Disney Refocuses On Entertaining Experiences That Helped Build Its Magical Kingdom In The First Place

During last week’s interview, Walt Disney Company DIS CEO Bob Iger clearly stated Disney's main mission is to capture broad and increasingly diverse audiences. Experiences division that is home to the happiest places on Earth, a.k.a. theme parks, is the best-performing business of the world’s biggest entertainment company. On the other hand, the more than a century old company is struggling to adapt to changes in movie and TV viewing habits.When it comes to streaming, Disney will be taking a page from the book of Netflix Inc NFLX to make its platforms profitable.

The interview took place a day after Iger won a key battle for boardroom control against a group of outside investors, but Iger still has a daunting task at hand, and it has to do with getting Disney back to sustained growth. Iger needs to find a way to restore magic to Disney’s kingdom that has been struggling with a lackluster performance over the last decade.

The experiences segment has plenty to brag about.

In 2023 fiscal year, the segment was the best-performing of Disney’s business as it made 36% of total revenue and 70% of the operating income, posting record revenue of $32.5 billion or revenue growth of 16% YoY.  Operating income expanded 23% to $8.95 billion.

A lot has changed in just three years when Covid-19 smashed Disney with revenue plummeting 35% in 2020. But Disney used those dark and difficult times as an opportunity to gain a new perspective, and as a result, it posted record revenue, margins and operating income.

Disney is in on a constant lookout for innovative ways to get people coming to its parks. From robotics, animatronics and immersive storytelling, Disney pledged as much $60 billion to enhance its park experiences over the next decade, continuing Walt Disney’s initial strategy. Back during the company’s first days, Disney’s creator and founder used to say that theme parks will never be finished as they will evolve with changing consumer behavior, tastes and technological development. Iger specified that 70% of the funds will be allocated to new attractions of theme parks and cruise ships while the remaining 30% will be focused on the technology and maintenance needed to make that expansion happen.

The media entertainment division is another story, with plenty of room for improvement.

In 2023, the entertainment division that is home to the theatrical and streaming businesses, represented 45% of revenue but only 11% of operating income. The idea of “the Disney difference” is yet to come through on the streaming front that is dominated by Netflix. Iger also confirmed that as of this summer, Disney will be joining Netflix in cracking down on password sharing. Unlike Disney, Netflix managed to reach the profitable shore, earning its “gold star of streaming” title. With the undergoing efforts, Iger expects streaming to become profitable until thefourth quarter of 2024.

Disney’s goals revolve around restoring its lost magic.

Iger, who returned behind the CEO wheel in 2022 and is set to step down at the end of 2026, made Disney’s goals clear. As for streaming, it aims to integrate Hulu into Disney+. It needs to transition ESPN into a new consumption era of streaming and gambling focused sports after decades of cable TV dominance. It also needs to breathe new life into its flagship properties, such as Marvel and Star Wars. On top of it all, it needs to continue to navigate the complex culture war politics that continue to wrack America. As Iger put it in simple words, Disney will simply be allocating its resources in places where it had great returns throughout its history.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.

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