Walt Disney Company Q3 Earnings Report

[anthony2k7]

Someone in one of Carlye’s twitter threads today said that when they worked at the company, non-local-APs made up ~80% of WDW’s clientele. On the call today, they said current attendance is roughly 50% local and 50% out of market, which is a huge reduction in their typical “go big or go home” spending base.

I, too, was surprised by the “uproar” on social media from people who I guess just learned that Disney values the out-of-market dollars more than the local-AP dollars? I know a lot of APs see their ticket as a status symbol of sorts within the parks, so maybe it’s a hurt pride reaction. I just thought more people were already aware that WDW has really geared their focus to those out-of-market higher spend guests, be they once-in-a-lifetime or every-few-years or whatever.

The parks still look way quieter in the afternoons compared to mornings so it appears people are not staying around to eat in the parks much. If they were on site guests where are they all going? So that must be an effect of the volume of guests being local and going home to eat or at least driving off site to eat.

 

[bookwormde]

It wasn’t a onetime write down. That $5 billion was booked as income as you can see here
View attachment 515890

Since we do not know the offsetting entry, we can not be sure but typically it would be against the balance sheet. My reading is that they took 5B in costs and offset them off against the balance sheet. This is a common tactic for large companies who are going though challenging times to show a number that is still positive.

 

[TheMaxRebo]

I think it’s mainly the thought that the film would do exceedingly well in the Chinese market. I too haven’t spoken to anyone at work or in my friend circle who were excited for the film (or like you said even cared for the cartoon). I know I had no interest in seeing this movie. I’ve never even seen the cartoon version!

We must travel in different circles - I know a ton of people excited for this. I am one of them and I don't generally like the remakes but this one looks rather cool and not just a shot for shot remake.

i also know someone who got to see it and said it was good

 

[Transvection]

... If they were on site guests where are they all going? So that must be an effect of the volume of guests being local and going home to eat or at least driving off site to eat.

When we were there a week ago, a lot of people were leaving to go to Disney Springs (Line for Disney Springs busses were long). I have a feeling a lot of people were going to the resort restaurants as well. We stayed at OKW and got several voicemails to the room pleading with people to please make a reservation before showing up to eat at Olivia's. We would eat in the parks with reservations near closing time to maximize our park times but for some, I imagine they either couldn't get a reservation or it was too early for dinner. All just guesses based on what I saw during my 8 days.

 

[TwoMisfits]

We must travel in different circles - I know a ton of people excited for this. I am one of them and I don't generally like the remakes but this one looks rather cool and not just a shot for shot remake.

i also know someone who got to see it and said it was good

Deadline, the go-to entertainment site, says the quality of Mulan is an issue...now, whether that's sour grapes, we'll see...

"Also, some who’ve already seen Mulan say it’s OK, not great, which could factor against it at the box office in a marketplace that’s not completely restored."

https://deadline.com/2020/08/mulan-disney-premiere-exhibition-corornavirus-1203004223/

 

[New Mouse]

Deadline, the go-to entertainment site, says the quality of Mulan is an issue...now, whether that's sour grapes, we'll see...

"Also, some who’ve already seen Mulan say it’s OK, not great, which could factor against it at the box office in a marketplace that’s not completely restored."

https://deadline.com/2020/08/mulan-disney-premiere-exhibition-corornavirus-1203004223/

Id argue that if youre the only game in town that would actually benefit a situation like this.

 

[jpeterson]

Id argue that if youre the only game in town that would actually benefit a situation like this.

I was thinking the same. If people are willing to go to the theaters (and that's a big IF) then even an OK to Good film might do really well. But maybe they think that won't attract people who are already nervous about going?

 

[Brianstl]

Given the current situation, this was actually a decent report for Disney. They are fairing better than I think most people expected. It wasn’t a good report, but it was as good as they good have in the current climate given what some of their historical big revenue generators are.

 

[OKW Lover]

Apparently Wall Street was impressed with the results. In early trading at the opening of the market today Disney is up ~8%.

 

[BrianL]

Given the current situation, this was actually a decent report for Disney. They are fairing better than I think most people expected. It wasn’t a good report, but it was as good as they good have in the current climate given what some of their historical big revenue generators are.

Disney+ has certianly been a huge boon for them. It's a good thing they rollled it out when they did.

 

[OSUZorba]

I forget who said it the other day but they brought up an interesting point. AP’s might not spend as much as vacationers on a day to day basis, but theyre also in the parks 20+ times a year, and even if they spend 25% of what a vacationer will spend on a day at the parks, it adds up because they’re in the parks more over the course of the year. Maybe that works more for DL than WDW because they have more of an AP base. But I dont think APs go in the parks and leave without spending a dime. That might be the plan, but then something catches their eye and now they just spent 20-30 dollars.

It was APs that bought out the Splash merch that has been sitting in that store since 1992. Yes, they all sold it for mega-profit, but Disney still got rid of the merch that they couldnt pay people to take prior to the announced retheme.

Then again, if they’re admitting that APs dont spend money in the parks like vacationers do (which is obvious) I still think its kind of a slap in the face. How often are locals shown that they dont matter to Disney? It’s a strange strategy, but they continue to do it, and locals continue to re-up their passes

Yeah, all businesses have a range of customers from budget to premium. On my last cruise I stayed in an owner's suite, when I booked it I could've gotten ~5 interior rooms for the same price. It'd be easy for a bean counter to say "we make so much more on owner's suites," yet the ship has 8 owner's suites and 500 interior rooms because they know they could never fill the ship the other way around.

They make much more from someone staying at the Poly bungalows than All-Stars, yet they have far more All-Stars rooms and have extended benefits to many AS priced resorts.

On a per day, direct basis you make less off your passholders, but that doesn't mean they aren't a valuable part of the equation. Especially, as I said before, they keep the parks viable in slow times (like right now), they keep premium guests in the parks longer (and get them to pay more to avoid the masses), they also provide a ton of free marketing and goodwill for the parks.

 

[OSUZorba]

Very fair and there is a component of coming often that can factor into these things too.

As an example and on-topic for the previous theater discussion prior to covid I listened to some AMC calls after they introduced A-List which lets people see up to 3 movies a week for a flat fee. AMC was happy with it but on the call did mention that per-visit spending on concessions for A-list members was lower which they expected but because an a-list member came 2-3 times as often per month as non a-list members, the per-month numbers were higher. A-list was like 10-20% of visitors at the time I believe. AMC was good with those numbers at the time.

Now if A-list was 50% of the people coming in, then that lower per-visit concession number becomes a bigger issue.

But I agree a think a lot of people complaining missed the context/audience for the call. I like in atlanta and when I go to six flags (have a membership) I rarely spend any money while at the park unless it's for alcohol (have the dining plan for food). Outside of alcohol the only other money I spend is if I go to the water park I may get a locker. So I'm in that group of I pay my monthly membership fee and little else. Does that at times make me not as profitable on a per-day basis as somebody buying a single-day ticket? absolutely and I'm fine with that.

This year is different, but in the past I took pride in not giving Six Flags or Cedar Fair any extra money beyond my pass. This year I've been freer with my money in the parks though, I'd like them to be here next year.

Same doesn't hold true at WDW because I rope drop to fireworks every day and I actually like the food and merch.

 

[jpeterson]

Disney+ has certianly been a huge boon for them. It's a good thing they rollled it out when they did.

I don't think the timing could have been better for them. They got in and got it started before the pandemic hit. Buzz had some time to build around Mandalorian before everyone got stuck at home.

 

[afan]

The parks still look way quieter in the afternoons compared to mornings so it appears people are not staying around to eat in the parks much. If they were on site guests where are they all going? So that must be an effect of the volume of guests being local and going home to eat or at least driving off site to eat.

People are still taking afternoon breaks at the pool etc. With the lower crowds, even with the shorter hours, from what I've read it's so easy to get it all done. It's probably the same people that wouldn't spend all day in the park. You aren't up as early but people still want pool or nap time at the resort and then go back. Or you finish everything you want to do and go to DS or your resort for the rest of the day.

 

[sponica]

I didn't go through 17 pages of posts, but my .02.

I think the price point on Mulan is a tad high but not bonkers, I think I paid 25 for trolls world tour (which was a bargain considering it was cheaper than 3 tickets and popcorn/soda/candy). I wasn't planning on seeing Mulan in theaters so it's a moot point for me.

I really hope things can improve enough for Black Widow to get a theatrical release. I want that on a big screen as a communal experience....and while drive-ins are making a rebound they're very seasonal in the northeast. They wouldn't be open around here when Black Widow does get released.

As far as the FL parks demand being lower than anticipated: i have no desire to travel through a covid inferno for an experience that isn't what I'm used to (not that it's necessarily bad but park hopping is part of our MO). We thought about going at Christmas, but I'm expecting the northeast to spike in the fall/winter when we all move back inside.

 

[DonMa]

There are some really upset people on social media with the comments about passholders. I guess it was not as obvious as many of us thought that per guest spending in general is going to be lower for a local guest.

Seriously isn’t it common sense that people who go for long hotel stays have a higher per capita value than people who go so often that they buy an AP to maximize their bang for the buck? Isn’t that basically why you would buy an AP?
Now should Chapek have said it the way he did? Probably not. That combined with the issues AP holders have with the reservation system and other limitations are only making it worse. But they have not exactly covered themselves in customer service glory throughout this situation. And People have been pointing out for a while that Chapek is not great at this stuff...

 

[DonMa]

It’s the possibility that this is the start of a trend that is worrisome. And not just to me, but should be for all Disney fans. It might be just 1 movie, but its still a big loss for them regardless. It’s like breaking even on the parks. Cool, people are going and they’re staying afloat, but thats not good, and if it continues, it’ll get worse, not better.

Christopher Nolan would have to pass away for WB to put Tenent on streaming. He’s pro-pro-pro the theater going experience.

But WW84, Dune, Soul, Black Widow, Bond. All potential billion dollar films that if released on PVOD are break-even movies.

What you are neglecting to realize is that break even is in many cases a very attractive option at this point. Live to fight another day is a viable strategy at this point
Is it shortsighted? Maybe. But somebody at TWDC thinks it’s a way to recoup some costs and be better positioned for whatever comes next
FWIW my family is already planning to rent it...or buy it...or whatever you do with it

 

[YesterDark]

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.

 

[hertamaniac]

Given the current situation, this was actually a decent report for Disney. They are fairing better than I think most people expected. It wasn’t a good report, but it was as good as they good have in the current climate given what some of their historical big revenue generators are.

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.

 

[skeeter31]

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.

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.