Disney Parks Struggle Over Weakened Consumer Spending

Disney had reportedly shed shed 23% of its value since its last quarterly report three months ago, when Disney first warned of weakness impacting its parks. 

The Wall Street Journal reports the decline of the cable-TV business and growth of the far-less-profitable streaming side has given theme parks a starring role on Disney’s bottom line. Combined operating profits from domestic and international parks accounted for 54% of Disney’s total operating income in the last fiscal year ended September, compared with a 26% contribution averaged in the five years before the pandemic.

Other factors are weighing on profit as well. Disney is adding three new ships to its cruise business over the next 18 months, and start-up costs associated with those launches will be “a little over double” in the next fiscal year compared with the current one, according to Disney Chief Financial Officer Hugh Johnston on Wednesday’s investor call. The overall cruise industry has been performing well lately and reporting strong bookings for the year ahead, which speaks well of Disney’s ultimate prospects there.

But weakened consumer spending that has also hit rival theme-park operators bodes poorly for Disney as it works to cope with the broad industry shifts that have hit the media industry with a vengeance.

 Revenue from the linear networks unit, comprising the company’s traditional cable and TV businesses, fell 7% year over year due to a drop in both affiliate fees and advertising. It came in below Wall Street’s projections for the September quarter. Sports helped offset some of that weakness; ESPN’s domestic revenue rose 5% year over year to about $3.9 billion.

Disney also managed to hit its profitability goal for its streaming business a quarter earlier than it originally projected. Combined direct-to-consumer operating profits for the entertainment and sports segments were $47 million compared with a loss of $512 million in the same period last year. That was helped by a surprising bit of growth for Disney+, which added about 700,000 net new subscribers to its core segment during a period when Wall Street was expecting a decline. The company noted that the original “Inside Out” film from 2015 drove much of that traffic as that movie racked up more than 100 million views ahead of and following the release of the sequel.