Disneyland'S "Change Of Battle": Fight Against "Epidemic" Of Streaming Media
On the evening of October 13, Beijing time, when the three major U.S. stock indexes fell, Walt Disney (DIS) shares bucked the trend and closed at $128.96, up 3.19%.
Disney's share price has been boosted by an earlier restructuring news, which recently announced that it will restructure its media and entertainment division and focus on streaming media. Investment banks are very optimistic about this, and JPMorgan even reiterated its "overweight" rating for the first time, and gave a target price with a higher premium.
Since this year, the outbreak of the epidemic has brought a huge blow to Disney, and the offline theme park business has been damaged, leading to the company's massive layoffs to stop loss. In this context, online streaming media business seems to be Disney's "lifesaver".
In fact, in Disney's official voice, restructuring the media and entertainment sector is not a passive choice under the epidemic situation. Bob chapek, the company's chief executive, recently publicly said that Disney's restructuring is not a response to the epidemic, but that the epidemic has accelerated the transformation of Disney.
However, the reorganization will also be Disney's streaming business with another giant Netflix launched a direct confrontation. Besides Disney and Netflix, there are also at & T, Amazon Prime video, Apple TV +, Comcast and other platforms in the North American market, where the streaming media war is heating up.
"Ice cold" offline paradise business
Since the outbreak of the epidemic, "layoff topic" has frequently put Disney on the "headlines".
The most recent layoff occurred at the end of September. Disney announced on September 29 that it would cut 28000 people, or 25% of the park's total staff, mainly at two Disneyland sites in the United States, Xinhua reported.
Disney's business is diversified: according to the disclosure of its financial statements, it is divided into media network, parks and resorts, film and television entertainment, direct to consumers and international (dtci) business. Taking the data of fiscal year 2019 as an example, the revenue of media network, amusement park and resort business accounted for 36% and 38% respectively, which are the two core pillars of Disney.
But parks and resorts, which account for a high proportion of revenue, have been hit by the epidemic this year. Since January this year, Shanghai Disneyland has taken the lead in announcing the closure of the park. Hong Kong, Tokyo, Paris and the United States have closed down one after another, and the park business has stagnated. With business suspended, operating expenses and labor costs peaked, forcing Disneyland to announce a pay cut for 100000 employees in April.
The financial report data more clearly shows the huge impact of the epidemic on the business of Disneyland and resort. In the third quarter of fiscal year 2020 (from March 29 to June 27, 2020), the revenue of this business of Disney was only $983 million, a decrease of 82% on a month on month basis, becoming the most obvious business of Disney.
It is worth mentioning that the third fiscal quarter coincided with the outbreak of overseas epidemic, and Disneyland entered the "dark moment". In the third quarter, the company achieved operating revenue of $11.779 billion, a year-on-year decrease of 42%, and a loss of $4.721 billion.
Among the six major theme parks, Shanghai Disneyland is relatively optimistic. As the earliest theme park in the epidemic, Shanghai Disneyland has been in high fever since it reopened in May this year. During this year's national day, the park even emerged with more than 10000 tourists a day and the hotel price doubled and sold out.
However, the local bustle can hardly cover up the overall fatigue of Disneyland and resort business. As a result, Bob chapek had to say, "we are greatly inclined to streaming media".
Bet on online streaming
The reorganization of the streaming media business is to centralize the media business of Disney into a separate organization responsible for content distribution, advertising sales and dis ⁃ ney +.
Streaming media is Disney's main investment line in recent years. The reason why Disney has increased its investment in online business is the formation of oligopoly competition pattern of offline theme park business. Therefore, Disney also needs to open up new core profit points.
In fact, the development speed of Disney streaming media business is very fast, especially the number of registered users of Disney +. According to Disney's official data, Disney + has more than 54 million registered users worldwide since it launched in November last year. According to other data, as of August this year, Disney's entire streaming media service had more than 100 million paying users, and more than half of them came from dis ⁃ ney +.
Disney's streaming media platform has formed a more diversified product matrix: Disney +, Hulu, ESPN, hotstar. In addition, through acquisition, original, self-made and other channels, Disney has built a wealth of film and television entertainment IP resources, laying the foundation for the development of streaming media business. The 21st century business reporter found that before the announcement of the restructuring, Disney had authorized the dtci streaming business of Walt Disney films, marvel, Lucas and Pixar this year.
M & A is the main way for Disney to quickly enrich its streaming media business product line. Among them, the completion of the two blockbuster acquisitions in 2019 is of landmark significance - 21st Century Fox and Hulu. It is worth mentioning that the acquisition of Hulu enables Disney's streaming media business to cover users of all ages.
With the rapid growth of users, the revenue growth rate of Disney streaming media business can be seen. According to the company's data in the second quarter of this year, its dtci business revenue soared to $4.123 billion.
Another phenomenon worthy of Disney's increasing investment in streaming media business is that the epidemic is accelerating the change in the form of film circulation.
Lei Juncheng, an analyst at Tianfeng securities, believes that the epidemic is accelerating the collapse of the value of cinema links in the value chain of traditional film industry, changing the circulation form of films, and accelerating the shortening of the window period between the release of films on the cinema and the online streaming media, and the trend of "synchronization between the academy and the network".
When it launched a blockbuster movie this year, Disney adopted the mode of Disney + pay online viewing and cinema synchronization. The price of the movie is $99.99 on demand, which is one week earlier than the paid movie. It's also the first time Disney + has tried to charge an extra fee for a premiere movie on the platform. According to relevant statistics, after the release of the film, Disney + downloads increased by 68% to 890000 times.
This trial opened up the idea of Disney using streaming media platform to play business synergy effect. However, it should be noted that, taking the North American market as an example, Disney is facing a large and numerous streaming media platform competitors. In addition to the giant netf ⁃ LIX, at & T, Amazon primevideo, Apple TV +, Comcast, etc. are also eyeing this field. Among them, Netflix had 193 million users worldwide as of July this year, far more than Disney.
Under the fierce competition, a marketing war is inevitable. In order to ensure the growth of the volume, Disney dtci business also sacrificed the early profits. In the second quarter of this year, the loss of this business increased, mainly due to the introduction of Disney + and Hulu, as well as Disney +, Hulu and ES ⁃ PN +. In this regard, Southwest Securities expects that "with the increase of Disney + user base, the marketing expenses in the next few years will accelerate growth, maintain a loss state for a period of time, and is expected to achieve profit in 2024 fiscal year." (Editor: Xu Xu)
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