Disney – Where’s the Magic?

Disney, once the vanguard of the entertainment industry, now faces the challenge of overseeing its various business divisions. From linear networks to streaming, theme parks to cruises, and sports to merchandise; Disney is trying to sustain its established cash cows while simultaneously investing in and nurturing the growth of its other ventures. But in doing so, it has been burning through cash, fighting boardroom proxy battles, and losing clout with consumers.

For Q2 2024, revenue for Disney increased by 1.3% to reach $22.1 billion. And operating income increased by 15% to reach $3.8 billion. Direct-to-consumer, which includes streaming services such as Disney+ and Hulu, posted its first ever quarterly operating profit, which was $47mn. This was driven by cost-cutting that Disney has implemented in their operations and content spend. Hulu programmes such as “The Bear” and “Shogun” drove the new signups to Disney’s streaming services. Disney’s experiences segment, the cash cow, generated $8.4bn in revenue, with an operating profit of $2.3bn for the quarter. Disney noted that they expect sales for their experiences segment to drop during the year, as the pent-up demand for experiences, built up during the Covid Pandemic, subsides.

Under Bob Chapek’s (Disney’s previous CEO) tenure, Disney has poured substantial resources into productions across its various studios: Marvel, Pixar, Star Wars, and Fox. However, many of these endeavours have failed to replicate the box office triumphs of previous years, particularly during Marvel’s illustrious heyday. These productions were intended to serve as the cornerstone for Disney’s streaming services to flourish, but the over expansion lead to disappointing figures.

During the earnings call, Disney acknowledged that Netflix has established the gold standard for streaming. Netflix consistently leads the industry, often pioneering new features, such as the recent crackdown on password sharing, a move that has proven effective in recouping lost revenue. Netflix have been what other streaming services are trying to replicate. However, If you were to ask about Netflix’s primary competitor, Netflix would likely point to YouTube. Netflix has previously hinted at this perspective. YouTube’s exceptional consumer engagement aligns with Netflix’s preferred focus of measuring the duration of viewers’ attention on screen.