Disney (DIS 1.24%) made headlines over the last few months for a variety of reasons. As an entertainment industry icon for nearly 100 years and with a market cap of $190 billion, the company is often a target of media scrutiny.
In 2022, Disney's stock fell 33% as rising inflation spooked investors, and consumer spending slowed across multiple markets. Following the inner workings of a company can be a great way to predict where it is headed and how far your investment will go. Disney experienced some exciting developments over the last few weeks that investors should be aware of. So, let's dig in.
A fruitful sports deal
Sports deals were all the rage among streaming and entertainment companies throughout the year as corporations try to cash in on the $57 billion sports advertising market. In 2021, Amazon penned a deal to exclusively broadcast Thursday Night Football on its streaming service Prime Video for a reported $1 billion a year. Meanwhile, Comcast agreed to pay $2.7 billion to stream live coverage of Premier League soccer until 2028.
Disney has been active in the sports broadcasting industry for years through its cable network ESPN and dove into the streaming side of it with ESPN+ in 2018. The company has made various deals to provide sports content to its viewers over the years. Most recently, on Oct. 22, the Walt Disney Company extended its agreement with Liberty Media to continue broadcasting Formula One races on ESPN in the U.S. until 2025.
NYSE: DIS
Key Data Points
Considering the exponential rise in popularity Formula One has experienced in the U.S. over the last couple of years, the extended deal could be incredibly lucrative for Disney. Last year, there was an average of 949,000 American viewers per race, resulting in the most-viewed season ever in the U.S. That figure was topped again in 2022, with an average of 1.2 million American viewers per race in the 18 out of 22 races held so far.
Netflix's popular docuseries Formula 1: Drive to Survive has skyrocketed the sport into becoming one of the most popular in the U.S., to the benefit of Disney. For instance, the race on Oct. 23 in Austin, Texas, saw crowds show up in droves, setting a new record of 440,000 fans attending the Circuit of the Americas. As a result, Disney could be in for significant gains as Formula 1 continues to grow in popularity in the U.S. over the next few years.
Park price hikes
All eyes have been on Disney's theme park business over the last few years as the company suffered significant losses from pandemic closures in 2020 and 2021. Then in the second quarter of 2022, the company celebrated a 70% rise in its parks revenue, totaling $7.39 billion. With a solid return of guests to its parks, the company took the opportunity to boost revenue by implementing price hikes and monetizing different aspects of the business.
On Oct. 11, ticket prices rose at its California parks, along with the cost of its premium Genie+ program that allows guests to have preferred access to popular attractions. Overall, a trip to the Disneyland Resort has increased by about 10%, which surpasses the U.S. annual inflation rate of 8.2%.
Additionally, in September, Disney scrapped its complimentary Fastpass program that allowed guests to make free reservations for certain attractions. The company replaced the system with Genie+, which allows guests to either buy an all-day pass or pay individually for premium access to attractions of their choice. The move has seen Disney monetize a once complimentary service as it works to reclaim what it lost throughout the pandemic lockdowns.
Is Disney stock a buy?
Disney has staunchly prioritized profits in 2022, as in addition to price hikes at its parks, the company will increase the cost of all of its streaming services in December. The rise will coincide with the launch of an ad-supported Disney+ tier, with an ad-free membership rising 38% from $7.99 a month to $10.99. Hulu will also see a $2 increase each month, while the cost of ESPN+ will increase by 43%.
The House of Mouse is working to safeguard its business in the event of a recession by increasing prices and offering a lower-priced ad-supported streaming option. The company is home to some of the world's most in-demand content and franchises, and it knows it. With a diverse business spanning multiple entertainment industries and a price-to-earnings ratio 60% below what it was a year ago, Disney looks like a great long-term buy right now.
