Disney Q1: Bob Iger's Profit-Back Project.

$Walt Disney(DIS)$ released earnings of first quarter of fiscal year 2023 ended December 31, 2022.

This is Bob Iger's first financial report after returning to CEO position. Due to the cost optimization, the revenue and profit of the quarter both exceeded market expectations, but Disney + subscribers declined for the first time.

Disney's share price rose by nearly 10% after hours, which is also the most direct feedback from the market. Due to the change of market risk appetite, the previous preference on rapid growth of streaming media performance has passed, now more attention has been paid to the company's operational efficiency and management restructuring plan.

Market is buying it.

For 23Q1 earnings,

• Revenue was US $23.51 billion, an increase of 8% year-on-year, higher than the market expectation of US $23.39 billion;
• The adjusted earnings per share was 0.99 US dollars, down 6.6% year-on-year, but higher than the market estimate of 0.74 US dollars;
• The revenue of the media, entertainment and distribution department was US $14.78 billion, a year-on-year increase of 1.31%, lower than the market expectation of US $15.4 billion and an operating loss of US $10 million;
• The revenue of parks and experiences was 8.7 billion US dollars, a year-on-year increase of 21%, which was higher than the market expectation of 8.1 billion US dollars, while the operating profit reached 3.05 billion US dollars;

As for subscriptions

• The number of Disney + subscribers was 161.8 million, up 25% year-on-year, but down 2.4 million from the previous quarter, which was lower than the market expectation of 164 million
• ESPN + subscribers were 24.9 million, lower than the market expectation of 25.73 million, an increase of 17% year-on-year and an increase of 600,000 over the previous quarter;
• Hulu subscribed to 48 million users, which was lower than the market expectation of 49 million; It increased by 6% year-on-year and 800,000 over the previous quarter.

ARPU also droped. Disney+ was $3.93, which was lower than the market expectation of $4.17; ESPN + was $5.53, which was lower than the market expectation of $5.56, and Hulu was $12.46, which was lower than the market expectation of $12.89.

Huge losses due to streaming business, total loss reached $1.06 billion in a single quarter, doubled year-on-year, but it was better than the company's management expectation. After all, Bob Chapek, the former CEO, was ousted because he couldn't control the loss of streaming media business.

At present, Bob Iger made some major changes to the company's structure, It also reduced the complaints of active investors including Trian. These include

1. No split ESPN for now, but separate ESPN as a business unit from entertainment sector, including ESPN Networks, ESPN + and ESPN International are still led by Jimmy Pitaro;
2. Control non-content costs, which will total 2.5 billion US dollars, including 7,000 layoffs;
3. Control the cost of content, which will total $3 billion, excluding sports content.

In a word, The restructuring is aimed at improving profit margins.

Of course, the decrease of subscribers for the first time in Disney + history may also reduce the expectation of the streaming media market. Previously, a large number of users were also exchanged by burning money. If the content budget is reduced, will it continue to damage the user market? Meanwhile, Disney management is considering licensing more Disney films and TV series to competitors, after years when the vast majority of Disney films and TV series have been broadcast only on its own platforms.

Since Disney's rich content reserve may be the best among many streaming media platforms, how can Disney Cut costs without harming content Will become another consideration point for investors.