The Walt Disney Company Shows Revenue and Income Increases in Second Quarter Earnings Report


Q2-2018

The Walt Disney Company has just released its earnings report for the second fiscal quarter this year, showing growth in both revenue and operating income thanks in a large part to their Parks and Resorts and Studio Entertainment divisions. The company boasted a 9% boost in revenue compared to this quarter last year, and a 6% jump in operating income.

This quarter’s earnings are broken down into the Walt Disney Company’s previous divisions, which were in place before a strategic reorganization in March that divided the company into the Parks, Experiences, and Consumer Products; Direct-to-Consumer and International; Media Networks; and Studio Entertainment divisions. Although already in place, Disney does not expect to begin financial reporting under the new structure until fiscal 2019.

Overall Earnings

Disney’s revenues raised from $13.336 billion to $14.548 billion — an improvement of 9% compared to last quarter. They also saw a 6% improvement when comparing 2018’s first six months to last year’s.

Operating income also jumped from last year’s second quarter, $3.996 billion to $4.237 billion. This is a 6% growth from last years Q2 report, and a 3% growth when comparing first halves of each year.

Here is how each of Disney’s divisions fared individually compared with last year’s second quarter:



  • Media Networks: 3% growth in revenues — 6% loss in operating income
  • Parks and Resorts: 13% growth in revenues — 27% growth in operating income
  • Studio Entertainment: 21% growth in revenues — 29% growth in operating income
  • Consumer Products & Interactive Media: 2% growth in revenues — 4% loss in operating income

 

Media Networks

For their second fiscal quarter, the Walt Disney Company’s Media Networks division increased from last year’s $5.95 billion to $6.14 billion in revenues; in contrast, segmented operating income dropped from $2.22 billion to $2.08 billion. Comparing the first halves of each year, 2018 saw a growth of 2% in revenues and a loss of 9% in operating income.

The Media Networks division’s success was largely based upon its Cable Networks department, as the changes in the Broadcasting department from quarter to quarter were negligible.

Disney cited their investment in BAMTech, the company developing their streaming services, as an explanation of the Cable Networks’ income loss, as well as once again referencing higher programming costs for ESPN due to complex sporting event pricing.

The stagnation of the Broadcasting department was explained as a number of changing costs which offset each other.



Parks and Resorts

This division saw growth all around, with revenues increasing from $4.3 to $4.88 billion and segment operating income jumping from $750 million to $954 million. Comparing this half of 2018 with the first half of last year, revenues grew by 13% and operating income by 24%.

The Easter holiday helped Disney’s 2nd quarter Parks numbers, as the holiday landed in the third quarter for 2017.

Disney accounts for the success at its domestic parks by referencing “increased guest spending, attendance growth at Walt Disney World Resort and higher sponsorship revenue.” Increases in ticket prices, hotel rooms, food, and merchandise explain the higher guest spending numbers. This was partially offset by costs associated with labor, attractions, and technology spending by the company.

Although their international parks suffered from decreased attendance at Shanghai Disney Resort, as well as “cost inflation and an unfavorable foreign currency impact,” those decreases were outweighed by growth at Disneyland Paris as well as attendance and increased hotel occupancy at Hong Kong Disneyland Resort.

Studio Entertainment

Revenue for this division raised from $2.04 billion to $2.45 billion, while operating income increased from $656 million to $847 million. Compared to the first six months of 2017, revenue saw a growth of 9% and operating income grew by 12%.



The massive growth in operating income was explained by Disney as “due to increases in theatrical, home entertainment and TV/SVOD distribution results, partially offset by higher film cost impairments.”

While last year’s second quarter had Disney’s Beauty and the Beast to contrast with 2018’s disappointing A Wrinkle in Time, this quarter had the highly successful Black Panther, while 2017 has no counterpart from Marvel Studios.

The Star Wars franchise can be largely thanked for growth in Disney’s home entertainment department. DVD/Blu Ray releases of Thor: Ragnarok and Pixar’s Coco performed better than 2017’s second quarter releases of Doctor Strange and Moana, but the true heavy hitter in the market was Star Wars: The Last Jedi.

Consumer Products & Interactive Media

Consumer Products & Interactive Media increased from around $1.06 billion to $1.08 in revenues, yet dropped from $367 million to $354 million in operating income. Compared with the first half of last year, that is a negligible difference in revenues but a 4% drop in operating income.

Due to “a decrease in comparable retail store sales and an unfavorable foreign currency impact,” higher income from licensing activities was not able to bring this department’s operating income even with last year.



Announcements and Strategies for the Future

  • Disney’s upcoming digital streaming service will include a “rich selection of much beloved classics”, recent content, and new content. It is still set to launch in 2019, and some Netflix contracts must expire for new content to be reproduced. Although Disney CEO Bob Iger stated that the service is not dependent on the ongoing Fox acquisition, it is expected to benefit from it by using Fox content.
  • When asked about where the Parks and Resorts division has room to grow, Iger stated that growth will come from expansions like Toy Story Land and Star Wars: Galaxy’s Edge and new ships coming to Disney Cruise Line, increased use of technology and intellectual property, and continued efficiency in the division.

Source: The Walt Disney Company


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