Disney shares traded more than 12% intraday on Thursday after the company beat earnings expectations and made a series of announcements focused on digital content.
In the face of pressure from activist investors, the market reaction may indicate growing confidence in CEO Bob Iger's turnaround plan and flow** strategy.
The entertainment giant said it is making further forays into gaming, investing in Epic Games, the makers of Fortnite, and adding new content to its streaming library, including Taylor Swift's Eras Tour concert footage, among others.
Disney-owned ESPN has also partnered with Warner Bros. Discovery Channel and Fox to create a sports streaming** service.
Disney (DIS) shares surged more than 12% intraday on Thursday after the entertainment giant beat earnings expectations and released a series of announcements focused on digital content, which may indicate confidence in CEO Bob Iger's turnaround plan and flow** strategy in the face of pressure from activist investors.
Disney said it is investing in Fortnite maker Epic Games to further foray into gaming, adding the Taylor Swift Eras Tour movie to its Disney+ stream** library, and releasing a new Moana movie this year. Its ESPN is partnering with Warner Bros. Discovery Channel (WBD) and Fox (FOXA) to provide a joint sports streaming** service. Disney also raised its dividend and said it plans to buy back $3 billion this year.
These moves are all part of Disney's plan to "return to a period of sustained growth and shareholder value creation," with a focus on its flow** business, which could help ease the pressure on activist investors to compete for board seats.
The Trian Group, which beneficially owns $3 billion Disney**, had previously called on the company to add Nelson Peltz and Jay Rasulo to its board, saying the company's lack of focus, coordination and accountability had led to a decline in financial performance and harmed the company's interests. Shareholder.
Mr. Egger, who returned to the company as chief executive at the end of 2022, said on Wednesday that the turnaround in earnings was "the result of a proactive, focused team, and now we are all very optimistic."
Disney's ESPN announced shortly before its earnings report that it is working with Warner Bros. Discovery Channel and Fox to develop a joint sports streaming** service, which is scheduled to launch in the fall of 2024.
The sports streaming** app combines products from traditional broadcast television networks and ESPN+ streaming**, as the two companies own the rights to parts of content such as the NFL, the National Basketball Association (NBA), and the FIFA World Cup. Other.
Bank of America analysts said they see the new stream plan as a "sports package" that "was launched after a few years of cutting the line, which put a lot of pressure on the [profit and loss (P&L)] ecosystem as a whole." ”
"It appears that this new product is targeted at 'cord-cutters' consumers who have abandoned traditional cable services in favor of streaming**, and those who rely solely on streaming**, which the company says accounts for about 1Half of the 2.5 billion broadband subscribers.
Bank of America also noted that Paramount and Comcast's NBCuniversal were not involved in the joint venture because Disney was struggling to compete with other giants in the streaming sector.
By $15b Epic Games invests in solving gaming problems.
Disney has announced that it will invest $1.5 billion in Epic Games to launch "a groundbreaking new world of games and entertainment that brings together Disney's beloved brands and franchises with the wildly popular Fortnite." ”
The company has an existing partnership with Epic Games, which has previously collaborated to bring Marvel and Star Wars characters to Fortnite.
The move is the company's latest and biggest foray into gaming, with CEO Iger saying that "given the demographic trends and the success of Fortnite," the partnership with Epic Games is the right move for Disney.
Disney had tried to create its own games, but ultimately had more success licensing its intellectual property (IP) to incumbent game makers such as Electronic Arts (EA). Speaking during his first tenure in 2019, Iger said, "We're good at making movies, TV shows, theme park attractions, cruises, and more, but we've never shown a lot of scale in terms of game publishing. "As CEO of Disney.
Disney has announced that the Moana sequel will be released in theaters in November, which will be the company's roster of upcoming films based on existing franchises, including Captain America: Brave New World, Fantastic Four and Avatar 3.
Iger said at Disney's earnings conference** that these new films "will not only appeal to a global audience in theaters, but, as we have consistently demonstrated, they will be an important pillar of our global streaming** platform, driving subscriptions and engagement." ”
Iger acknowledged the company's success in offering movies on streaming**, reporting that "the 2016 original film Moana recently surpassed 1 billion streaming hours on Disney+, making it the most-streamed film of any platform in the U.S. in 2023."
The company announced Taylor Swift's concert film "Taylor Swift |."The Eras Tour (Taylor Edition)" will be exclusive on Disney+**. Disney has benefited from making third-party content available on its streaming platforms, Disney+ and Hulu, with Iger noting that the entertainment company has been nominated for 27 Golden Globes and won for FX's "Bear" and Searchlight's "Poor Stuff." Disney's streaming** service generates revenue through subscriptions and advertisers. The company said that "the number of global advertisers has increased to more than 1,000 in the first quarter" and "a tenfold increase since launch."
UBS analysts said Disneyland reported "record results" and Disney chief financial officer Hugh Johnston said that "each of our parks was profitable in the first quarter".
Johnston noted that the park's profitability has given Disney "an extremely strong foundation as we invest heavily to drive growth in this business." He added that the record-breaking performance was "largely driven by our performance at our theme parks in Shanghai and Hong Kong".
With revenues lagging behind driving profitability, the entertainment giant has focused on reducing costs. In his opening remarks at the latest earnings report** meeting, Iger said Disney is "on track to achieve or exceed $7.5 billion in cost savings as we continue to pursue opportunities to further improve efficiency across the company." Johnston noted that the company "delivered more than $500 million in SG&A and other operating expense savings across the enterprise in the first quarter."
Disney also announced a $3 billion buyback program for fiscal year 2024 on Wednesday and paid a cash dividend of 45 cents per share in July.
As of around 3:00 p.m. ET on Thursday, Disney stock price** 121% to 111$17. So far this year, the entertainment giant's share price has been around 22%.
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