The Walt Disney Co. (DIS) is a diversified global entertainment company that operates theme parks, resorts, cruise lines, television networks, and related products. It's a favorite blue-chip dividend-paying stock for many investors. The company also creates live entertainment events and produces and streams a broad array of film and TV entertainment content through its digital content streaming services.
Disney faces a large list of competitors, including Paramount Global (PARA), Comcast Corp. (CMCSA), Sony Group Corp. (SONY), AT&T Inc. (T), Netflix Inc. (NFLX), Apple Inc. (AAPL), and Amazon.com Inc. (AMZN). It also has smaller niche rivals, including theme park and resort companies Six Flags Entertainment Corp. (SIX), SeaWorld Entertainment Inc. (SEAS), and Hilton Worldwide Holdings Inc. (HLT).
Key Takeaways
- Disney is a diversified global entertainment company that operates theme parks, resorts, and television networks and streams TV shows and movies.
- Disney’s Linear Networks division for cable and broadcast television programming currently generates the most revenue for the company.
- Its Entertainment, Sports, and Experiences business has recovered from the COVID-19 pandemic and currently generates the most profits.
- Its Disney+ streaming media business had 111.3 million subscribers at the end of 2023, down 1.3 million subscribers in a quarter after a hefty price increase. Meanwhile, its Hulu channel picked up 1.2 million new subscribers.
Disney’s Financials
In early February 2024, Disney announced financial results for the first quarter (Q1) of the fiscal year (FY), the three-month period ended Dec. 30, 2023. The company posted net income of $2.15 billion, up almost 58%. Revenue rose less than 1% year over year (YOY) to $23.55 billion. Disney uses operating income as the profit metric for its business segments. Segment operating income rose 27% to $3.88 billion in fiscal Q1.
Hard hit by the COVID-19 pandemic beginning in 2020, Disney has since turned a corner. Disney was forced to close theme parks and resorts and suspend cruise ship sailings and guided tours. Disruptions to film and TV production meant less new content for its media and entertainment business.
Disney’s Business Segments
Disney reorganized its reportable business segments starting in fiscal 2023. The company now operates through three main business segments: Entertainment, Sports, and Experiences (formerly Disney Parks, Experiences, and Products).
The first of these segments, which is composed of Disney’s media and entertainment businesses, is further separated into three components: Linear Networks, Direct-to-Consumer, and Content Sales/Licensing and Other.
Disney provides a breakdown of revenue and operating income for each of these segments. Prior to this change, the company operated through two primary business segments: Disney Media and Entertainment Distribution (DMED) and Disney Parks, Experiences and Products (DPEP).
Entertainment: Linear Networks
Disney’s Linear Networks segment includes its domestic and international cable networks such as Disney, ESPN, and National Geographic; ABC broadcast television network, eight domestic television stations, and a 50% equity investment in A+E Television Networks.
The Linear Networks segment posted revenue of $2.8 billion in Q1 FY 2024, only slightly lower than revenue in the YOY quarter. Operating income fell 7% YOY to $1.2 billion. The segment accounts for about 28% of total revenue and carries total operating income.
Entertainment: Direct-to-Consumer
Disney’s Direct-to-Consumer (DTC) segment is composed of its various streaming services, including Disney+; Disney+ Hotstar; ESPN+; Hulu; and Star+.
The DTC segment posted revenue of $5.55 billion in Q1 FY 2024, up 15% from the same three-month period a year ago. The segment reported an operating loss of $138 million, widening from the operating loss of $984 million reported in the year-ago quarter. The DTC segment accounts for 55.57% of total revenue.
Entertainment: Content Sales/Licensing and Other
Disney’s Content Sales/Licensing and Other segment sells film and television content to third-party TV and subscription video-on-demand (VOD) services.
The segment also includes the following operations: theatrical distribution; home entertainment distribution, such as DVD and Blu-ray; music distribution; staging and licensing of live entertainment events; post-production services through Industrial Light & Magic and Skywalker Sound, and a 30% ownership interest in Tata Sky Ltd., an India-based operator of a direct-to-home satellite distribution platform.
The Content Sales/Licensing and Other segment posted revenue of $1.63 billion in Q1 FY 2024, down 38% from the year-ago quarter. The segment reported an operating loss of $224 million, a significant deterioration from an operating loss of $1 million posted in the year-ago quarter. The Content Sales/Licensing and Other segment accounts for 16% of total revenue.
Sports
Disney's Sports division is comprised solely of ESPN, the group of sports channels it has owned since 1995, plus the ESPN Wide World of Sports Complex at Walt Disney World in Orlando.
Disney's Sports division increased revenue by 4% to about $4.8 billion in the first quarter of its fiscal year 2024.
The breakout of Sports into a standalone division is seen as a signal of the importance of ESPN to Disney.
Experiences
Disney’s Experiences segment includes its theme parks and resorts in Florida, California, Hawaii, Paris, Hong Kong, and Shanghai. It also includes a cruise line and vacation club.
Revenue comes mainly from selling theme park admissions, food, beverages, various merchandise, resort and vacation stays, and royalties from licensing intellectual properties.
The Experiences segment reported revenue of $9.13 billion in Q1 FY 2024, rising 6.87% from the year-ago quarter. The segment posted operating income of $3.1 billion, an 8% increase YOY.
The segment accounts for about 39% of Disney’s total revenue and about 80% of total operating income.
Note that the segment revenue and operating income figures in the breakdowns above and in the pie charts include intersegment transactions.
Disney’s Recent Developments
In Disney’s fiscal Q1 earnings report released on Feb. 7, 2024, the company discussed the performance of its DTC business. Total subscriptions across Disney+ and Hulu rose less than 1% YOY to 199.3 million subscribers. Disney+ finished the quarter with 149.6 million subscribers, up less than 1% YOY.
On Jan. 19, 2022, Disney announced that it was creating a new hub for international content creation to support the expansion of its streaming services business. The company appointed Rebecca Campbell as chairperson of International Content and Operations to lead the new content creation hub. Under her newly expanded role, Campbell will focus on local and regional content production for the company’s streaming services and continue to oversee its global international media teams.
Who Owns the Walt Disney Co.?
Disney has been a public company since 1940 and has been listed on the New York Stock Exchange since 1957.
Among its largest individual stockholders are Bob Iger, the company's CEO, and Abigail Disney. who is the daughter of the company's late senior executive Roy E. Disney and the granddaughter of company co-founder Roy O. Disney.
Its largest institutional shareholders include the Vanguard Group Inc., BlackRock Inc., and StateStreet Corp.
What Is the Walt Disney Co. Best Known For?
It has been almost a century since Walt Disney's creation Mickey Mouse created a box office sensation in Steamboat Willie but the company is perhaps still best known for its films, both animated and live-action. The Walt Disney Studios division of the company now includes Walt Disney Pictures, Walt Disney Animation Studios, Pixar, Marvel Studios, Lucasfilm, 20th Century Studios, 20th Century Animation, and Searchlight Pictures.
Has the Walt Disney Co. Ever Made a Movie that Bombed?
You bet. One of Disney's most recent big-screen bombs was its lavish, star-studded adaptation of A Wrinkle in Time, a fantasy novel by Madeleine L'Engel. The 2018 movie was estimated at a $63 million loss. A Christmas Carol, in 2009, and The BFG, in 2016, were among Disney's other recent duds.
The Bottom Line
More than 80 years after it went public, the Walt Disney Co. remains a blue-chip, dividend-paying favorite among investors, with a place on the Dow Jones Industrial Average and the S&P 500 Index.
Still, the bigger Disney gets the tougher its competitive landscape becomes. Premium cable is a particularly tough nut to crack, as Disney learned when it hiked the price of Disney + in 2023.
But Disney is not just a premium cable company. For the last three months of 2023, Disney posted operating income of $3.88 billion, up 27% from the previous quarter.
