Speculation on Changes to the Movie Industry

[Wayne]

I have thought about this a lot lately. As always a list for my thoughts.

• Theaters are date venues. I do not see them going away because teens will not want to have dates in their living rooms with their parents in the house.
• The theater experience will need to continue to evolve. The standard experience of shoving as many people in a room as possible to watch a movie has already pretty much died. Now theaters have reserved seats, larger seats, and less people. Some have food and alcohol brought to you. I think the Drafthouse model of theaters are the type that will really survive.
• Laws that have prevented Movie production companies from owning theaters are being challenged now. If these are overturned we could see a drastic shift in how theaters operate as well as what movies go to which theaters. This is not a positive turn for indie and arthouse movies.
• If I could get movies from my home on release date I would probably never go to a theater again. The price is high for me, but it makes sense for a family. $30 is a lot for one person to see a movie, but for a family or even a couple it isn't that much.
• Some theaters are open. Chad went to a Marcus just last week to see Tennant. That is a movie high on my list to see.
• Some people feel really strongly about the movie going experience and home streaming will never be enough for them. They want the larger screen and time away from the real world. I am not one of those people but there are a lot of them.
• Streaming has a huge drawback right now of being done per platform. If you wanted Mulan for some reason you had to have Disney+. Warner Brothers movies would be HBO Max. You have to already be subscribed to a platform to buy the additional ticket for the movie. That will be a problem for some movies and severely limit the available audience.
  

[Chad]

It won't matter how many people would rather pay $30 to steam something when the product is no longer offered that way. Do you really think Disney is going to keep releasing movies for $30 to stream instead of putting them in theaters first?

Considering the vast majority of Disney's revenue comes from resorts, parks, and hotels, I'd say they have bigger problems. Disney as a movie studio has only ever been a workshop/acquisition house for shit they can turn into rollercoasters (from a business perspective).

That is incorrect.

The parks are only 7% of revenue.

https://www.investopedia.com/how-disney ... ey-4799164

The Parks, Experiences and Products segment reported revenue of $983 million, or 7% of total revenue, in Q3 FY 2020. Revenue plunged 85.0% compared to the year-ago quarter. The segment posted an operating loss of $2.0 billion, a significant change from the $1.7 billion of operating income reported in the same quarter a year ago.

The Media Networks segment posted revenue of $6.6 billion in Q3 FY 2020, down 2.2% compared to the same three-month period a year ago. Operating income rose 47.6% to $3.2 billion. The segment accounts for about 50% of total revenue and 83% of total operating income.

One of their investor groups are asking Disney to cut it's divined permanently (it cut it last quarter due to pandemic losses) and is asking them to take that money and plow it into original content for their streaming platform.

[Chad]

That said the parks in a pandemic are a major drag on profits.

https://www.cnbc.com/2020/05/05/disneys ... nings.html

Profit and revenue are not the same thing.

[Chad]

As far as no one going to a theater anymore I went last week, there were 4 of us in there! Granted it was like 2PM on a Tuesday.

[clintmemo]

The parks are only 7% of revenue.

https://www.investopedia.com/how-disney ... ey-4799164

The Parks, Experiences and Products segment reported revenue of $983 million, or 7% of total revenue, in Q3 FY 2020. Revenue plunged 85.0% compared to the year-ago quarter. The segment posted an operating loss of $2.0 billion, a significant change from the $1.7 billion of operating income reported in the same quarter a year ago.

The Media Networks segment posted revenue of $6.6 billion in Q3 FY 2020, down 2.2% compared to the same three-month period a year ago. Operating income rose 47.6% to $3.2 billion. The segment accounts for about 50% of total revenue and 83% of total operating income.

if being down 85% means they were only 7% of revenue, then on a normal quarter, they would be 7% / (1.00 - .85) or 46% of revenue. i.e. normally, almost half.

And yes, that's revenue, not profits. Maybe 46% of their revenue earns 200% profit while the other 54% breaks even - we don't know.

[Wayne]

I would bet like most things that the real profit comes from merchandising. Spider-man for example earns $1.3billion a year by himself in merchandising leading all comic book properties. Add in the rest of Marvel, Star Wars, Disney, and all the other companies they bought and there is a serious chunk of change there. Also that falls under the Media Network segment for reporting.

The park impact really came in because movies were not going out either. Typical streams of revenue all dried up. Even if merchandising and licensing is the largest stream as I estimate it is that doesn't mean losing the others does not hurt especially when the others have larger overhead and cost than merchandising and licensing does. Whoever mentioned revenue vs profit brought up an excellent point. Something can be a leader in revenue but barely an impact in profit and vice versa.

[Azhrei Vep]

As far as no one going to a theater anymore I went last week, there were 4 of us in there! Granted it was like 2PM on a Tuesday.

Sounds more crowded than almost every movie I went to for the last few years pre-Covid. This must mean that movie-going is actually on the rise!

[tombombodil]

The parks are only 7% of revenue.

https://www.investopedia.com/how-disney ... ey-4799164

The Parks, Experiences and Products segment reported revenue of $983 million, or 7% of total revenue, in Q3 FY 2020. Revenue plunged 85.0% compared to the year-ago quarter. The segment posted an operating loss of $2.0 billion, a significant change from the $1.7 billion of operating income reported in the same quarter a year ago.

The Media Networks segment posted revenue of $6.6 billion in Q3 FY 2020, down 2.2% compared to the same three-month period a year ago. Operating income rose 47.6% to $3.2 billion. The segment accounts for about 50% of total revenue and 83% of total operating income.

if being down 85% means they were only 7% of revenue, then on a normal quarter, they would be 7% / (1.00 - .85) or 46% of revenue. i.e. normally, almost half.

And yes, that's revenue, not profits. Maybe 46% of their revenue earns 200% profit while the other 54% breaks even - we don't know.

Disney's 2019 financial year.

Revenue - $69.570 billon

Segments

Parks -(Parks global, Cruises, Merchandise licencing) $26,225 billon 37.7%

TV channels (ABC & ESPN + other US, TV show licencing) - $24,827 billion 35.69%

Films (Theatrical, VOD, Home video and Licencing) - $11,127 billion 15.99%

International and Direct to Consumer (All international TV channels and all Streamers) - $9,349 billion 13.44%

I'm sure there's a lot of hidden nuance in those values, but unless I'm completely ignorant of how money works the realistate portion of Disney's income pre pandemic is way more critical than their film division. Also I guess ESPN (and TV in general) is another rediculously huge earner for them which makes sense.

You're pulling numbers from one quarter deep in the pandemic. Which confirms what I was saying, their biggest earner has dropped massively.

[Lord Foul]

Public Service Message

real estate

ridiculous

That is all.

[Chad]

https://www.fool.com/investing/2018/06/ ... -mone.aspx