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Disney: What Is Driving A $10 Billion Revenue Surge In 2019?

Walt Disney Company (NYSE: DIS), is most likely to expand its revenue base by over $10 billion in 2019. After adding $4.3 billion in revenues in 2018, Trefis estimates that Disney is set to increase its total revenue from $59.4 billion in 2018 to $69.7 billion in 2019. The sudden surge is expected to be driven by healthy growth in its media networks, parks and resorts, and studio entertainment businesses, benefiting from the Disney-FOX merger in early 2019 and an increased stake in streaming player Hulu.

You can view the Trefis interactive dashboard – Walt Disney Revenues: How Does Disney Make Money? – to better understand the different operating segments and business model of the company, along with revenue performance. In addition, here is more Trefis Media data.

Disney-Fox Deal

  • In March 2019, Disney acquired FOX for $71.3 billion, in one of the biggest media mergers.
  • Disney, which already owned the Pixar, Marvel, and the Star Wars brands, also got Deadpool and the Fox-owned Marvel characters such as the X-Men and Fantastic Four, allowing for the full Marvel family to be united.
  • Disney also now owns former Fox television networks such as FX Networks and National Geographic Partners.
  • Post the deal, Disney has a controlling share of 60 percent in Hulu (earlier it owned 30%), and also gained a few movie studios — most notably 20th Century Fox and its associated prestige films arm Fox Searchlight.

Media Networks

  • After a drop in 2017, segment revenue increased in 2018 due to higher affiliate fees (fees charged to multi-channel video programming distributors (MVPDs) – cable, satellite, telecommunications – and digital over-the-top ~ e.g. Hulu, YouTube TV – service providers (MVPDs) and to television stations affiliated with the ABC Network for the right to deliver programming to their customers) and TV/SVOD (subscription video on demand) revenue, partially offset by a decline in advertising revenue.
  • We expect the rising trend to continue at a higher rate over the next 2 years.
  • Increase in affiliate fees is driven by higher contractual rates, partially offset by lower subscribers.
  • Subscription revenue growth reflects higher program sales and the consolidation of BAMTech.
  • Lower advertising revenue is driven by a decrease in impressions, which are due to lower average viewership, partially offset by higher units delivered.
  • Media Networks revenue is likely to increase from $24.5 billion in 2018 to $27.3 billion in 2019.
  • Additionally, the inclusion of FX Networks and National Geographic Partners in Disney’s portfolio of offerings post the Fox deal is expected to increase its subscriber base.

Parks & Resorts

  • The segment has added $4.1 billion to its revenue base, as sales increased from $16.2 billion 2015 to $20.3 billion in 2018, with revenue expected to increase at a faster rate to $24.5 billion in 2019 driven by strong performance in the domestic as well as international operations.
  • Domestic revenue growth is driven by higher average ticket prices for theme park admissions and for cruise line sailings, increased food, beverage, and merchandise spending, and higher average daily hotel room rates, along with higher volume due to higher attendance and passenger cruise ship days.
  • International operations growth is driven by an increase in volumes, higher average guest spending, and favorable foreign currency impact.

Studio Entertainment

  • Segment added $2.6 billion to its revenue base, as sales increased from $7.4 billion in 2015 to $10 billion in 2018.
  • Studio Entertainment revenue is expected to grow at a faster rate in the near term, driven by higher theatrical distribution and TV/SVOD revenues, partially offset by continued pressure in home entertainment.
  • Acquisition of Fox is also expected to drive revenue growth due to additional offerings.
  • This is mainly because of Disney gaining a few movie studios — most notably 20th Century Fox and its associated prestige films arm Fox Searchlight – both of which are major award contenders every year at the Emmys and Oscars.

Consumer Products & Interactive Media

  • Segment revenue has declined due to lower licensing revenue, reflecting lower revenues from sales of licensed merchandise and a decrease in licensee settlements.
  • Segment revenue is expected to remain flat in 2019 and rise in 2020, driven by higher sponsorship revenue and favorable FX impact.

Total Revenue

  • For the full year, total revenue is expected to see a sharp jump of 17.3% from $59.4 billion in 2018 to $69.7 billion in 2019, which marks an increase of $10 billion in a year.
  • Higher revenue could primarily be a reflection of benefits from the Fox acquisition, in the form of increased and high-quality content, higher subscribers, increased studio revenues, and an increase of 30% stake in streaming player Hulu.
  • Additionally, higher affiliate revenue, strong performance in Parks and Resorts segment, increased theatrical distribution, and higher sponsorship revenue, partially offset by pressure in home entertainment and licensing revenue, is set to boost revenue growth for Disney in 2019.

 

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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