Is Disney Doing Good? Reflecting on Its Financial Performance, Strategic Moves, and Future Directions
Recent market trends have sparked skepticism regarding the financial health and positive direction of the Walt Disney Company. Despite these concerns, Disney remains a powerhouse in the entertainment industry, with a mix of achievements and challenges ahead.
Financial Performance and Entertainment Quality
The current discourse often centers on whether Disney is doing well or not. Financially, Disney is indeed stable and thriving. However, the quality of their entertainment offerings is subjective. Whether Disney does good in the world can be debated, but their financial state is robust. This analysis will break down Disney's strategic successes, areas for improvement, and the uncertainty surrounding its corporate leadership transition.
Strategic Successes
Acquisition of Most of Fox’s Media Assets
One of Disney's most significant moves has been the acquisition of the majority of 21st Century Fox's media assets. While the deal is not as advantageous as initially announced (e.g., no Sky, fewer Regional Sports Networks, and a higher price), it is still a strategic win for Disney. The acquisition provides Disney with a vast film library, intellectual property, and the capability to produce diverse content, including 20th Century Fox Television, Fox Searchlight, FX Networks, and National Geographic. Additionally, this deal allows Disney to enhance its international reach and compete more effectively with emerging media giants such as ATT, Comcast, Facebook, Amazon, Apple, and Google.
Big Investments in Streaming Services
Disney is actively investing in streaming services, particularly its own Disney platform. This service has the potential to disrupt the industry given its ambitious original content production from studios like Lucasfilm, Marvel, Pixar, and expansion of Hulu with adult-oriented content. While there are mixed feelings about ESPN, its growth has been promising. If Disney can match the success of Netflix, the company could witness significant growth. The strategic expansion of Disney’s media assets through these streaming initiatives is a testament to their forward-thinking approach.
Investments in Theme Parks and Cruise Lines
Disneys Parks and Resorts segment has consistently outgrown their Media Networks and Studio Entertainment segments. Michael Nathanson, a well-known media analyst, estimates that Disney will spend over 24 billion dollars on new attractions, hotels, and cruise ships over the next five years. This investment underscores Disney's commitment to its theme park and cruise line businesses, which generate substantial revenue. While there are calls for expanding to a seventh theme park outside the United States, the company's financial commitment to its existing parks is noteworthy.
Areas for Improvement
Transitioning from Video Game Production to Brand Licensing
Disney's video game production efforts have been met with mixed results. Despite the growing video market, particularly among young audiences, Disney has chosen to focus on brand licensing rather than developing its own game publishing division. This decision, while pragmatic, might limit Disney's potential in the gaming industry. Companies like Electronic Arts (EA) and Sony have shown successful integration of Disney properties, but Disney's own efforts have been problematic, such as with Disney Infinity and Club Penguin. Continuing to develop a strong in-house game publishing division could enhance Disney's overall content offerings.
Overreliance on Older Intellectual Property (IP)
Disney's 2019 slate is dominated by sequels and remakes, with the sole "original" movie being a book adaptation. This overreliance on existing properties could lead to diminishing returns, as evidenced by the Pirates of the Caribbean and Star Wars franchises. Moreover, both Marvel and Star Wars are nearing the end of their storytelling journeys. Disney needs to consider new franchises and original stories to sustain long-term success. Leveraging Fox's intellectual property, such as Avatar, Alien, and Predator, could provide a fresh narrative direction.
Continued Investment in ESPN
ESPN continues to struggle with subscriber losses, coupled with the increasing costs of sports licensing. This financial strain impacts Disney's overall stock performance. Given the lack of successful cross-pollination between ESPN and other Disney assets, it may be time for Disney to divest from live sports and sports-related content. Instead, focusing on growing related entertainment businesses, such as video streaming and gaming, could be a more strategic move.
Succession Planning
Bob Iger, the current CEO of Disney, has extended his tenure multiple times. The corporate leadership transition is a critical aspect of Disney's future. There is a three-way race for the CEO position between Bob Chapek, Kevin Mayer, and Peter Rice. Depending on whom is chosen, the outcome could be either positive or negative. Regardless, the uncertainty surrounding the succession plan is a source of concern for stakeholders and investors alike.
In conclusion, while Disney faces challenges, the company's strategic investments and financial stability are undeniable. Addressing areas for improvement, such as the gaming division and intellectual property focus, could bolster future success. The leadership transition will be pivotal in shaping Disney's next chapter.