Walt Disney Company Q3 Earnings Report

[BrianL]

I want to thank Disney for giving me a great topic for the next episode of my podcast.

So this whole Mulan conversation is pretty simple. It's about cash and access right? They are doing something everyone is not used to - giving you permanent access to a brand new movie via a paid streaming service. It'll take people a while to get used to that, but it's probably the new norm.

Some facts:

• This is cheaper way to watch the movie at release if you're at least a family of 4 if not 3 depending on region and snack purchases.
• This is more expensive if you're solo and have a movie pass.
• This is slightly more expensive if you're solo and typically buy drink/snack at the theatre. (Maybe break even? I mean how much popcorn and candy do you buy?)
• This is cheaper if you plan on A) Seeing the movie. B) Buying the Blue-Ray C) Subscribing to D+

Honestly it's a win win for consumers. If you're not a movie goer, regardless of release platform (theater vs. stream), you still gain access to the movie via normal avenues like streaming on D+, Redbox or blue ray purchase (why do you people still buy physical media???). If you're the type that needs to see it right away and assuming you're not torrenting the movie 5 hours after it's released, it's pretty cheap for a family to buy and keep in their collection on D+

Here's what the future may look like for D+ that would be interesting. Because Disney owns so much IP/catalog/studios etc. you could see something like a Steam (platform for publishing PC computer games) but for movies and shows. You may see a whole section on D+ that gives you early access to popular shows and access to newly released movies just like this. Not sure if the consumer marketplace is ready for that as it's used to paying a sub and streaming everything. Very tricky if they go that direction, and it's something I probably wouldn't participate in.

I do however, see a very viable market for releasing movies this way in the future but it's going to majorly impact the budgets for them. I don't see how they make $1B in global revenue on a movie if they are expecting people to buy in at $30 a household unless it's a blockbuster.

If I were an executive at Disney, you have to start smaller with smaller budget films to get people used to the idea. "Hey everyone we got this new movie coming out, it'll be $30 to stream and after 3-5 months it'll be available normally in your lineup on D+". do that for a year or two and I think you can get people to buy in .. literally.

I like your assessment. The only area of concern is that after the theatrical windoe and home-video (disc, digital) release it likely would be released to D+ at some point. It probably still will, but it will need to be a long enough window tha thte people who paid $30 for it feel that they got their money's worth. I'm not sure how long that is. It's also interesting to note that if you bought the disc (or digital), then you'd have it forever, but this is tied to your D+ subscription. It's certianly interesting to try but they have to do unprescedented things right now to see what works.

 

[hertamaniac]

The CFO did address this on the call yesterday. They do have some debt coming due in the next fiscal year, but they have the cash on hand to pay that off without refinancing it. Obviously the newer loans they just took out won’t come due for a few years, but it was nice to hear they’re prepped to pay off current debt with cash on hand.

Translates to my point of record consumer price increases to pay shorter and longer term debt loads. Just because a company has capital reserves to pay short term debt, doesn't equate to actually paying off that debt with those funds.

 

[Krandor]

Interesting additional detail there in that tweet. Own it as long as you're a continual subscriber. Sounds like they are hoping people build up a library of bought content over time that they then hope people value enough to never end their subscription.

I think what you are doing is paying to see it early. You'll get 6 months or so and then it will join D+ for everybody. So it's effectively pay to see it early.

Personally I don't like that model. I'd rather it be part of my sub or let me pay to own it independent of my sub.

 

[Tiki Birdland]

why do you people still buy physical media???

I do this because I rip it and put them on my Plex streamer. I find that Netflix and other streamers pull content all the time. And, I bet D+ will be doing this too. With the physical media, I have the right to put it on my own "TikiBirdLand" Streaming service

If I were an executive at Disney, you have to start smaller with smaller budget films to get people used to the idea.

I can totally see this happening. Mando has proven that good story-telling is important. Add in some innovative set creation and you're all set. I believe that Avatar isn't remembered much (well, by most people) is the story wasn't compelling. It did have awesome special effects. Maybe that would be a good reason for it to be an exception. I don't think I'm waiting for the sequels.

 

[xuxa777]

Short sellers. DIS will drop tomorrow - I'm fairly sure of it!

this aged well, still a long way to go today before close

 

[YesterDark]

I like your assessment. The only area of concern is that after the theatrical windoe and home-video (disc, digital) release it likely would be released to D+ at some point. It probably still will, but it will need to be a long enough window tha thte people who paid $30 for it feel that they got their money's worth. I'm not sure how long that is. It's also interesting to note that if you bought the disc (or digital), then you'd have it forever, but this is tied to your D+ subscription. It's certianly interesting to try but they have to do unprescedented things right now to see what works.

Not really unprecedented, pay per view has been a big thing for stuff like boxing and UFC. I remember Howard Stern doing some new years eve events 30 years ago that brought in some good cash. Just unprecedented for major movie releases, but there is data out there to see how people would buy in to it.

It'll require a lot of marketing to get people warmed up to the idea.

 

[YesterDark]

I think what you are doing is paying to see it early. You'll get 6 months or so and then it will join D+ for everybody. So it's effectively pay to see it early.

Personally I don't like that model. I'd rather it be part of my sub or let me pay to own it independent of my sub.

It is part of your sub, just not right away. Like you said.

If you want Disney to continue to make amazing high production value movies, they need to get sales some way. The can't afford to do blockbusters just to release them to D+ for free.

 

[Krandor]

It is part of your sub, just not right away. Like you said.

If you want Disney to continue to make amazing high production value movies, they need to get sales some way. The can't afford to do blockbusters just to release them to D+ for free.

Agree but I'd prefer a I can buy it and keep it model without having to maintain a subscription.

 

[YesterDark]

Agree but I'd prefer a I can buy it and keep it model without having to maintain a subscription.

Disney and other studios are used to double dipping. Ticket sales and Blueray/digital sales 6 months later plus rentals. I suspect that D+ availability will be after the normal physical/digital release.

 

[Krandor]

Disney and other studios are used to double dipping. Ticket sales and Blueray/digital sales 6 months later plus rentals. I suspect that D+ availability will be after the normal physical/digital release.

I totally get why they are doing. Just not a model I like.

 

[YesterDark]

I totally get why they are doing. Just not a model I like.

What's not to like about it? It just gives you more options. You'll still be able to get your digital download just like any other movie months after theatrical release. Nothing changes here.

 

[OSUZorba]

I think they shouldn't have done the Mulan release as part of D+, that is what is confusing matters and making people worried about microtransactions.

 

[hertamaniac]

Honestly it's a win win for consumers. If you're not a movie goer, regardless of release platform (theater vs. stream), you still gain access to the movie via normal avenues like streaming on D+, Redbox or blue ray purchase (why do you people still buy physical media???).

Some of us purchase blue ray discs for sharing with family/friends that don't have access to my personal streaming accounts. This is a major issue I have with this Mulan experiment as I can't hand a disc/media to someone. By sharing the cost(s) of purchasing the discs, I dilute my actual cost(s).

So I don't see it as a win-win at all.

 

[rteetz]

What's not to like about it? It just gives you more options. You'll still be able to get your digital download just like any other movie months after theatrical release. Nothing changes here.

I think the worry for some is this will become more frequent and could lead to other things that would’ve probably been included in Disney+ to now be an up charge.

 

[hertamaniac]

I think the worry for some is this will become more frequent and could lead to other things that would’ve probably been included in Disney+ to now be an up charge.

That's it. This could lead to a Disney++ or whatever catchy marketing term they come up with. I think they will make a new tier(s) for subscribers (basic/plus/premium/ultimate/Thanos level).

I really want to see Mulan and the previews look outstanding, but this model gives us pause.

 

[CastAStone]

But the debt/borrowing load has to concerning if/when the notes are called. And we consumers think prices are high now....I suspect a record % increases across the general board is looming.

I don't see where the debt load is ever unmanageable under the schedule they laid out. The company - in normal times - is a cash generating machine.

On what basis do you imagine a bondholder / noteholder would call a bond/note prior to its scheduled maturity?

 

[Krandor]

What's not to like about it? It just gives you more options. You'll still be able to get your digital download just like any other movie months after theatrical release. Nothing changes here.

I don't like it because of the requirement to pay $30 AND keep a subscrription. I'd rather one or the other - not both.

 

[Chumpieboy]

No, they'll do it with the Marvel shows that they've already pushed back...

Again, this experiment needs to be ended or Disney + just becomes a "fee for access" and then you pay for everything else...

Like the parks!

Brilliant!!

 

[Krandor]

I think the worry for some is this will become more frequent and could lead to other things that would’ve probably been included in Disney+ to now be an up charge.

"Watch Manalorian a week before everybody else for an extra $5/episode"

 

[Eric Smith]

"Watch Manalorian a week before everybody else for an extra $5/episode"

I think we should wait to see if that happens before we worry about falling down the slippery slope. I don't think this would have happened if not for the pandemic. Theaters may not be open in the US for another 9 to 12 months and I doubt the company wanted to sit on the movie for that long.