Recently, Disney released its Q3 financial report, with a cumulative revenue of $68.787 billion for the first three quarters of 2024, a year-on-year increase of 1.67%; The cumulative net profit for the first three quarters was 5.209 billion US dollars, a year-on-year increase of 93.21%.
It is worth noting that the profit growth is mainly due to the positive performance of Disney's entertainment division, especially its streaming business: after the merger of businesses including Disney+, Hulu, and ESPN+, it achieved profitability for the first time, one quarter ahead of the company's expectations. However, the amusement park revenue, which has always been regarded as the "pillar" of growth, is showing a weak trend, with sales and profits lower than Wall Street's expectations.
Southern Daily reporter Ye Qihan
Behind the weakness of theme parks
The slowdown in amusement park performance is both accidental and inevitable.
According to the financial report data, the revenue of the amusement park and consumer experience business in Q3 was 8.383 billion yuan, a growth of only 2%, far lower than the 10% growth rate in Q2; Operating profit decreased by 3% year-on-year to 2.2 billion US dollars.
Compared to the third quarter of last year, the theme park experience and product business contributed significantly to Disney's revenue growth, with a growth rate of 13%. One of the main reasons is the revenue boost from Shanghai Disneyland Resort and Hong Kong Disneyland Resort.
In fact, the high demand for travel in the Chinese market in 2023 and the multiple price adjustments of amusement parks have brought considerable growth to Disney's revenue. This year, the popularity of Shanghai Disneyland has increased instead of decreased: as early as early as early July, the park experienced a peak in summer foot traffic, with an expected daily reception of 85000 people, setting a new historical high compared to last year's 70000 people.
But at the same time, its local amusement park has been "dragging its feet". According to the financial report, Disney's domestic (US and Canada) revenue for the third quarter decreased by 6% year-on-year to $1.35 billion, attributed to "depreciation of the US dollar and inflation" and "profit margin compression caused by new profits and new facility investments".
It is worth noting that in the third quarter of this year, the revenue of Disney stores also experienced a 5% decline. Tourist consumption tends to be more rational, which is a significant challenge for Disney, which regards secondary sales as an important source of revenue.
Demand has slowed down, but costs remain high. As early as the opening of Shanghai Disneyland, there were media reports that the management cost of Disney theme parks was five times that of large domestic amusement parks. Due to factors such as large management space, high visitor traffic, complex business formats, and emphasis on visitor experience, cost control and service quality often become a dilemma in the game.
Prior to this, some industry insiders had predicted that although the theme park business could be called Disney's "cash cow", its radiation audience was limited. With the instantaneous decline of consumer enthusiasm, there was great uncertainty about whether Disney's theme park business could continue to release growth potential.
Where is the incremental growth of streaming media
However, a new "cash cow" has emerged - Disney reported that its streaming business achieved a profit of $47 million in Q3, marking the first profit since the launch of its flagship Disney+streaming service in 2019.
Disney attributed this profit to the increase in subscription revenue brought about by the price increase and customer growth of Disney Core+. During the quarter, Disney+core users (excluding Disney+Hotstar users in India and other countries in the region) grew by 1% to 118.3 million; Hulu's total users also increased from 50.2 million in the previous quarter to 51.1 million. It is expected that Disney Core+users will experience moderate growth in the fourth quarter.
Relying on its core competitiveness in content, Disney is constantly exploring ways to layout retail and making many attempts. For example, collaborating to launch more bundled packages or attracting and retaining subscribers through new content. In addition to the content, it also focuses on the e-commerce business. In recent years, while optimizing streaming media functions, it has also strengthened the links and exploration of advertising business. Currently, Disney+has partnered with over 100 brands to launch advertising options and launched testing of its first native streaming shopping advertising format, Gateway Shop, earlier this year.
Although its user growth remains relatively stable, Disney continues to drive the profitability of its streaming services. Recently, it plans a new round of price adjustments, starting from mid October, most subscription packages for Disney+, Hulu, and ESPN+will face a monthly fee increase of $1 to $2.
Under the continuous price adjustment strategy, the platform also needs to achieve corresponding content and service upgrades. "The industry pointed out that if the value does not match the price, it is not only difficult to horizontally expand new audiences, but may also face the loss of old users.
Is the amusement park business still thriving?
In the short term, streaming media business has the upper hand, but what about the long term?
For Disney, the operating revenue of the park is still very important, "said an industry insider. Whether within the group or in the global tourism market, the presence of Disneyland cannot be underestimated.
What is the "money making" ability of the amusement park? According to the third quarter financial report, although the amusement park and experience business have declined, they still account for 84% of profits. Despite the strong profit momentum of streaming media, there is still a gap between it and amusement parks in terms of profits.
The larger the investment, the greater the return, which is why Disney is willing to spend a lot of money to build the park. And the investment is still ongoing: According to recent official announcements, Disney plans to implement multiple measures to boost its experience business, including doubling the Marvel theme Avengers park in Anaheim, California, and opening a new villainous amusement park at Walt Disney World Magic Kingdom in Orlando, Florida. There are also Avatar themed attractions launched at California Adventure Park, and Spider Man themed attractions added at Disneyland in Shanghai and Hong Kong.
The combined effect of a series of measures is optimistic: on the one hand, it can radiate more fans of film and television content, further enhancing the attractiveness of the amusement park; In addition, it also means having more sufficient reasons for price adjustments, and the importance of ticket revenue is more prominent today. Lin Huanjie, the director of the China Theme Park Research Institute, told reporters that as an international theme park brand, Disney's proportion of secondary consumption is indeed higher than other parks, but tickets are still its main source of revenue. Especially in the Chinese market, the proportion can even exceed 70%
In contrast, the revenue model of streaming media is more flexible, but the challenges it faces are also particularly clear: there are many similar platforms available for users to choose from, and Disney does not yet have an irreplaceable core advantage; The sentiment of repetitive classic content is easily consumed, but in recent years, its original works have fallen into a bottleneck period, and many have been criticized by audiences.
At the same time as their involvement in the e-commerce business, many e-commerce platforms have also started to consider content. For example, Amazon recently announced a partnership with content platform TikTok to explore more possibilities for social commerce. On the other hand, at Disney, while "hard implantation", how to grasp the compatibility of appearance and experience is also an urgent problem that needs to be solved.
The amusement park is like Disney's' moat ', "commented a netizen. Perhaps its potential for increasing revenue is not as great, but for Disney, it is still very important - as a platform for carrying content, it is also the core password for maintaining popularity and "traffic".