Powered by the high-profile hit Frozen and the continued success of any films carrying the Marvel brand, The Walt Disney Co (NYSE:DIS) has been on a bit of a role.
Those massive movie hits have been good not just at the box office, but in product licensing and, in the case of the icy animated feature, in driving theme park attendance. Add in the continued strength from the company's networks division, specifically ABC and ESPN, and the House of Mouse's revenue spiked by 7% in its most recent quarter, to $12.5 billion from $11.6 billion during the same period last year.
That's great news for a company that just released Avengers: Age of Ultron and has more Marvel movies to look forward to in the coming year, as well as a new Star Wars film in December. Those releases, which can be leveraged across other platforms, should power the company to a very strong year.
CFO Jay Rasulo and Investor Relations Senior VP Lowell Singer recently appeared at the second annual MoffettNathanson Media & Communications Summit for a question-and-answer session. Here's a look at some of the more interesting comments:
What is driving Disney's media success?
"Those of you that have followed the company for a long time will see a certain consistency," Rasulo said. He explained that CEO Bob Iger laid out a strategy "eight or nine years ago" covering content, embracing technology, and expanding the brand's franchises global footprint.
"The depth of that strategy has really held up even in a rapidly evolving marketplace," he said.
Rasulo pointed out that when Disney first thought through that plan, Netflix was not even an idea. But, he said, the core strategy has proven flexible even as new markets and technologies emerge.
"We've invested for the long term and ignored business cycles," he said. The CFO also noted the company has made strong acquisitions, citing Marvel and Star Wars as examples."We have used our balance sheet and our debt capacity to really invest strongly behind what we have competitive advantage in and what we're good at. ... We have a franchise-focused strategy ... we're a company with a very long tail on where we monetize what we create."
Can you walk us through the Disney vision for its movie franchises?
While Disney has had unprecedented success with its movie division, Rasulo and Singer were asked to address concerns that Frozen was a fluke and Marvel's success might not be sustainable.
"If you look at Marvel since we've owned it, we have put out eight movies," Singer said, "and we've averaged close to $800 million in global box office per film. ... If you look at DIsney and Pixar, I think we've put out 13 films, averaging $650 million."
Singer cited those numbers and the very positive ratings the films have generated on the movie review website Rotten Tomatoes as examples of the company's commitment to quality.
"If we make great content, audiences will follow that content, not just into the theaters, but into the other parts of our business," he said.
Singer said the company's other divisions have incentives to use film properties, which creates a fully integrated business model. "When we have a success like Frozen we can exploit that in many different parts of our business, whether its theme parks, or television."
How do you decide how to use new technologies in cable and TV?
"We don't think that utilizing the different means of distribution that are out there today are in conflict with each other," Rasulo said. "As a content company it's our job to figure out how to meet the consumer desire through the distribution capabilities."
He pointed out that different consumers want different things. Some will binge view streaming material, and others consume quick content online. "Everything in between exists and if you're in the business of creating content you want to be at the top of your game. You really have to look at every decision."
Rasulo said he believes the content dictates the medium and there are no absolutes. He pointed to Netflix's Daredevil (produced by Marvel for streaming on Netflix) which he said fit the Netflix model better than it fit on ABC or any of the company's cable outlets. The CFO said he expected the traditional TV model to exist for a long time, "but we continue to look at everything from Netflix, with its hyper-long consumption, to Maker Studios at the other end of the spectrum and ask ourselves, how are our franchises going to manifest itself in all the different ways consumers consume media?"