Tuesday, Aug 4th 2020

Disney Q3 Earnings: Parks Challenges and Subscription Strength

Update

  • On Tuesday after hours, Disney stock rose 4% after reporting a mixed Q3 earnings
  • Revenue fell 5% short of analyst estimates, while expectations for an EPS loss were conversely met with profits, primarily driven by better-than-expected profits on the media/network side of the business
  • The company was most dramatically impacted in its parks and experiences segment, which saw a $3.5 billion adverse impact from COVID-19
  • However other segments of the business fared better, with Disney+ now surpassing 60 million subscribers - the bottom end of the subscriber range the company had initially targeted to reach by 2024.
  • On the investor call, management announced that its upcoming Mulan film would mostly bypass theaters and instead premier directly on Disney+ for a $30 "premiere access" fee
  • At over 4 months of a monthly Disney+ subscription, the $30 price point certainly feels jarring at first glance - but we see it as likely having been based on a per-household-viewing basis
  • While this arrangement was framed as a one-off event given the current environment, we see this as a bold test of the pricing power of Disney's IP assets
As of this writing, DIS was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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