Disney Profits Decline Due to Underperforming Movies and TV Shows
Disney is facing challenges in its latest quarterly results, primarily attributed to underperforming movies and disruptions in its television partnerships. Despite a revenue growth of approximately 5%, the company’s adjusted earnings per share fell by 7%, reaching $1.63. Simultaneously, the operating profit decreased by 9% to $4.6 billion for the quarter ending December 27.
Factors Contributing to Profit Decline
The decline in profitability is linked to several key factors:
- Escalating production costs, particularly for films like “Avatar: Fire and Ash” and “Tron: Ares.”
- A protracted contract dispute with YouTube TV, impacting access to channels like ESPN and ABC.
- Reduced advertising income, particularly from political campaigns on Disney’s US television platforms.
Production Costs and Movie Performance
Disney released nine films during the quarter, an increase from four in the previous year. This surge in film releases led to higher expenses. The production cost for “Avatar: Fire and Ash” was estimated at $500 million, while “Tron: Ares” had a budget of at least $320 million but managed only $142 million in ticket sales.
Impact of YouTube TV Standoff
During the quarter, an estimated 10 million YouTube TV subscribers lost access to Disney-owned channels for 15 days due to a contract negotiation breakdown. This standoff cost Disney about $110 million in operating income.
Positive Outcomes in Streaming and Experiences
On a more positive note, the streaming sector, including Disney+ and Hulu, experienced a substantial profit increase of 72%, bringing in $450 million. This growth was driven by higher subscription prices. Additionally, Disney’s cruise business thrived, contributing to an 8% rise in operating profit in the Experiences division.
Theme Park Attendance and Visitor Spending
Overall attendance at Disney’s US theme parks saw a 1% increase. However, spending per visitor surged by 4%, benefiting from increased merchandise and food and beverage sales.
Looking Ahead
As Disney navigates these challenges, the board of directors is set to meet in Los Angeles. They are expected to discuss succession plans for CEO Robert A. Iger, who will retire later this year. Despite the difficulties, CFO Hugh F. Johnston expressed optimism about the company’s performance, indicating a focus on future growth and strategic adjustments.
