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Visitors frequent Disneyland Park in Anaheim, California.
David McNew / Getty Images
The focus on storytelling and direct contact with consumers is at the heart of
Walt disney
‘s in the wake of the Covid-19 pandemic, CEO Bob Chapek said on Tuesday. This means increased investment in content for streaming and other distribution channels, expansion into new markets, and improving the experience at Disney theme parks around the world.
“Our goal has always been to come out stronger than before and I think we got there,” Chapek said at Goldman Sachs’ annual Communacopia media and telecommunications conference on Tuesday.
But in the meantime, Chapek has warned that the wave of Covid-19 fueled by the Delta variant is impacting film and television production and will delay releases for months to come. The pandemic suspension of the Indian Premier League cricket season last spring also means less sports content on Disney streaming services in India over the summer. And Chapek said the launch of Star + in Latin America in recent months has gone slower than expected.
Overall, that means Disney + and its international counterparts could add “a low million single-digit subscribers” in the current quarter, which is Disney’s fourth fiscal year, Chapek said. The average Wall Street analyst estimate was 17 million more Disney + subscribers during the period, according to FactSet.
The bad news pushed Disney stock (ticker: DIS) from a slight gain on Tuesday to a loss of over 3% in afternoon trading. Shares have skyrocketed over the past two years thanks to rapid growth in the number of streaming subscribers, just as traditional revenues have been negatively affected by Covid-19. This has made quarterly subscriber numbers a very important metric for Disney.
Elsewhere, Disney continues to see strong park attendance and spending in the current quarter despite the Delta variant. The reinstated indoor mask requirements and the additional health and safety measures were not controversial, Chapek said. And bookings and bookings for the period are higher than they were in the previous quarter.
Revenues from Disney theme parks and cruises fell to almost zero in the worst months of Covid-19 closures last year and remain below pre-pandemic levels. The company’s fleets and consumer products segment broke breakeven for the first time since early 2020 in the last quarter. Chapek said Disney used the closures to overhaul technology and other visitor experiences at its parks.
“The shutdown allowed us to rearrange things and build the systems needed to do it,” Chapek said. “The backbone of the whole thing is our new reservation system, as it gives us the ability, in real time, to direct people, make sure we have the right mix of guests in the park and control the request in a way that frankly we never could. This then activates all of the consumer interfaces that we recently implemented.
These upgrades include Disney Genie, a smartphone app launched this fall that lets visitors manage their daily itinerary at Disney parks, join virtual queues for rides and attractions, and purchase upgrades. and extras.
On the film and television side, Disney continues to add new markets for its streaming offerings. These are Disney +, Hulu, and ESPN + in the United States. Star, Hotstar, and Star + are other names that Disney uses for its overseas streaming services. Chapek said the regional or national approach allows Disney to deliver content and services to different consumer preferences. Competitors like Netlflix (NFLX) have taken a different approach, opting for an all-you-can-eat service for the whole world.
Chapek pointed out that Disney’s global streaming strategy is a long-term one, with a 2024 target of 230 million to 260 million Disney + subscribers – the service reached 116 million subscribers at the end of June, after launching late. 2019. But the CEO noted that the path to this long-term goal will not be linear.
“What we’re finding, as you’ve seen in our last few quarters, is that these numbers tend to be a lot louder than a straight line,” Chapek said. “It’s not a linear relationship from quarter to quarter. And indeed, we’ve seen some of it this current quarter. “
Disney’s next quarterly results are expected to be released in November.
Chapek added on Tuesday that Disney’s capital allocation priority is investing in the business first and foremost, followed by debt reduction. After that, the company could reinstate its dividend – on hold since the start of the pandemic – and continue with share buybacks. But Chapek said it was “in the distant future.”
Disney stock has climbed 24% since the start of 2020, compared to a return of 39% including dividends for the
S&P 500
and 23.5% for the
Dow Jones Industrial Average.
ViacomCBS
Stock (VIAC) fell 2.4% after dividends and Discovery stock (DISCA) fell 22%.
Netflix
stocks climbed 78%.
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