Walt Disney(DIS 0.18%) reported its fiscal fourth-quarter and full-year 2015 results last week. The beloved entertainment giant posted solid year-over-year quarterly revenue growth of 9%, which essentially met analyst expectations. The force was especially strong with earnings, with GAAP earnings per share rising more than 10% and adjusted EPS soaring 35% in the quarter, comfortably beating estimates.
The purpose here isn't to rehash the results (you can read my earnings take here) but to supplement the earnings release with color from the analyst conference call. Here are four key things you should know about.
Source: Disney
Expanding and leveraging the Star Wars universe
From CEO Bob Iger's prepared remarks:
A new generation is connecting with Star Wars through Disney XD's animated series Star Wars Rebels; and fans and gamers around the world are anxiously awaiting the November 17 release of the highly anticipated Star Wars Battlefront from EA, praised as the ultimate Star Wars gaming experience.
We're expanding the franchise in our Parks and Resorts, adding Star Wars theme lands to Disneyland and Disney World. And we're also using digital platforms to familiarize global consumers with the franchise and to market the film in truly innovative ways.
Disney is doing with its Star Wars gem, which it acquired when it bought Lucasfilm in 2012, what it does best: leveraging its creative assets across its entire company to drive long-term growth.
Upcoming slate of movies is as strong as a superhero
Chief Operating Officer Tom Staggs ticked off Disney's film slate for the next year during his opening remarks:
In addition to the Star Wars movies Bob mentioned [see comments below], we have a spectacular slate of releases scheduled for 2016, representing our full array of fantastic brands, starting with the release of Pixar's The Good Dinosaur later this month. Disney Animation's Zootopia opens next March, followed by Disney's live-action adventure, The Jungle Book, in April. In May, we'll release Marvel's Captain America: Civil War. And later that month, Johnny Depp returns as the Mad Hatter in Alice through the Looking Glass. Fans of Pixar's Finding Nemo will finally get their wish for a sequel when Finding Dory opens in June.
We've successfully introduced some fantastic but lesser-known superheroes into the Marvel cinematic universe with last year's Guardians of the Galaxy and again with Ant-Man this year, and we're looking forward to doing the same with Dr. Strange next year. We also have another great movie from Disney Animation, Moana, which will be in theaters for families to enjoy about a year from now.
This is an amazing line up for the next year, which should power the studio entertainment segment's results in fiscal year 2016 and beyond.
As to Scaggs' reference to Iger: Iger noted that Star Wars: The Force Awakens opens on December 18 and that Disney will have "three new Star Wars films in theaters between now and the end of 2017 with even more to come." The Force Awakens is the first Star Wars movie in a decade and the first one released since Disney acquired Lucasfilms.
ESPN is mighty enough to be a superhero
Not surprisingly, Disney's top management team rattled off numbers illustrating the strength of its sports cable network, ESPN. The full-court press was surely meant to reassure investors, who sent Disney's stock tumbling after Iger's comments on the third quarter conference call. He said that the company expects the modest decline in the number of ESPN subscribers to trim a few percentage points off its previously issued forecast for profit growth from domestic subscriber fees from 2013 to 2016. This decline in subscribers is due to "cord cutting," people cancelling or trimming their large cable packages.
A snippet from one of Scaggs' remarks:
In fiscal 2015, ESPN was the number one full-time cable network in all major demos, delivering more than half [26, as shared later on the call] of the year's top 50 cable telecasts. ESPN's first college football playoff actually delivered the three biggest audiences in cable history, as well as an 83% ratings increase over the prior-year's bowl championship series.
ESPN is the cash-generating machine at the heart of Disney's largest and most profitable segment, media networks. In fiscal 2015, media networks accounted for 44% of total revenue and a whopping 53% of operating income, so there's no denying that the segment and its star player, ESPN, are critical to the company's long-term success. While one quarter is just one quarter, the results showed no sign of weakness. Disney is cutting costs at ESPN, which will help in the short term, and it's surely exploring its long-term options. In fact, Iger recently said that the company could offer a stand-alone ESPN product in the future.
Look for more direct-to-consumer offerings
Iger acknowledged the importance of the traditional multi-channel business model, which involves sending content through distributors. However, several of his comments make it clear that Disney is exploring more direct-to-consumer offerings.
From Iger's answer to an analyst's question:
We believe that we're seizing these opportunities to augment what is still a primary form of us delivering content to consumers on the TV side, and that's the multichannel package through MVPDs [multichannel video programming distributors]. DisneyLife is a direct-to-consumer proposition that we're launching in the UK in a few weeks.
DisneyLife, which Iger described as essentially an "app experience", represents Disney dipping its toe in the direct-to-consumer distribution sea. It will give subscribers in the UK unprecedented access to a vast universe of Disney content, including hundreds of movies, thousands of TV episodes, as well as music, books, and more.
