After reviewing the numbers and digesting the call, i like where the company is headed for the most part. I like that the dividend is looking to come back by the end of the year, but with it being a fraction of what it was, it does not move the needle for me.
DTC
Streaming is the future of the company's media division but still needs to have more oversight as I think they are spending to much on content. Q1 2022 production and programming costs for Disney Plus were $920M and now one year later Q1 2023 costs were $1.68B. There really is not a need for that type of increase in a year and Iger looks to be addressing this. We see overall SG&A expenses dropped over $500M from last quarter and just over $100M from last year.
The subscriber gain for core Disney plus could have been bigger but a gain is a gain and they have stated that we should be seeing larger gains in the back half of the year, so we will see how that goes.
My one worry is ARPU just keeps dropping in the U.S. It peaked in Q4 of 2021 at $6.81 and is now sitting at $5.95 after 5 straight quarters of decline. This is one metric that needs to be going up. This quarter only had a few weeks of the latest price hike but they really need to be getting ARPU much higher.
With mentions of licensing content, Hulu could and probably should be sold off. This would free up a lot of content, especially adult content that could be licensed out, like FX. On top of getting some funds from the sale, they would save money not having to but out the remaining share of it. I use Hulu mostly for next day watching of live shows and they could easily integrate ABC shows into Disney Plus like this like peacock or paramount do.
Linear
Disappointing results for linear overall but with advertising softening, this was not unexpected. ESPN reporting on its own is weird to me as it has never been the case. I am interested as to why this is needed and my only speculation was to show potential buyers more transparency in the numbers but Iger tossed that theory to side during the call. I would still like them to at least shop around ESPN and see what it could fetch. Sports is certainly a big business but it does not have any integration with the rest of Disney. Let someone else deal with pivoting ESPN to the digital age and bidding against apple and
amazon for rights.
PARKS
I think we all want more investments in the park and the decrease in Capex hopefully is the "timing" issue they stated vs an actual decrease in spending. I am fine with the thought that increasing capacity at the parks with new lands or attractions is what they think is better than a 5th gate but we need to start getting announcements of these so called projects. A new Avatar experience was brought up during the call for
Disneyland but we need stuff for Disney World. What comes after Moana's journey? What goes into Dinoland? They can keep bringing up the fact that they would rather increase capacity at their current parks but we are going to need actual projects.
Universal is spending what I estimate to be $5-$6B to build Epic Universe. Disney does not need a new park in order to compete with this but there should at least be a new land or rides to open during this time. I am not worried about Epic Universe or Universal taking a huge share away from Disney. Epic Universe will be very popular and packed but they have a lot of work that needs to be done on their other 2 parks that I see more people cutting those parks off a trip vs excluding Disney.
They seemed more confident that attendance will continue to be strong through the year and so I have no worries the parks will continue to rake in the money. People want to come and spend and they look to continue to do so for the foreseeable future.
