Disney CFO Christine McCarthy On Bob Iger’s Return, Streaming & Theme Parks: “We Are Winners, And We Are Going To Win”
Walt Disney CFO Christine McCarthy nudged investors to discard a few narratives that emerged from the latest earnings: that Disney parks growth may be unsustainable and that the company is shedding subscribers and slashing streaming content.
“We like to think of ourselves as a company of winners. We know there are challenges in this industry, but we look at the hand we have to play, and we think it’s a great hand… We are winners, and we are going to win,” she said at a media conference in New York City, where the company just had its annual upfront presentation to advertisers. Attendess at this and other meets during the week had to skirt WGA pickets.
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Disney ended its fiscal second quarter with 157.8 million global subs, down 4 million from the prior quarter, but the drag was from Disney+ Hotstar. “When we broke it down, we saw a decline of 4.6 million in India and lost four million globally, which meant that Disney+ core subscribers were actually up. By less than a million. We would have like more,” but that’s partly due to a price increase for the service, McCarthy told the MoffettNathonson event. She’s confident original TV content and films set to hit streaming in the second half of the year will attract signups and reduce churn. Disney will also introduce a new app that merges Disney+ and Hulu.
It launched an ad-supported streaming tier in September and she said the reception from the ad community at the company’s upfront presentation yesterday was “very positive.” Advertising is slow overall, for Disney and others, but it’s cyclical and will rebound as it always has. Ad sales chief Rita Ferro, also at the conference, said said refinements and advances in Disney’s data technology have it well positioned when the ad market does come back.
Asked what’s changed in how the streaming business is being run since Bob Iger returned as CEO in November, she said: “Well, Bob is back. That is great news.” She asked to step back a bit, describing divisions from parks to ESPN now being managed more as streamlined global operations with accountability at the top – in this case Josh D’Amaro and Jimmy Pitaro, as well as Entertainment co-heads Dana Walden and Alan Bergman. The latter “are looking at spending inside not only their linear or film businesses, but also in direct-to-consumer. Where is the marginal dollar of content investment best spent?”
McCarthy noted “some concern” from the earnings call about pulling content off streaming that could make it harder to attract or retain subs. “That’s really not the case. It is really spending our content dollars to the highest and best use of where they will attract and retain subscribers,” and, again, about “accountability.”
“There’s a lot going on when we release earnings. There’s a lot of information that goes into the market all at once,” she said.
“This like a big puzzle. This isn’t a 300-piece puzzle, this is a 2,500-piece puzzle,” she said. The first piece is cost savings, which Disney is addressing, including laying off 7,000 employees.
At booming theme parks there’s a perception on Wall Street that they may be flush in large part on higher admissions costs, which may not be sustainable. “We are in an inflationary environment. We are very aware of that, as inflation impacts everybody’s life. McCarthy said, insisting that ticket prices are tracking inflation — no more. Parks sales and profits are coming from a mix of spending on “experiential” food and beverage offerings related to specific properties like Star Wars — “things people want to Instagram and post, and merchandise.” Merchandise — “It’s t-shirts and hats, but also build your own Light Saber. Not cheap. But people tend to spend the money. That is consumer choice.”
Genie+, which gives easier access to attractions for an added fee, is boosting sales. “Yes, you pay for it, but some people have a limited amount of time.” Since Covid, the parks have also developed a much more sophisticated reservation system to maximize attendance and revenue. For the first quarter since Covid, attendance popped at international locations.
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