The pandemic was a cause of concern for the company with permanent closures and later limited occupancy of its physical assets, namely parks, attractions, experiences, studios, etc. Disney+ was an asset that delivered positive returns to the company and helped maintain its direct-to-consumer connection. At the end of February 4, 2020, the company reported 26.5 million Disney+ subscribers . Fast forward to the end of May 13, 2021; the company registered 103.6 million Disney+ subscribers . The company added 77.1 million subscribers in 464 days, rendering on average 166,164 users added per day. Lockdown measures and stay-at-home orders applied in 2019 generated more time spent with family. Over the dinner table, a conversation about Mickey Mouse or any Marvel Superheroes brings incredible joy and builds a more accessible bridge to connect over. Disney provides niche products that span generations and hold a special place in every individual’s zeitgeist.
At Investor Day 2019, Kevin Mayer, the then Chairman, Direct-To-Consumer & International, encapsulated Disney’s intrinsic value best, “These are brands that are recognized around the world, they are relevant across generations and geographies. They resonate with consumers everywhere and they attract a 4-quadrant audience: adults and children, males and females. The sheer scope of these brands is truly unrivaled” . Allow me the liberty to name a few: PIXAR, MARVEL, LUCASFILM, 20th Century Studios, ABC, HULU, National Geographic, ESPN, and on and on. An argument presented in agreement with Mr. Mayer is that it is challenging to find an individual who has not been directly or indirectly impacted through the juggernaut that is The Walt Disney Co (NYSE: DIS). The content created and produced by its legacy and new platforms has enabled Disney to develop valuable connections that span generations and demographics. An apt anecdote would be a personal one and a special show called Phineas and Ferb.
Disney launched its TV channel in India in 2004, and at first, it hosted American shows like The Suite Life of Zack and Cody, Hannah Montana, and others. Phineas and Ferb came around 2008 and was a show that created an alternative universe that allowed a curious 10-year old like me to be enamored with adventure. Every episode involved the Evil Dr. Heinz Doofenshmirtz, whose plans would be thwarted by Perry the Platypus. The TV station played the episodes sporadically, and if you missed it, then you missed it.
Fast forward to 2010, and when I moved to America, I found that Disney Channel played Phineas and Ferb here all the time. Phineas and Ferb served not just as a marker that allowed me to connect with a distant memory and childhood but as a product that allowed me to navigate the English language and mannerisms. Unlike India, America cable offered a DVR system with a “Pause” and “Rewind” feature and pre-recorded episodes of Phineas and Ferb that was priceless. It’s been a very long time since I have watched that show, and now, if I do want to watch it, I have to scavenge out of the Internet or be civilized and watch it at Disney+.
Disney has created a fantastic product that only helps strengthen its Direct-To-Consumer relationship. With Disney+, Disney is allowed to monetize its content and gain better pricing power. Reaching 100 million subscribers in a year and a half compared to ten years of Netflix is no ordinary feat and speaks to the value of The Walt Disney Co (NYSE: DIS) and its content.
Upon reviewing Annual Reports from 1999, the following graph is rendered that shows Total Revenues generated by Disney Parks, Experiences and Products compared to that the Total Revenue for Amusement and Theme Parks, Establishments Subject to Federal Income Tax, Employer Firms prepared by FRED, Economic Data.
They are indexed to 100 starting from 1998. Suppose the Total Revenue line is considered as a general measurement of the strength of the Amusement and Theme Park industry. In that case, Disney performs better than the industry in general because Disney is an experience and not purely an amusement park.
Compared to other publicly traded Amusement Park companies such as Cedar Fair LP (NYSE: FUN) and Six Flags Entertainment Corp (NYSE: SIX), the following chart is for the metric Revenues to Operating Income ratio between 2011 and 2019. Operating Income, a measurement of “amount of profit realized from business operations” .
It should be noted that what Disney generated in Operating income between 2011 and 2019 is sometimes as much as 4.5 times greater than what Cedar Fair and Six Flags generated in total revenues. Disney Parks and its Experiences are a considerable portion of the Disney enterprise, and the Disney+ network has only encouraged its allure. Opening day on July 17, 1955, Walt Disney famously said, “To all who come to this happy place; welcome. Disneyland is your land. Here age relives fond memories of the past…and here youth may savor the challenge and promise of the future” .
In December 1996, the Associated Press reported that “The Roman Catholic Church has banned its priests from performing marriage ceremonies at Disney World,” citing “that the nuptials belong inside a Church” as the reason . In May 2017, the Washington Post reported that “Disney has put on more than 30,000 weddings around the world, including at Disneyland in California, Walt Disney World in Florida, Disney’s Aulani resort in Hawaii, on multiple Disney cruise lines, and in Disney resorts and parks abroad” . It is safe to assume that one signs up for a Disney wedding to live their memories from franchises like Cinderalla and not religious preferences. It is that minutia, the minutia of monetizing memories and narratives through characters that resonate through geographies and demographics, that Disney has done so well in capturing and maintaining its market share. Disney+ is a convenient tool added to The Walt Disney Co (NYSE: DIS) arsenal that acts not just as a simple tool to monetize their decades of content accurately but also as a window into creating new universes for their parks and experiences.
Mr. Bob Chapek, Chief Executive Officer, in The Walt Disney Co (NYSE: DIS) Investor Day 2020 presentation, said, “Walt Disney founded this company nearly 100 years ago with the belief that we should always be evolving, growing, and reinventing ourselves. In his words, “We keep moving forward, opening new doors, and doing new things, because we’re curious and curiosity keeps leading us down new paths” . Disney+ has opened the door for something new and different for this Entertainment juggernaut, and the next 5-10 years in The Walt Disney Co (NYSE: DIS) will be an exciting sight to see. The Avengers Campus is opening on June 4, 2021, at Disneyland California Adventure. If the Avengers has taught me anything, it would be that superheroes are not restricted to the pages of comic books anymore, but are characters, when mixed with the correct narrative, can generate billions from attached fans. To put it mildly, Mickey Mouse came before Disneyland and not the other way around.
Author’s Note- The data shared in the essay is reflective of the results rendered till the date of publication. As of publication, I do not own shares of any of the stocks mentioned in the essay. Historical performance only serves as an indicator and teacher, not a predictor. The thoughts expressed are my personal opinions, and cannot be equated to personal advice. The essay was constructed for informational and educational purposes only. I encourage all readers to perform their own due diligence prior to investing.