Disney FY1Q24 Earnings, Disney Buys Minority Stake in Epic Games, Disney, Warner Bros. Discovery, and Fox Announce New Sports App

Today's update will have a Disney focus with the company announcing earnings and two new business initiatives.

Heading into earnings earlier this week, Disney CEO Bob Iger and the board were facing some of the strongest pressure to date from activist shareholders looking to get Disney board seats – and eventually kick Iger out. The pressure served as the backdrop for what was a news-packed earnings release from Disney.

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Disney FY4Q23 Earnings, Another Disney Bomb at the Box Office

Happy Tuesday. In today’s update, we will go over Disney's earnings. The discussion will also cover the latest box office developments.

Disney FY4Q23 Earnings

Disney’s legacy business performance was fine in FY4Q23 (July through September). Bob Iger spent months talking down expectations for those businesses to the point of there not being too many negative surprises. At this point, the lack of implosions would lead to a sigh of relief on Wall Street.

  • While Disney’s linear TV business is shrinking (revenue down 9% last quarter), the assets are kicking off roughly the same amount of cash. Linear Networks generated $805M of operating income, unchanged from last year. Disney benefited from a one-time gain in FY4Q23 related to its A&E investment.

  • ESPN saw similar results to last year with flat revenue of $3.5B while operating income was up 16% to $987M due to the non-renewal of the Big Ten.

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Disney 3Q23 Earnings, Iger Setting Low Expectations, Disney Raises DTC Streaming Prices

Hello everyone. We end the week with one of the more anticipated earnings releases of the current cycle: Disney. Let’s jump right in.

Disney 3Q23 Earnings

This was not the disaster of a quarter that some were expecting. One could go so far as to say it was an OK quarter, although there are caveats found with that statement.

There were several moving parts found in Disney’s earnings. Expectations of this release being a disaster were never realistic to begin with. More on that shortly.

The moving parts:

  1. Linear Networks (cable/broadcast) results weren’t great with revenue down 7% and operating income down 23%. The weak numbers were found in both Domestic and International.

  2. Parks & Experiences benefited from an easy year-over-year compare for Shanghai Disney Resort (related to COVID closures). Domestic results were on the weak side with just 4% revenue growth. Lower volumes at Disney World were partially offset by Disneyland results that were modestly better year-over-year. The numbers add credibility to the WSJ’s article about fewer visitors at Disney World.

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Disney Earnings, Disney to Combine Disney+ and Hulu, Hulu’s Future

Hello everyone. Happy Tuesday. Today's discussion will take us into paid video streaming land. Last week, Disney reported CY1Q23 earnings. We go over Neil’s thoughts on the earnings release. The update then turns to Bob Iger’s plan to combine Disney+ with Hulu in a new streaming app. We conclude with a look at Hulu’s future as it pertains to Disney and Comcast.

Let's jump right in.

Disney Earnings

Disney’s FY2Q23 earnings were good. Overall revenue was up 13% while free cash flow was just shy of $2B. Over the past year, there hasn’t been a shortage of mediocre to poor quarters in the tech and media space. However, Disney’s CY1Q23 results reflect the benefits found with a truly diversified business model in the media space (IP that can be monetized in various ways). Disney Parks and Experiences remains on a tear with ~20% revenue growth and strong operating income. Excluding timing issues with higher sports programming costs, even Disney’s Linear Networks results were OK, helping to offset continued financial losses found with Disney+. Management claims streaming losses peaked last year.

Here are Disney’s DTC subscription totals (as of April 1st, 2023):

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Peter Stern Departs Apple, Apple’s Services Reorganization, My Concern With Warner Bros. Discovery (Daily Update)

Hello everyone. Today’s update kicks off with Neil’s thoughts on Peter Stern departing Apple. The discussion then expands to talk about Apple’s Services reorganization. We conclude with some qualutiative takeaways from Warner Bros. Discovery’s most recent earnings call. Neil has a concern with the company’s strategy. Let's jump right in.

Peter Stern Departs Apple

In an article published back in January, here’s Claire Atkinson over at the Insider:

“One of Apple's top subscriptions executives is exiting the company.

Peter Stern, who had been helping establish Apple's presence in sports rights in addition to running Apple TV+, has informed colleagues that he is exiting Apple to spend more time on the East Coast, according to a source close to the executive. Stern, whose title is VP Services, is leaving at the end of the month.

Apple is reorganizing its Services unit, and Stern's responsibilities will be split into three separate divisions, according to two people familiar with internal conversations at Apple. The shape of the restructure is still being negotiated, but one of those executives will be Oliver Schusser, who is currently in charge of Apple Music; another is Robert Kondrk, whose current title is VP, Apple Product Services and Design.

Stern, who was widely tipped as a possible successor to Apple's SVP Services, Eddy Cue, was in charge of a broad swath of the company's subscription businesses and was largely responsible for building the business operations of Apple TV+. He is one of about 20 direct reports under Cue.

During his six-year tenure at Apple, Stern helped build subscription products such as Arcade, Books, and Apple One, News+, Fitness+, iCloud+. Before that, he was an exec Tim Warner Cable.”

We will talk about Apple’s Services reorganization shortly.

It’s not clear where the “widely tipped as a possible successor to Apple’s SVP Services, Eddy Cue…” comes from. Yes, Stern was a VP and Apple made him available to speak to outsiders/press. However, claiming Stern was some kind of de facto Cue successor feels off.

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More on Apple’s Buyback Plan, It’s All About Apple Free Cash Flow, Iger vs. Chapek (Daily Update)

We begin today’s update with a few additional takeaways from Neil’s new report on Apple’s share buyback program. The discussion then turns to a key different between Bob Iger and Bob Chapek and what it means for Disney’s approach to blockbuster movies.

Hello everyone. Welcome to a new week. It’s good to be back after a few days off.

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Let’s jump into today’s update.

More on Apple’s Buyback Plan

The newest Above Avalon Report examined where things currently stand with Apple’s share buyback program and what the future will likely bring.

In recent years, somewhat of an understanding has taken hold when it comes to Apple’s buyback. Wall Street is not as doubtful about Apple’s ability to fund both share buyback and its investment opportunities (capex, R&D, M&A). This doesn’t mean that Apple’s share buyback lacks unknown.

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