The Walt Disney Company’s 3rd Quarter Earnings Report

Yesterday The Walt Disney Company reported their quarterly earnings for its third fiscal quarter ending on July 1, 2017. They also made a big announcement about their move away from Netflix and into their own streaming services.

Although impressive earnings were reported, Disney still showed disappointing revenues. We have the breakdown below:

Cable Networks – revenues for the quarter decreased 3% to $4.1 billion and operating income decreased 23% to $1.5 billion.

• Lower operating income was due to a decline at ESPN showing higher programming costs and lower advertising revenue, as well as severance and contract termination costs.

Parks and Resorts – revenues for the quarter increased 12% to $4.9 billion.

• Domestic Parks: Increased costs were essentially offset by increases in guest spending and volumes.
  • Higher costs were primarily due to labor and other cost inflation, increased operations support costs, new guest offerings and the dry-dock of the Disney Fantasy in the current quarter.
  • Costs for new guest offerings were driven by the launch of the expansion of Disney’s Animal Kingdom at Walt Disney World Resort, including the related marketing costs.
  • Guest spending growth was due to increases in average ticket prices for sailings on the cruise ships and admission to the theme parks, as well as higher average daily hotel room rates and food and beverage spending.
  • Higher volumes were due to attendance growth, partially offset by a decrease in occupied room nights and lower passenger cruise days due to the dry-dock of the Disney Fantasy.
  • The decrease in occupied room nights was due to refurbishments and conversions to vacation club units
• International Parks: Showed operating income growth
  • Due to increases at Shanghai Disney Resort and Disneyland Paris
    • Shanghai Disney Resort reflected a full quarter of operations in the current year compared to the prior-year quarter, which included pre-opening costs
    • Higher operating income at Disneyland Paris was due to increases in guest spending and attendance, partially offset by higher costs for new guest offerings, including the 25th Anniversary celebration.

Studio Entertainment – revenues for the quarter decreased 16% to $2.4 billion

• Lower operating income was due to decreased theatrical and home entertainment distribution results, partially offset by growth in TV/SVOD distribution and lower film cost impairments
  • The decrease in theatrical distribution results was due to the performance of our releases in the current quarter compared to the prior-year quarter.
  •  Significant releases in the current quarter included Guardians of the Galaxy Vol. 2, Pirates of the Caribbean: Dead Men Tell No Tales and Cars 3, while the prior-year quarter included Captain America: Civil War, The Jungle Book, Finding Dory and Alice Through the Looking Glass.
  • The decrease in home entertainment results was due to lower unit sales driven by the performance of Star Wars: The Force Awakens in the prior-year quarter compared to Rogue One: A Star Wars Story in the current quarter
  • Higher TV/SVOD distribution results were primarily due to an increase in domestic rates, international growth and the timing of domestic title availabilities.

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Source Credit: Disney

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