Disney reported flat revenues and a further slide in Disney+ subscriber counts for its first quarter of the 2024 fiscal year as CEO Bob Iger fights to stave off an activist investor movement led by Nelson Peltz.
But despite that, the company still saw a big bump in afterhours trading, rising by 6.5% at time of writing.
The Iger Bump: At time of writing, Disney’s stock currently stands at around $105.68/share rising from a price of $99.14 at market close. The bump has been attributed to Disney’s ongoing efforts to cut costs in its direct-to-consumer division, as well as big announcements from Iger such as its $1.5 billion equity investment in Epic Games and its plans to launch a new sports streaming service with Warner Bros. Discovery and Fox Sports.
Revenue: Disney’s $23.5 billion in quarterly revenue — flat from last year — consisted of $10 billion from its Entertainment division, which consists of TV, film and streaming businesses, $4.8 billion for Sports, including ESPN and Star; and $9.1 billion for Experiences, which includes its theme parks, cruise line and products.
Disney also reported a 27% increase in its overall operating income to $3.9 billion, as a $103 million loss in the company’s sports division was offset partly by a more than doubling of entertainment division income to $874 million this quarter, from $345 million in Q1 2023.
Mixed streaming results: In the short term, Disney’s numbers for its streaming services aren’t particularly rosy, as total subscribers for all its services slipped by about 600,000 this past quarter to 149.6 million. But the streaming division’s quarterly losses dropped to $216 million after topping $1 billion a year ago, and the company is expecting subscriber counts to jump as much as 6 million next quarter with the release of “Taylor Swift: The Eras Tour” on Disney+.
“Our strong performance this past quarter demonstrates we have turned the corner and entered a new era for our company, focused on fortifying ESPN for the future, building streaming into a profitable growth business, reinvigorating our film studios, and turbocharging growth in our parks and experiences,” Iger said in a statement.
Disney met Q1 Wall Street projections with $23.5 billion, though that figure is flat from the previous year. Diluted earnings per share rose to $1.22, slightly above the 97 cents expected by analysts surveyed Zacks Investment Research.
Core subscribers for Disney+ fell by 1.3 million subscribers, with Hulu seeing a 1.2 million subscriber increase and Disney Hotstar subscribers increasing by 700,000. Overall, subscriber counts stand at 111.3 million for Disney+ Core, 38.3 for Disney+ Hotstar and 49.7 million for Hulu. Overall subscriber count is 149.6 million, down slightly from the 150.2 million reported last quarter.
Disney also reported increased Disney+ Core revenue per user by 14 cents thanks to an increase in the service’s monthly rate to $7.99/month, with $13.99/month for ad-free tiers.
Disney’s streaming division is also making major progress towards turning a profit, reporting losses of $216 million this past quarter. It’s a major improvement from the $1 billion-plus in losses a year ago and even the $387 million loss last quarter.
Disney projects a 5.5 to 6 million increase in subscribers next quarter as the service will exclusively stream Taylor Swift’s hit concert film “The Eras Tour,” which grossed $261.6 million at the global box office after AMC reached a deal with the pop star to release the film in theaters without a major studio attached.
Disney also projects a 20% increase in earnings per share in 2024 and free cash flow of $8 billion for the year.
Disney’s earnings also came with a flurry of big announcements for various divisions. In addition to the upcoming “Eras Tour” release, Disney and ESPN will be partnering with Fox Sports and Warner Bros. Discovery to launch a new streaming service that will air live games and programming from ESPN, ABC, Fox, Fox Sports 1, TNT and TBS, among other channels that carry live sports.
Iger also announced the launch of a new ESPN streaming platform to replace its current ESPN+ platform, which will include all of ESPN’s cable networks and programming. Iger told CNBC that Disney is projecting a launch of that service in August 2025.
Disney is also making a $1.5 billion equity investment in Epic Games, publisher of the hit video game “Fortnite,” and will work with the gaming company to create a new “games and entertainment universe” with characters from all of Disney’s franchises, including “Avatar,” “Star Wars,” and Marvel.
The latest quarterly results come as the House of Mouse is gearing up for a showdown with activist investor Nelson Peltz during its annual meeting of shareholders on April 3. Shareholders of record as of the close of business on Feb. 5 will be entitled to vote at the meeting.
Peltz and former Disney chief financial officer Jay Rasulo are seeking to oust current board members Michael Froman and Maria Elena Lagomasino and have set several goals for the company, including targeting Netflix-like profit margins of 15-20% by fiscal year 2027 and completing a successful CEO succession.
Peltz and his firm Trian Fund Management argue that Disney’s operating income, free cash flow and earnings per share have declined by 18%, 50% and 85%, respectively, since 2018, which it blames on Disney’s board having a lack of focus, alignment and accountability.
“We do not believe the current Board can solve Disney’s problems. To Restore the Magic, we need new perspectives, fresh thinking and tangible goals,” Trian said in a message to shareholders on Feb. 1. “We certainly do not expect this same Board that has sat idle, watching Disney’s decline, to suddenly change and have the drive to fix Disney. So, to ensure a better future for this great company, we, its owners, must act!”
Disney has argued it has the “right strategy to drive profitable growth and value creation,” touting its “substantial progress” in making the business more efficient and effective, including a sharpened focus on its brand and franchises, a continued commitment to cutting costs and a reinstatement of the company’s dividend.
It added that Peltz and Rasulo “do not not possess the appropriate range of talent, skill, perspective and/or expertise to effectively support the Board’s ongoing efforts to drive profitable growth and shareholder value creation in the face of continuing, industry-wide challenges.”
The board has recommended its own slate, which includes Froman, Lagomasino, Disney CEO Bob Iger, Mary Barra, Safra Catz, Amy Chang, Carolyn Everson, Calvin McDonald, Mark Parker and Derica Rice, as well as recent appointees James Gorman and Jeremy Darroch.
More to come…
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