Recently, Walt Disney (NYSE: DIS) released its Q4 and full year financial reports for the fiscal year 2024 (CY24Q4).
In terms of revenue, the company's fourth quarter revenue increased by 6% to $22.574 billion, and the full year revenue increased by 3% from $88.9 billion to $91.361 billion; In terms of profit, the net profit in the fourth quarter increased by 74% year-on-year to $460 million, and the net profit attributable to the parent company for the whole year was $4.972 billion, a significant increase of 111%, far exceeding the expectations of the capital market.
Disney Financial Report Main Data
The most noteworthy is undoubtedly the direct to consumer (streaming media platform) business that has continued to turn losses into profits since the second quarter of this year. This business includes Disney's streaming platforms Disney+, Hulu, and ESPN+, with a revenue of $22.776 billion in fiscal year 2024, a year-on-year increase of 15%, becoming the core revenue supporting the entertainment division.
Regarding this achievement, Bob Iger, CEO of The Walt Disney Company, and Hugh Johnston, CFO, stated in an executive review that 2024 has proven to be a "crucial and successful year" for the company. The two pointed out, "Due to significant progress, we have emerged from a challenging and destructive period and are prepared for growth. We are optimistic about the future
Streaming media business enters a period of steady return
At present, Disney's business architecture is mainly divided into three major departments - entertainment, sports, and experience.
Among them, as the main source of revenue for Disney, the entertainment division's revenue for this quarter was $10.829 billion, a year-on-year increase of 14%, and remained basically unchanged for the whole year; The operating profit for this quarter was 1.067 billion US dollars, a 4.5-fold increase from 236 million US dollars a year ago, and a significant increase of 271.68% for the whole year, which is particularly impressive and has become the core source of profit.
Revenue situation of Disney sub sectors
Upon closer inspection, each of the three businesses within the entertainment sector has experienced growth and decline, with the most noteworthy being undoubtedly the direct to consumer business (streaming business) that includes Disney+, Hulu, and ESPN+, media platforms under Disney's umbrella.
In Q3 2024, the streaming media business achieved a revenue of 5.783 billion US dollars, a year-on-year increase of 15%; Throughout the 24th fiscal year, the revenue from streaming services increased by 15%, reaching $22.776 billion.
Revenue situation of Disney's entertainment business
You should know that this business only achieved its first turnaround from loss to profit in the second quarter of this year. Just two years ago in the fourth quarter of 2022, the streaming business suffered a loss of $1.474 billion, and former CEO Bob Chapek resigned as a result.
The strong growth of streaming media business is due to the continuous increase in the number of subscribers, while the subscription prices of Disney's media platforms are rising. As of the end of the fourth quarter, the company had 174 million Disney+and Hulu subscribers, of which 120 million were paid Disney+Core subscribers, an increase of 4.4 million from the previous quarter.
Among them, the growth rate of international users is more significant than that of domestic users. As of September 28, 2024, Disney+has 56 million domestic paying users, an increase of 2% compared to June 29, 2024; Disney+International (excluding Disney+Hotstar) has 66.7 million paying users, an increase of 5% from June 29, 2024.
As a comparison, Netflix's subscriber base in the third quarter was 282.7 million, an increase of 5.07 million. Although the distance between the two in terms of total user numbers is still far, Disney's pace of catching up is accelerating and showing strong momentum.
Disney Streaming Subscription Status
Previously, in order to increase the profit margin of its streaming business, Disney raised the prices of several streaming subscription packages in mid October. This is effective as the streaming media business continues to maintain revenue growth and expand profits under the dual stimulation of price increases and user growth.
Regarding this achievement, Johnston stated during the earnings conference call that the growth of streaming media can "naturally hedge" against the decline of linear television business.
The decline of traditional television business has long been evident, and in the past year, the revenue of linear television business, which belongs to the entertainment sector, has decreased by 6% year-on-year. As more and more consumers abandon cable TV packages, the revenue of linear TV networks is expected to continue to decline, which is one of the reasons why Disney has shifted its business focus to streaming media.
However, considering that linear business profits still accounted for nearly 50% of the entire entertainment business board in the quarter, the management stated during the earnings call that "after internal evaluation, it has been decided not to completely sell the assets of the cable channel".
The decline of traditional media channels and the rise of streaming platforms have driven Disney to continuously adjust its entertainment business. To enhance the appeal of Disney+, Disney will launch an ESPN tile on December 4th to further strengthen its streaming services. ESPN belongs to the company's sports department and includes famous sports events such as MLB and NHL. As an important gathering place for sports enthusiasts, ESPN Digital has ranked first in the US sports category for over 30 consecutive months, benefiting from the return of the rugby season and receiving 120.6 million independent visitors in September.
The company stated that this move "will provide complete ESPN+sports content for three platform package users on Disney+, similar to the experience we provide Hulu content for package users on Disney+. This integrated experience takes us one step closer to bringing complete sports content to Disney+users in the United States.
Behind the impressive growth of channel business is the driving force of high-quality original content.
The fundamental reason why Disney has been able to achieve long-term success is that the upstream can continue to produce great works. Since two years ago, Disney Studios has been engaged in large-scale content innovation aimed at restoring the company's core creativity, and this effort has paid off in 2024.
In terms of movies, Pixar's "Mission: Impossible 2" and Marvel's "Deadpool&Wolverine" have set multiple box office records, currently ranking in the top 1 and top 2 of the 2024 film box office respectively, contributing $316 million in revenue to content sales, licensing, and other businesses. Disney Pictures has thus become the first film company in 2024 to surpass $4 billion in global box office revenue.
In terms of television, Disney's branded dramas and comprehensive entertainment programs have performed well, attracting new audiences while also receiving an unprecedented number of awards. At this year's 76th Emmy Awards, Disney set a new record for the company, winning a total of 60 awards.
The company expects to continue increasing its investment in content creation in the future. Looking ahead to 2025, Disney's newly released hot films include "Captain America: Brave New World," "StarCraft Baby," "Zootopia 2," and "Avatar 3," all of which were delayed due to factors such as the pandemic and strikes in the previous two years. In the current stable business environment, these films are expected to steadily invest and gradually be released.
Iger and Johnston said, "Our intellectual property, creative talent, and constantly increasing consumer touchpoints have expanded the coverage of the story, and today a successful Disney movie is more valuable than ever before
The performance of the experience section is average
However, Disney's second largest business, the experience sector (including offline theme parks), has performed relatively lackluster.
Its annual revenue was 34.151 billion US dollars, a year-on-year increase of only 5%, and its operating profit was 9.272 billion US dollars, a year-on-year increase of only 4%. Although the performance for the whole year showed both income and profit growth, the Q3 quarter was not satisfactory, with revenue of $8.24 billion, a year-on-year increase of only 1%; The overall operating profit was 1.659 billion US dollars, a decrease of 6% year-on-year.
Shanghai Disneyland was named for the decline in operating profit in the experience sector in the third quarter.
During this earnings conference call, Igor mentioned signs of consumer softness in Shanghai. This quarter, the operating profit of Disney International Park&Experience business declined year-on-year, which was affected by the decrease in the number of visitors to Shanghai Disneyland. In addition, Paris Disneyland was affected by this year's Paris Olympics, "said the company's executive.
It is reported that although Shanghai Disneyland will have a passenger flow of over 14 million in 2023, becoming the fifth ranked theme park in the world, the number of visitors will significantly decline in 2024. During the National Day holiday period alone, the passenger flow may decrease by more than 30% compared to the same period last year.
In fact, Disney is not the only theme park that has suffered setbacks in China.
The "2024 China Theme Park Competitiveness Evaluation Report" released by the China Theme Park Research Institute points out that as of October 2024, the overall performance of China's theme park industry has declined compared to 2023. In addition, the secondary consumption of theme parks, such as dining, souvenirs, and specialty experience projects, will also show a downward trend in 2024, with a decrease of 10% to 30%.
The downgrade of consumption cannot stop the price increase of Shanghai Disneyland tickets. During the summer vacation, Shanghai Disneyland became a hot topic due to the peak day ticket price rising to 719 yuan, while the regular Disneyland ticket price is 475 yuan.
However, according to Igor, the company believes that the slight decline in profits in the experience department is only temporary and should soon rebound and recover, and the prospects for offline amusement park business remain broad. Disney plans to invest heavily in domestic and international parks as well as cruise routes in the coming years, which may drive the growth of the experience sector.
This is also a surprising point for the market. For the future, Disney's conservative expectations are very optimistic. As conveyed in September 2023, Disney plans to increase its capital expenditures for its parks, experiences, and products divisions to approximately $60 billion over the next 10 years. In fiscal year 2025, the company plans to invest $8 billion in capital expenditures, a significant increase from $5.4 billion in fiscal year 2024.
This may be because CEO Igor needs to use this to repair his credibility. This is already his second time taking over as CEO. During the tenure of the previous successor he selected, Disney's performance was in crisis, and he had to return to Disney to take control. Optimistic expectations seemed to be in preparation for the next successor.
Currently, Disney is searching for a new CEO successor. Current CEO Igor plans to officially step down by the end of 2026. According to The Wall Street Journal, Disney announced that it will officially announce a new CEO candidate in early 2026. James Gorman, a current board member and former CEO of Morgan Stanley, will take the lead in this work and serve as the chairman of Disney's board of directors from January 2, 2025.
As of the opening on the 21st, Disney's stock price was $112.26, with a market value of $206.9 billion.