The Walt Disney Company (DIS) is set to report its fiscal third quarter earnings on Wednesday, amidst a backdrop of declining linear TV business, slower growth in its parks business, and profitability hurdles in streaming. Despite CEO Bob Iger’s aggressive turnaround plan, investors remain cautious, with shares falling over 20% in the last three months.
New Reporting Structure: A Step in the Right Direction?
Disney’s recent reorganization into three core business segments – Disney Entertainment, Experiences, and Sports – is a strategic move to better align its operations with the evolving media landscape. However, this new structure also raises questions about the company’s ability to effectively manage its diverse portfolio.
Streaming: The Profitability Conundrum
Disney’s streaming division, a key growth driver, has been struggling to achieve sustainable profitability. Despite announcing price hikes for its streaming services, the company expects weaker results in the third quarter. This raises concerns about the long-term viability of its streaming business, particularly as competition from rival services intensifies.
Streaming Revenue Growth
| Quarter | Revenue (in billions) |
|---|---|
| Q3 2022 | 4.66 |
| Q3 2023 | 5.17 |
| Q3 2024 (est.) | 5.51 |
Source: Bloomberg consensus estimates
Parks: A Shaky Foundation
Disney’s parks business, a significant contributor to its revenue, has been experiencing softness in attendance. With rising costs and inflation expected to impact profits, the company’s ability to maintain growth in this segment is uncertain.
Parks Revenue Growth
| Quarter | Revenue (in billions) |
|---|---|
| Q3 2022 | 6.65 |
| Q3 2023 | 7.15 |
| Q3 2024 (est.) | 7.31 |
Source: Bloomberg consensus estimates
Theatrical: A Bright Spot
Disney’s theatrical business has shown signs of recovery, with strong showings from recent films. However, analysts caution that this segment is no longer a significant driver of profitability.
Theatrical Revenue Growth
| Quarter | Revenue (in billions) |
|---|---|
| Q3 2022 | 1.43 |
| Q3 2023 | 1.63 |
| Q3 2024 (est.) | 1.81 |
Source: Bloomberg consensus estimates
Conclusion
Disney’s Q3 earnings will be closely watched as the company navigates a complex landscape of declining linear TV business, slower growth in parks, and profitability hurdles in streaming. While the company’s theatrical business shows promise, it is no longer a significant driver of profitability. To achieve sustainable growth, Disney must successfully execute its turnaround plan, address the challenges in its streaming division, and stabilize demand in its parks business.
Controversial Take
Disney’s struggles in streaming and parks may be symptomatic of a larger issue – the company’s failure to adapt to changing consumer behavior. As the media landscape continues to evolve, Disney must prioritize innovation and agility to remain competitive. This may require significant investments in emerging technologies, such as virtual reality and artificial intelligence, to enhance the consumer experience and drive growth.
