The Business Of

Movies | Disney | What Do They Do?

Morning All!

Hope you had a great weekend! Today we’re starting the final part of our The Business Of Movies series! In part 1, we explored the cinema operator industry and analysed The Business Of Cineworld. Last week, in part 2, we turned our attention to the streaming space. And went through The Business Of Netflix.

For part 3, we’re going to be looking at a company that’s got a thriving streaming platform. An incredibly successful film studio. And some of the most popular TV channels! Yes, we’re going to be diving into The Business Of Disney!

I think it’s a really nice way to end this series. Because the business model of Disney gives us a nice overview of the industry dynamics we’ve talked about for the last 2 weeks. But without further ado, let’s dive into what Disney does!

Streaming

So, let’s start with the segment we touched on last week. Disney’s streaming business - Disney+. Since the company launched their streaming platform in Nov 2019, subscriptions have grown super, super fast. From 0 subscribers in 2019 to 164m subscribers in 2022. Disney’s subscriber growth has been even faster than Netflix’s!

And with some of the most famous franchises including Marvel, Pixar and Disney. And some strong original content too. It’s not surprising to see that they’re hot on the tail of Netflix!

This week, we’ll look more closely at this segment. Because whilst Disney+ has matched Netflix in terms of subscriber and revenue growth. They haven’t matched Netflix in terms of profitability. More to come this week!

Content Licensing

Over the last two weeks, we’ve talked about the Big 5 Film Studios. The companies responsible for producing the blockbusters we all love watching. And Disney’s, Walt Disney Pictures, is one of those Big 5. The biggest revenue-generating film that the studio’s ever produced was The Lion King (2019) - which has grossed $1.7 billion in movie ticket sales!

But it’s not just Walt Disney Pictures. Disney also owns 20th Century Studios and Marvel Studios. And these two studios are responsible for the two biggest box office hits of all time! Avatar has made $2.9bn in movie ticket sales. And Avengers Endgame has made $2.8bn in movie ticket sales. Not bad!

This week, we’ll look at how the business model for Walt Disney Studios is changing. Are they producing more films now just for Disney+? Or will they still value producing films for cinema operators, like Cineworld?

Linear Networks (basically TV)

Now, moving further away from streaming, and cinemas. Disney is also a major operator in the TV space. Obviously the company has the Disney channel. But did you know that Disney also own ESPN, the ABC network, National Geographic, and a host of other channels!

But what do they actually do with these channels? Well, let’s look at the example of ESPN. ESPN signs contracts with the major US sporting organisations so they can show those sporting events to ESPN viewers. In The Business Of Man United, we saw how the Premier League sells media rights for their games to Sky, BT, and Amazon. And in the US, it’s very similar with the NBA (basketball) and NFL (American football) selling their rights to ESPN and other broadcasters.

But how do these channels like ESPN make money for Disney? Well, we’ll dive into this tomorrow. And over the course of the week, we’ll look at whether the rise of streaming platforms is hurting Disney’s TV business!

Parks and Experiences

Last but by no means least. The final segment for Disney is their Parks!

The company has Disney resorts in Paris, Florida, California, Tokyo, Shanghai and Hong Kong. And these destinations have been some of the most popular holiday attractions for families over the last four decades. The Florida resort attracts nearly 60m visitors a year. Making it the most visited vacation resort in the world!

Over the course of this week, we’ll look at just how the theme parks make money and how profitable they are. And whether the pandemic has changed things permanently. We think you’ll be pretty shocked at just how lucrative this segment is for Disney!

17th Apr 2023

Nigel Jacob CFA