All right, let's find out what's been going on at Disney as it came out with sales and profit that was below Wall Street expectations, joining us to look at all this is gua Tech and Media as a Bloomberg intelligence guita looking at what's happened in Disney. I mean it's quite something. You add twelve million subscribers, which is a big, big beat on the consensus, and he's still coming below estimates. What happened here? Yeah, and that's it's
a really good, good question. I mean, um, what happened was they came in light on profits, and they came in light on profits both on the streaming side and the streaming of course there are absolutely no profits, which meant there were more losses than expected. So so far we have seen four billion dollars in fiscal two losses. And then on the theme park side as well, and this was a little bit of a surprise. I think to most investors. They came in about twenty short of
consensus in terms of you know, park profits. So I think those two were like the big headline numbers that is kind of causing this weakness and after hours normally when we think about costs in streaming, we would be thinking about access of content, but that's not a problem for Disney has loads of content. So it's kind of curious what is the where is the cost structure that's so high when it isn't the content, so it is
the content too. They are spending uh really, they're they're spending tons and tons of money for producing some of these really big shows on the Disney Plus platform. Yes, they have access to i P, but remember creating even like one season of The Mandalorian or some of these Marvel series, it costs of about twenty five million per episode. So we're looking at, you know, ten billion dollars in content costs for fiscal two. That's probably going to go up the next year. So they are spending a lot
on content. But where they're really looking to get more efficiencies going forward is really in the marketing spend. So with you know, with them launching in so many different markets, they obviously had to undertake very intensive marketing efforts, but obviously all of that is going to come down pretty
pretty nicely going forward. So that's interesting because it means that they need new content, not just the other content, but are they also producing some content that is only for the streaming, it's not for the theatrical and therefore, you know, you really have to up the spending. Oh. Absolutely, there is a lot of content that's exclusively for streaming.
Whether it's all of these Marvel TV shows, whether it's you know the Mandalorian which is a Star Wars show, Um, we had and or we have you know, she Hug, all of these are created exclusively for the Disney Plus platform. Um and so yes, they do have you know, just that component. But of course, as you mentioned, they also have you know, content that they are creating for a theatrical worldwide theatrical releases, which then also again flows back
into the Disney Plus platform after about two months or so. Um, you know at the box office. Well, tell me sounds what happens that you know, we've got just on the sports side of things that you know, we've got major headwinds. Indeed, with all these different rights that they have to screen sport in different jurisdictions. Uh, these cost a lot of money and a lot of these are coming up for renew. Yeah, that is a big, big, you know, pain point, not just for Disney. I think it's it's for all of
you know, the media landscapes. So for Disney, Disney they are the biggest sports rights holder right now. They pay about nine billion dollars every year and that's really because of ESPN and all of the marquee rights that ESPN holes. Um. Yes, there is huge cost inflation. On average. We've seen at least about you know, fifties sixty cost inflation every time these rights come up for renewal. So that is something that that Disney is definitely looking at down the road.
But what they have shown us so far is that, you know, they are willing to exercise a lot of discipline and forego rights if it doesn't make financial sense to them. So they did that recently in India with the I p L cricket streaming rights. Um that was really a huge magnet for them in terms of subscriptions, but it was very, very expensive, and so they decided to let that go, and they said they're going to do the same thing for new sports rights that kind
of come up. They're going to be very financially disciplined as they take a look into those You mentioned the parks were disappointing. Was a lot of that tied to China because of lockdowns or whether it was it also disappointing in North America. No, it was definitely some of it was international. And with China, what they did mention was that they have very very actually they have absolutely no visibility into when Shanghai is going to be able to reopen. So that is definitely going to take a
toll in terms of pranctability. But you know what was disconcerting was that we saw some pretty weak results from the US, you know, the domestic parks as well. Of course, some of that was tied to Hurricane Ian, which affected their Florida park. It resulted in about sixty five million dollars of operating income impact. But they also talked about higher costs and so one has to wonder about inflationary pressures in their cost pace. Um, you know, they talked
about costs of new attractions. So all of that kind of really took or or you know, exerted pressure on on the bottom line for for the market segment. Excellent stuff, Guita, thanks very much. We know that Disney is off the worst levels and after hours of stock traded down about almost eight percent, now down about six six point one percent. Gita wrong and often is. Tech and media analysts at Bloomberg Intelligence