DIS Shareholders and Stock Info ONLY

[bryaalre]

Revenue and operating income tell 2 different stories since FY18 (The last FY before Disney+ launched).

Revenue growth has been driven by Entertainment and specifically streaming:
Ent revenue
FY18: $34.5B
FY25: $58.3B
+$23.8B

Exp Revenue
FY18 $24.7B
FY25 $36.2B
+$11.5B

Operating Income growth has been driven by Experiences (single/multi pass and new cruise ships).
Ent OI
FY18: $9.6B
FY25: $7.6B
-$2B (this is slowly trending toward positive each quarter)

Exp OI
FY18 $6.3B
FY25 $10B
+$3.7B

As much as Linear is declining (and it is) it does provide 30% margin. Under the radar, Disney breaking its contracts to license content along with a lack of pre-covid box office perfomance has been just as big of a negative factor in Entertainment. The costs to eliminate these licensing deals continues to add up. FY25 Disney reported $1.8B in eliminations and they take in half the licensing revenue of 2018.

The eliminations aren't them breaking contracts in order to license. It is intercompany transactions that need to be removed so they are not duplicating revenues for the company as a whole.

From their recent financials eliminations "Reflects fees paid by (a) Hulu to ESPN and the Entertainment linear networks business for the right to air their networks on Hulu Live TV and (b) ABC Network and Disney+ to ESPN to program certain sports content on ABC Network and Disney+."

Assuming Disney continues to be aggressive with its push to homogenize their services and allow more and more programming to be shown on ABC/ESPN/Hulu/Disney +, eliminations will continue to increase. However, this has no real impact on the company and is not something that is meaningful.

Also, as far as I am aware, there shouldn't be many licensing deals that Disney can break since most have run its course since Disney Plus has started and have naturally ended or Disney broke years ago in order to get the content to the service faster at the start. Licensing revenue as well is not a big deal since the decrease in that revenue is essentially just Disney paying themselves that licensing fee through Disney Plus.

 

[clarker99]

The eliminations aren't them breaking contracts in order to license. It is intercompany transactions that need to be removed so they are not duplicating revenues for the company as a whole.

From their recent financials eliminations "Reflects fees paid by (a) Hulu to ESPN and the Entertainment linear networks business for the right to air their networks on Hulu Live TV and (b) ABC Network and Disney+ to ESPN to program certain sports content on ABC Network and Disney+."

Assuming Disney continues to be aggressive with its push to homogenize their services and allow more and more programming to be shown on ABC/ESPN/Hulu/Disney +, eliminations will continue to increase. However, this has no real impact on the company and is not something that is meaningful.

Also, as far as I am aware, there shouldn't be many licensing deals that Disney can break since most have run its course since Disney Plus has started and have naturally ended or Disney broke years ago in order to get the content to the service faster at the start. Licensing revenue as well is not a big deal since the decrease in that revenue is essentially just Disney paying themselves that licensing fee through Disney Plus.

They take the $1.8B right off the balance sheet. It def affects the profitability of Entertainment. They reported $0 eliminations in 2018 and prior.

And yes licensing revenue declines affect the division. Not getting an extra $2-3B from others is kind of a big deal.

I am not sure I understand how wiping out $4-5B in revenue that use to count is not a big deal?

 

[OKW Lover]

They take the $1.8B right off the balance sheet. It def affects the profitability of Entertainment. They reported $0 eliminations in 2018 and prior.

And yes licensing revenue declines affect the division. Not getting an extra $2-3B from others is kind of a big deal.

I am not sure I understand how wiping out $4-5B in revenue that use to count is not a big deal?

You're looking at DIS as a consolidated entity when the report their results. When management looks at the individual segments they see the picture without the need of eliminations.

 

[clarker99]

All this tells me is that Linear, Sports, DTC and the Studios numbers are inflated as they back out the double accounting on the macro.

 

[RivShore]

Not getting an extra $2-3B from others is kind of a big deal

Was just going to say similar - no matter how they treat it internally, they forfeited this near 100% margin line of business in favor of streaming which lost $11B before it finally brought something to the bottom line.

That is part of the steep hill they have to climb just to get back to where they were a few years ago - Make back the $11B in D+ losses, make up the $2-3B in annual licensing revenue/margin, and replace cord cutting losses, all that ='s a stagnant stock price.

 

[RivShore]

BTW, a Public Serve Announcement - Youtube is a giant cesspool of mostly AI generated nonsense!

Did a quick search to find DIS licensing revenue numbers and a pile of YT clickbait about the decline and death of Disney came up. The couple I just couldn't avoid watching (at double speed) were of course woefully misinformed. Then a Kevin O'Leary channel came up as a suggest watch, and there he was giving detailed real estate advice. I quickly realized it was AI generated drivel. For the less discerning who are feed stuff like this on every platform, is it any wonder the world is in chaos? And why don't public figures like O'Leary sue them off the platform? Fun times we live in!

 

[clarker99]

Revenue growth has been driven by Entertainment and specifically streaming:
Ent revenue
FY18: $34.5B
FY25: $58.3B
+$23.8B

DTC alone went from $0 in revenue FY18 to $24.6B in Fy25. The rest of the Entertainment side has declined $800m since 2018. Can $DIS's DTC offerings grow into a Netflix sized business with 30% margin? Revenue-wise they are over half way there. Profits and margins have a long way to go. We are looking at a very long game here from $DIS.

 

[bryaalre]

All this tells me is that Linear, Sports, DTC and the Studios numbers are inflated as they back out the double accounting on the macro.

At the segment level, yes, you could say that they are inflated. This is due to each segment needing to show its true revenue as if they weren't combined units. The eliminations line than pulls out all intercompany transactions that would be double booked due to these agreements.

One note they use is fees paid by Disney+ to ESPN to program certain sports content on ABC Network and Disney+. At the segment level, ESPN needs to book this revenue as it is indeed revenue for that unit and Disney Plus needs to book the corresponding expense as it is an expense. However, Disney is neither generating more revenue or having more expenses with this transaction, so they need to back that out at the company level and that is why we have the eliminations line. This is needed to prevent the inflation of numbers on the financials as the intercompany transactions themselves have a net zero impact on the consolidated entity overall.

As for licensing declines, its not a big deal because they are made up for form the Disney Plus revenues and accounted for from profiting from that unit. Its not as simple as saying licensing generating less revenue is bad. The licensing revenue just gets reported differently now that it is on Disney Plus. Prior to the service we were able to see those licensing fees being paid by Netflix and others as it was its own line. Nowadays, most of those licensing payments are lumped into the Disney Plus expenses and used as content for the service. Would it be better if they could double dip on say Pixar movies and get money from other sources like Netflix and Disney Plus, sure, but I think Netflix and Disney would both want exclusive rights for something like Pixar.

IMO, placing Disney content on Disney Plus and generating that profit means much more to the company than not having it and only getting licensing. We are more than making up for the licensing decline with the Disney Plus results and will be generating substantially more via that route vs the route if they didn't have a service.

 

[clarker99]

Did a quick search to find DIS licensing revenue numbers

(millions)

Linear and Studios used to report TV/SVOD separately up to FY2018 and after the 20CF purchase the licensing revenue was very large. Then in FY19 they moved all TV/SVOD in to Content Sales and Licensing (except for some ESPN stuff) and the revenue fell off a cliff.

Then starting in FY25 they combined TV/SVOD with 'Home Entertainment' which muddies things so I dont have it on this chart.

 

[bryaalre]

Was just going to say similar - no matter how they treat it internally, they forfeited this near 100% margin line of business in favor of streaming which lost $11B before it finally brought something to the bottom line.

That is part of the steep hill they have to climb just to get back to where they were a few years ago - Make back the $11B in D+ losses, make up the $2-3B in annual licensing revenue/margin, and replace cord cutting losses, all that ='s a stagnant stock price.

The losses were bad and decisions were made that shouldn't have been made during that time that but a lot of those losses were due to overspend of new content and the cost of bringing the old content to the service in lieu of licensing. All of that is now in check and should hopefully be caught back up in a few years.

No one will ever mention Netflix and licensing because the service generates substantially more than any licensing deal would. We are at that point now with Disney and its DTC unit. My biggest gripe with their DTC is the paltry level of revenue growth, especially in the face of continued price increases. Their DTC revenues should be growing at a much higher rate than the 8% last year and this to me is the biggest hang on the stock. Should they accelerate this, and trickle it down to accelerate their margin and profit, we would see the stock move. If they continue to grow less than 10%, we will probably continue to see this sideways action.

 

[PsylockeSmythe]

BTW, a Public Serve Announcement - Youtube is a giant cesspool of mostly AI generated nonsense!

I'm so glad that I only use YouTube for when I want to watch 80's music videos (not as often as I use to) or when I need a visual how-to on fix something. Otherwise, it is not a site I visit any longer. I also don't use TikTok, again just not something that appeals to me.

Psy

 

[clarker99]

The losses were bad and decisions were made that shouldn't have been made during that time that but a lot of those losses were due to overspend of new content and the cost of bringing the old content to the service in lieu of licensing. All of that is now in check and should hopefully be caught back up in a few years.

No one will ever mention Netflix and licensing because the service generates substantially more than any licensing deal would. We are at that point now with Disney and its DTC unit. My biggest gripe with their DTC is the paltry level of revenue growth, especially in the face of continued price increases. Their DTC revenues should be growing at a much higher rate than the 8% last year and this to me is the biggest hang on the stock. Should they accelerate this, and trickle it down to accelerate their margin and profit, we would see the stock move. If they continue to grow less than 10%, we will probably continue to see this sideways action.

I just question if they had to rip the band-aid off so quick with licensing. In the end maybe it was the right call but I feel it could have been gradual and at the break even point there could have been a hand off.

Yes, DTC revenue is a conundrum. The ad revenue has been very disappointing.

 

[bryaalre]

I just question if they had to rip the band-aid off so quick with licensing. In the end maybe it was the right call but I feel it could have been gradual and at the break even point there could have been a hand off.

Yes, DTC revenue is a conundrum. The ad revenue has been very disappointing.

I agree, the band-aid did not have to be ripped off quite as fast. The initial sign up numbers and Covid really skewed the services potential. They should have left many of the agreements in place and let content naturally come back to the service instead of breaking so many and not only forgoing the license revenue but also paying an additional fee.

It is what it is at this point. Similar to them ignoring the parks during Covid, they seem to be righting a few wrongs. Hopefully they can stay focused and start hitting to jump start the stock.

 

[HokieRaven5]

It is what it is at this point. Similar to them ignoring the parks during Covid, they seem to be righting a few wrongs. Hopefully they can stay focused and start hitting to jump start the stock.

I’ll caveat the “ignoring of the parks” as far as construction got tied into the amount of loss from reduced operations and salaries still being paid for a time. Heck they took out another few $B in debt just to ensure things were kept afloat for the experiences sector while Linear was the only thing actually making money for the company.

 

[bryaalre]

I’ll caveat the “ignoring of the parks” as far as construction got tied into the amount of loss from reduced operations and salaries still being paid for a time. Heck they took out another few $B in debt just to ensure things were kept afloat for the experiences sector while Linear was the only thing actually making money for the company.

Ignoring is certainly an over simplification of that time. Had the purchase of Fox timed with Covid and the start of their DTC unit not happened all at about the same time, I have no doubt they would have continued to expand like they had in the prior 5-10 years at the parks.

 

[HokieRaven5]

Ignoring is certainly an over simplification of that time. Had the purchase of Fox timed with Covid and the start of their DTC unit not happened all at about the same time, I have no doubt they would have continued to expand like they had in the prior 5-10 years at the parks.

Yes, it was a culmination of timing. And then handling of how construction firms were allowed access during COVID could’ve been a factor. Tron for instance being an inside coaster they could’ve had self implemented conditions for how many workers could be in there at a time.

I give this because my work for our design projects had restrictions for how many contractors could be with us into buildings as a group to go on site walkthroughs.