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Disney shares have increased 16.6 percent year to date. The increase in the share price partly reflects Disney’s consistent ability to create memorable fictional characters. Frozen, released in 2013, is still capturing children’s imagination, as evidenced by the monopoly of Elsas present at our carnival this year.
2015 and 2016 are also expected to be exceptional years for Disney Studios due to the release of the second installment of the Avenger’s franchise and the November release of the 7th instalment of the Star Wars franchise.
Avengers: Age of Ultron premiered in Hollywood on April 13, and as of May 4 has grossed $643 million worldwide. The Movie’s worldwide opening grossed $392 million, making it the 5th largest ever.
Star Wars Episode VII: The Force Awakens is already generating unprecedented levels of interest. In April 2015, the ‘Hollywood Reporter’ reported that a $540 million opening could be possible. Analysts expect the movie to hit $1 billion ‘without blinking’. $2 billion is possible if the movie is particularly good.
Theme Park success continues to be mixed, with US Parks continuing to prosper while international parks fail to live up to expectations. Shanghai Disney Resort is due to open by the end of 2015.
An Overview of the Quarterly results ending March 2015
The Walt Disney Company reported positive results for the second quarter of fiscal year 2015. Theme parks in the United States continue to make up for weakness from parks elsewhere. The incredible success of ‘Frozen’ continues to drive sales for toys and other related products. The highlights from the different revenue generating segments follow.
Studio and related products
The quarter ending March 2015 lacks any significant blockbuster movie, however, merchandise sales filled the gap as Frozen related products led an increase in sales of over 32 percent. While Frozen was released in 2013, sales of ‘Frozen’ products were almost 10 times higher than last year.
Disney Parks
Disney’s theme parks in the United States continue to drive revenues in this segment. Disney was able to increase prices for Orlando’s Magic Kingdom resort above $100 per ticket without impacting demand.
International parks did not perform as well; low attendance at Hong Kong Disneyland and high operating costs at Disneyland Paris led to lower returns. Going forward, strong demand at US Parks, higher prices at Disneyland Paris and the potential income from the opening of Shanghai’s Disney Resort should continue to drive returns upwards.
Media Networks
Despite an increase in costs at ESPN, higher charges and an increase in subscribers led to an increase in revenue. Programming costs continue to increase as TV rights, especially sports related content becomes more expensive to obtain.
Forward Expectations
A unique portfolio of intangible assets makes Disney an attractive share to hold. Future success will depend of the Company’s ability to continue creating unforgettable characters, characters with a potential to generate revenues for prolonged periods through merchandise, rights and entertainment. A good Star Wars Movie later this year has the potential of carrying the Disney stock to higher levels.
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