The Walt Disney Co. (DIS) is a diversified global entertainment company that operates theme parks, resorts, a cruise line, broadcast television networks, and related products. The company also produces live entertainment events, and produces and streams a broad array of film and TV entertainment content through its new digital content streaming services.
Disney faces an unusually large number of competitors, including Paramount Global (PARA), Comcast Corp. (CMCSA), Sony Group Corp. (SONY), AT&T Inc. (T), Netflix Inc. (NFLX), Apple Inc. (AAPL), and Amazon.com Inc. (AMZN); and smaller niche rivals, including theme park and resort companies Six Flags Entertainment Corp. (SIX), SeaWorld Entertainment Inc. (SEAS), and Hilton Worldwide Holdings Inc. (HLT).
Key Takeaways
- Disney is a diversified global entertainment company that operates theme parks, resorts, broadcast networks, and streams TV shows and movies.
- Disney’s Linear Networks currently generates the most revenue, but its Parks, Experiences and Products business is recovering from the COVID-19 pandemic and currently generates the most profits.
- Disney’s domestic theme parks and resorts have been reopened gradually and no longer face mandatory capacity restrictions.
- Disney recently appointed executive Mike White to oversee the implementation of the company’s metaverse strategy.
- Disney+ finished the first quarter (Q1) of fiscal year (FY) 2022 with nearly 130 million subscribers, up 36.8% year over year (YOY).
Disney’s Financials
In early February 2022, Disney announced February financial results for the first quarter (Q1) of its 2022 fiscal year (FY), the three-month period ended Jan. 1, 2022. The company posted net income of $1.2 billion, up 64 times its net income in the year-ago quarter. Revenue rose 34.3% year over year (YOY) to $21.8 billion. Disney uses operating income as the profit metric for its individual business segments. Segment operating income rose 144.6% to $3.3 billion in fiscal Q1.
In its earnings report, Disney highlighted the adverse impacts of the COVID-19 pandemic since early 2020. Its Parks, Experiences and Products segment has been affected the most by those impacts. Disney was forced to close theme parks and resorts and suspend cruise ship sailings and guided tours. However, beginning in May 2020, the company has gradually reopened its theme parks, albeit at reduced capacity. Disney’s domestic parks and experiences are now generally operating without significant mandatory capacity restrictions. Its cruises and guided tours also have begun to return to service. Disruptions to film and TV production also have contributed to less content for its media and entertainment business.
Disney’s Business Segments
Starting in Q1 FY 2021, Disney reorganized its reportable business segments. The company now operates through two main business segments: Disney Media and Entertainment Distribution (DMED) and Disney Parks, Experiences and Products (DPEP). The first of these segments, which is composed of Disney’s media and entertainment businesses, is further separated into three components: Linear Networks; Direct-to-Consumer; and Content Sales/Licensing and Other. Disney provides a breakdown of revenue and operating income for each of these segments. Prior to this change, the company operated through four primary business segments: Media Networks; Parks, Experiences and Products; Studio Entertainment; and Direct-to-Consumer & International.
DMED: Linear Networks
Disney’s Linear Networks segment operates a long list of properties, including domestic and international cable networks such as Disney, ESPN, and National Geographic; ABC broadcast television network and eight domestic television stations; and a 50% equity investment in A+E Television Networks.
The Linear Networks segment posted revenue of $7.7 billion in Q1 FY 2022, only slightly higher than revenue in the year-ago quarter. Operating income fell 13.3% YOY to $1.5 billion. The segment accounts for about 35% of total revenue and 38% of total operating income.
DMED: Direct-to-Consumer
Disney’s Direct-to-Consumer (DTC) segment is composed of its various streaming services, including Disney+; Disney+ Hotstar; ESPN+; Hulu; and Star+.
The DTC segment posted revenue of $4.7 billion in Q1 FY 2022, up 33.8% from the same three-month period a year ago. The segment reported an operating loss of $593 million, widening from the operating loss of $466 million reported in the year-ago quarter. The DTC segment accounts for 21% of total revenue.
DMED: Content Sales/Licensing and Other
Disney’s Content Sales/Licensing and Other segment sells film and television content to third-party TV and subscription video-on-demand (VOD) services. The segment also includes the following operations: theatrical distribution; home entertainment distribution, such as DVD and Blu-ray; music distribution; staging and licensing of live entertainment events on Broadway and around the world; post-production services through Industrial Light & Magic and Skywalker Sound; and a 30% ownership interest in Tata Sky Ltd., an India-based operator of a direct-to-home satellite distribution platform.
The Content Sales/Licensing and Other segment posted revenue of $2.4 billion in Q1 FY 2022, up 42.9% from the year-ago quarter. The segment reported an operating loss of $98 million, a significant deterioration from operating income of $188 million posted in the year-ago quarter. The Content Sales/Licensing and Other segment accounts for 11% of total revenue.
Disney Parks, Experiences and Products (DPEP)
Disney’s Parks, Experiences and Products segment is composed of theme parks and resorts in Florida, California, Hawaii, Paris, Hong Kong, and Shanghai. It also includes a cruise line and vacation club. Revenue comes mainly from selling theme park admissions, food, beverages, various merchandise, resort and vacation stays, and royalties from licensing intellectual properties.
The Parks, Experiences and Products segment reported revenue of $7.2 billion in Q1 FY 2022, rising 101.6% from the year-ago quarter. The segment posted operating income of $2.5 billion, a significant improvement from the operating loss of $119 million in Q1 FY 2021. The segment accounts for about 33% of Disney’s total revenue and about 62% of total operating income.
A note to readers: The segment revenue and operating income figures in the breakdowns above and in the pie charts do include intersegment transactions.
Disney’s Recent Developments
On Feb. 15, 2022, Reuters reported that Disney has appointed one of the company’s executives to lead its metaverse strategy. Chief Executive Officer (CEO) Bob Chapek appointed Mike White, an executive in the company’s Media and Entertainment Distribution group, to take up the new role of senior vice president of Next Generation Storytelling and Consumer Experiences. In his new role, White will be in charge of designing the consumer experience of Disney’s forthcoming metaverse.
In Disney’s fiscal Q1 earnings report released on Feb. 9, 2022, the company highlighted the strong performance of its DTC business. Total subscriptions across Disney+, ESPN+, and Hulu rose 34.2% YOY to 196.4 million subscribers. Disney+ finished the quarter with 129.8 million subscribers, up 36.8% YOY.
On Jan. 19, 2022, Disney announced that it was creating a new hub for international content creation to support the expansion of its streaming services business. The company appointed Rebecca Campbell as chairperson of International Content and Operations to lead the new content creation hub. Under her newly expanded role, Campbell will focus on local and regional content production for the company’s streaming services and continue to oversee its global international media teams.
How Disney Reports Diversity and Inclusiveness
As part of our effort toimprove the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Disney and its commitment to diversity, inclusiveness, and social responsibility. We examined the data that Disney releases to show you how it reports the diversity of its board and workforce, to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whetherDisneydiscloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Disney breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status,and LGBTQ+ identity.
| Disney Diversity & Inclusiveness Reporting | |||||
|---|---|---|---|---|---|
| Race | Gender | Ability | Veteran Status | Sexual Orientation | |
| Board of Directors | |||||
| C-Suite | |||||
| General Management | |||||
| Employees | ✔(U.S. Only) | ✔ | |||
