recoveries from the pandemic, demonstrating a clear opportunity for continued growth.
Improving the Quality of Films
In the realm of film studios, Disney is working on improving the quality of its films and enhancing their economic impact. The focus on franchises has led to tremendous engagement on Disney+ with past hits such as Guardians of the Galaxy, Avatar, and the Indiana Jones series.
Despite acknowledging near-term headwinds, Iger expressed his overwhelming confidence in Disney’s long-term trajectory. He cited the work done in the past eight months, the strong foundation of creativity, iconic brands, and exceptional talent as reasons for his bullish outlook.
Iger said that “we are focused on improving the quality of our films, and on better economics – not just reducing the number of titles we release, but also the cost per title. And we’re maximizing the full impact of our titles by embracing the multiple distribution windows at our disposal, enabling consumers to access our content in multiple ways.”
“By focusing on big franchises and tentpole films, we’re able to generate interest in our existing library,” he added. “For example, we’re seeing tremendous engagement on Disney+ with the previous Guardians of the Galaxy films, the original Avatar, and the first four Indiana Jones movies.
It’s important to note that the company included a disclaimer about forward-looking statements in the communication, highlighting that actual results may differ due to various factors, including market conditions, competitive pressures, regulatory changes, and unforeseen developments beyond the company’s control.
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