To The Moon

$Walt Disney(DIS)$ released its June quarter (Disney's Q3 of FY 22) earning, with double beats on top and bottom line, proved its ability to of strategical and operational capabilities. After the pandemic, the vigorous demand for going out for consumption has made Disney themepark business the best performance in history; At the same time, although the target of the number of streaming media users to fiscal year 2024 has been lowered, investors are still optimistic about its growth in the streaming media field.

In terms of Q3,

• Revenue was US $21.5 billion, a year-on-year increase of 26.4%, which was higher than the market expected consensus of US $21 billion;
• Operating profit was US $3.57 billion, a year-on-year increase of 49.8%, higher than the market expectation of US $3.36 billion; EBITDA was 4.37 billion US dollars, higher than the market expectation of 3.73 billion US dollars;
• Adjusted diluted earnings per share was $1.09, which was higher than the market expectation of $0.96.

In terms of operational data,

• Disney + subscriptions reached 152 million, higher than the market expectation of 148 million, a year-on-year increase of 31.1%;
• The number of Disney + Hotstar subscribers was 58.4 million, higher than the market expectation of 56.7 million; In addition, the number of Disney + users is 93.6 million, which is higher than the market expectation of 93.3 million;
• The number of ESPN + subscriptions was 22.8 million, up 53% year-on-year, which was worse than the expected 23.17 million
• Hulu's fixed users were 46.2 million, an increase of 7.9% year-on-year, which was basically the same as the expected 46.37 million;
• The overall number of subscriptions reached 221 million, higher than the market expectation of 219 million.

Now, Disney's current two major business: streaming media and offline theme parks, both performed well this quarter.

The theme park earned the highest revenue in history this quarter, reaching $7.4 billion, up 70.3% year-on-year, compared with a 307% increase in the same period last year, due to recovering from the worst quarter of the pandemic. This quarter's revenue has exceeded the performance of the same period in 2019.

Regionally, the growth in the United States is more notable, with a year-on-year growth rate of 104%, while the growth rate in overseas regions is 50%. But all areas are operating normally. At the same time, the operating profit of the theme park reached US $2.19 billion, an increase of 514% year-on-year, from the previous loss.

But Disney also trimed its long-term subs goals.

By the end of fiscal year 2024 (that is, the end of September 2023), the number of "core" Disney + subscribers will now reach 135 million to 165 million, which is consistent with the previous guidance, while Disney + Hotstar's guidance is 80 million, which is slightly lower than the market expectation. This means that the total number of Disney + (including Hotstar) users is expected to be 215 million to 245 million, which is lower than the previous $230 million to $260 million.

Disney + Hotstar is a business mainly in India and Indonesia, and is a part of Disney + international business. The expected downward adjustment is related to the competition in India and some exclusive TV broadcasting rights (such as Indian national cricket).

Although the expectation is lowered, the ARPU of Disney + Hotstar hit an all-time high of $1.20 this quarter. Core Disney + 's revenue was $6.29, down from $6.33 in the previous quarter, which was compared with Hulu's bundles with Disney+.

On the other hand, ESPN's growth in this quarter is still 53%, but it is slightly miss the estimate, mainly due to the impact of the end of the sports season. As for Hulu, the Wall Street Journal rumored that its subscription number exceeded Disney +. At present, Hulu has 46.2 million subscribers this quarter, which is only higher than the 44.5 million Disney + users in the United States, but the growth rate of Hulu has also dropped to single digits.

Obviously, The focus of Disney streaming in the future is still on Disney +. Disney's operating loss for the entire DTC (face-to-face consumer) segment rose to $10.61 from $293 million in the same period last year, as the business still requires a large amount of investment. In other words, Disney is feeding the streaming media business with the money earned from the cable media business.

The spending on content is conceivable, so Disney has slightly reduced its content cash expenditure for the whole 22 years to $30 billion, and expects the budget for the next fiscal year to be similar. It is also very stressful to shoot more special effects films such as Marvel and Star Wars within the cable budget.That's why most of Disney's short TV series with six episodes--Reduce costs and increase series derivatives.

Generally speaking, Disney Streaming Media has given users different choices in different regions through different platforms, and also increased its business coverage. For example, Disney + covers Marvel and Star Wars series, and also provides rich children's programs. Hulu, on the other hand, has more adult film and television works and obtains more members through advertising strategies.

At present, the competition of streaming media platform is fierce, and more users can be included by adopting multi-brand mode.Just like daily consumer goods, such as Procter & Gamble's Haifei Silk, Rejoice, etc., there is always one that can be selected by interested users.

Therefore, at present,$Netflix(NFLX)$The pressure is getting bigger and bigger, and even the growth target of Disney streaming media is lowered, so advertising may be the only way out for Netflix in recent quarters.