Disney - Compelling Long-Term Investment In 2019 And Beyond

  • Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company

Disney’s reinvention is already taking shape and growth is being restored with continued catalysts in its studio segment and streaming initiatives unfolding. This quarter marks the beginning of what I feel will be a string of subsequent quarters with robust growth.

Box Office Dominance and Streaming Growth:

Disney has dominated the box office over a multi-year stretch due to successes across multiple brands such as Star Wars, Marvel, Pixar and Disney Animation releases. Disney has held the most market share for the past three years by a wide margin. In 2016, 2017 and 2018 Disney’s studio captured 26.3%, 21.8% and 26% of the market share, respectively based on domestic box office gross. Disney’s studio is also the fastest to reach $1 billion in domestic box office gross and holds the three top fastest times. In 2016, 2017 and 2018 Disney achieved this mark in 128, 146 and 117 days, respectively which are the three fastest on record. In 2018, Disney’s studio was the fastest ever to $1 billion in box office gross (117 days) and has captured over a fourth of the market share at 26%.

Black Panther became the third highest grossing movie of all-time domestically with $700 million and ultimately grossing $1.35 billion worldwide and becoming the ninth highest grossing movie of all-time. Avengers: Infinity War posted the biggest domestic and international box office weekend of all-time with $258 and $630, respectively. Avengers: Infinity War became the fastest movie to gross over $1 billion worldwide and only the fourth movie to ever break through the $2 billion thresholds ultimately grossing $678.8 million and $2.049 billion worldwide. The recent release of The Incredibles 2 shattered box office records bringing in $180.7 million during its opening weekend debut, not only shattering the previous opening weekend record for an animated film, but finishing with one of the top ten openings of all-time for a film of any genre and surpassing $608.6 million domestically and $1.243 billion worldwide.

Thus far, Disney has the top three grossing movies domestically with Black Panther and Avengers: Infinity War and Incredibles 2 by a wide margin from the fourth highest grossing movie. Wreck It Ralph 2 brought in the second-highest Thanksgiving five-day gross of all-time with 84.5 million ultimately grossing $181.3 domestically and $355.5 worldwide. Mary Poppins Returns has already eclipsed $205 million in worldwide box office sales to cap off 2018. 2019 has highly anticipated releases that stand to rack in billions in box office receipts such as Captain Marvel (the first female lead for a Marvel film), Dumbo, Avengers 4, Aladdin, Toy Story 4, Lion King, Frozen 2 and Star Wars Episode 9. Disney is poised to defend its box office dominance again in 2019 for the fourth consecutive year (Figure 1).

Shifting the focus to Disney’s future of streaming, ESPN Plus was launched earlier this year in April to a mixed skeptical reception among shareholders and consumers upon its debut. Due to precipitous declines in ESPN viewership via traditional cable, Disney was cornered to remediate its ESPN business and evolve to the cord cutting consumer. Recently, Disney announced a key milestone for its streaming platform, reaching over 1 million paid subscribers. ESPN is Disney’s first inroads into the streaming arena offering a package of sports which include Major League Baseball (MLB), National Hockey League (NHL), college football, soccer, boxing and UFC for $4.99 per month. Disney has kept its ESPN Plus subscriber numbers a secret and would only state that its paid subscriptions were "strong" and that growth was surpassing expectations.

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Disclosure: The author does not hold shares of Disney however may engage in options trading with the underlying security. The author has no business relationship with any companies mentioned in ...

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