Disney’s Q4 And Full Year 2023 Earnings Call: Bob Iger Talks Disney+, Hulu Deal, And A Strong Quarter For Theme Parks

Disney's Q4 earnings call will likely address the ongoing actors strike, the current state of Disney+.

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2023 isn't quite over yet, but the fiscal year has ended for Disney. It's time to get the rundown of where things stand. There are a few things we can likely expect. Disney+ will almost certainly post losses, but the size of them will be of key importance to investors. Disney Parks are usually a bright spot in Disney earnings, but exactly where in the world success was found will be of interest. 

Sometimes Bob Iger will take the opportunity of earnings calls to announce some new part initiative or movie project, and with this being the earnings call for the last quarter of the year, we might get some of that if there's a significant discussion of where fiscal year 2024 is planning to go.

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Disney's financial report has been released and it looks pretty good on paper. Disney cut costs by $7.5 billion, $2 billion more than previously announced, and streaming losses are shrinking, in part due to an increase in Disney+ subscriptions by seven million, more than what Wall Street was expecting. 

The call is now going live. It will open with a general statement from Bob Iger. Interim CFO Kevin Lansbury is taking the call. A new permanent CFO, Hugh Johnson, was named earlier this week, but I guess he's not ready for prime time yet. 

All three segments, Entertainment, Experiences, and Sports, saw income growth over Q4 last year. Iger then touts the increased cost cutting as well as the Disney+ numbers. Disney+ expected to be profitable by Q4 2024.

Iger says a lot of time was spent on "fixing" previous problems, a clear slight at the Chapek regime and the decisions he made Iger did not agree with. But Iger says that the fixing period is over, and it's now time to begin "building."

On Disney+/Hulu: More than half of the new Disney+ subscribers took the ad-supported option. Iger mentions the deal to take one Hulu, and reiterates plan for a "one app" solution for Disney+ and Hulu, which will happen once the deal is complete. Beta version of one app solution in December, full roll out in Spring

On ESPN: Growth in revenue and operating income, the last two years. Viewership numbers are the best ESPN has seen in four years. ESPN Bet launching next week. 

Linear Networks: Disney is "evaluating options" which is the business way of saying that they're not selling anything yet, but that's clearly still on the table. Iger has indicated selling networks is an option.

Parks and Experiences: Iger singing the praises of Disney Parks' financials, says the return on investment has been strong. Talks about plans to spend a lot more on the parks in coming years, but doesn't go into any specifics. 

Iger has handed the call over to the interim CFO. Runs through the major financial numbers that are important to Wall Street. Disney needed to put up big numbers this quarter and it did. Growth is almost clear across the board,. Even in DTC operating income, where there was a loss, that loss is shrinking.

Operating results at Walt Disney World decreased due to the closing of Galactic Starcruiser, and the lack of the 50th anniversary celebration, which we can assume means lower attendance compared to last year. Everywhere, else, including Disneyland, saw year over year growth. 

Over 8,000 total layoffs were made as part of the Disney cost savings plan announced earlier this year. That's 1,000 more than were originally announced. On the plus side, the much beloved Disney stock dividend will be recommended to return by the end of the calendar year. 

Q&A Begins: First question about recent carriage deal with Charter. Iger says the deal focused on streaming, which made it make sense for Disney. On the studios he says that Disney made too much, which harmed quality, and the plan is to make less in order to improve quality.

Question about what profitability in DTC might actually look like, as well as the plan to bring ESPN as a full DTC offering. Iger calls ESPN as a total direct-to-consumer platform is "inevitable." Iger sees DTC as a "real growth business." Says Hulu is part of that. Iger also says that success of Disney theatrical films on D+ will allow them to spend less on original content.

Question about wider advertising trends, where gains on streaming can balance losses with linear networks. Iger says linear is stronger than they expected, it's seen a slight improvement. Targeting ads on Disney+ are improving, and sports advertising is very strong. He says the tools for targeting ads are what advertisers want. 

Asked about the possibility for Disney to license more content to other streamers, like WB is doing with DC films on Netflix. Iger says that licensing is happening and likely will continue, but he doesn't see it happening with "core brands" so don't expect to see the MCU on Netflix in the future. 

Final question: question regarding ESPN partnership possibilities, and then a follow up on Disney Parks demand. Iger says a "number of different entities" are involved in possible partnerships. On Parks consumer demand, Lansbury says Disneyland and Cruise Lines look very strong going forward, expectation that Walt Disney World numbers will continue through Q1, which is when the 50th anniversary celebration ended a year ago.

That's a wrap for the Q4 and fiscal 2023 earnings call. Good numbers for Disney, it will be interesting to se how the stock market responds in the morning. As far as more consumer focused info, the integration of Hulu and Disney+, seemingly just on the app level, not technically as a single service, will be starting as early as next month. It will be excited to see how that ends up working.