2019 will forever be known as the year that Disney smashed all box-office records and dominated cinema, but how will this affect its wider range of products?
Jan. 6, 2020
You might have often found yourself wondering: how does Disney make its money?
If you look at the top 10 highest-grossing movies of all time, you will notice that there is a very common theme. Disney (NYSE: DIS) owns 7 of these 10, which accumulated a joint total of roughly $14 billion dollars globally.
You can argue that Disney only recently acquired James Cameron’s ‘Avatar’, the ex-highest grossing movie of all time, but that still leaves the House of Mouse directly benefiting from 6 of these movies in the space of just SEVEN YEARS.
That’s a lot of cash.
2019: The year Disney broke Cinema…
With Disney’s latest blockbuster ‘Frozen II’ set to become the studio’s sixth film in 2019 to gross more than $1 billion at the box-office, this year must feel like a fairytale to CEO Bob Iger. Disney’s film segment looks set to make an unprecedented $12 billion this year following the success of ‘Frozen II’, and the newly released ‘Star Wars: The Rise of Skywalker’.
The final installment of George Lucas’ famous ‘space opera’ could well topple ‘Avengers: Endgame’ as the highest-grossing movie of all time. If that wasn’t impressive enough, Disney has also accounted for 30% of all cinema tickets sold in the U.S. in 2019 alone.
This kind of market dominance is rivaled only by the likes of Netflix (NASDAQ: NFLX) in the streaming industry. Disney is a market leader in the entertainment industry and can be considered among the most recognizable brands on the planet alongside the likes of Apple (NASDAQ: AAPL) or Nike (NASDAQ: NKE).
What does this mean?
To put this year’s cash-intake into perspective, Disney’s fiscal 2019 ended on September 30th of this year, with the company announcing a record $69.57 billion in revenue, with net income of just under $10.5 billion. Not only that, but this year was so successful that Disney movies directly helped to improve the profits of cinema chains such as IMAX (NYSE: IMAX). The cinema chain saw its stock soar on the success of ‘Avengers: Endgame’ — shot entirely with IMAX’s cameras.
Disney’s movie segment — should it take in $12 billion in 2019 — will have amounted for close to 16% of 2019’s revenue. This is the company’s second-largest revenue stream after the Parks, experiences and products segment that contributed $26.23 billion in 2018.
However, Disney’s parks are largely built around the themes of its movies. Only this year, the Star Wars-themed ‘Galaxy’s Edge’ park opened, which is set to become a premier attraction for the company, having successfully revived the Star Wars brand and opened it up to younger generations.
There may be no future plans as of yet, but who is to say there will not be an Avengers-themed park at some point? Following the success of the movies, this would be sure to rake in massive numbers of visitors every year. And it doesn’t just stop there, with so many movies in the works from studios such as Pixar, Lucasfilm, and Marvel.
How the movies will build Disney’s streaming empire
The launch of the company’s original content streaming platform, Disney+, will have left many fans wondering what it means for the future of Disney Studios. Though it is early days and there is still a lot that could go wrong, Disney+ has been mostly well-received.
It can already be seen that both cinema and streaming will work hand in hand. Just look at the situation with Marvel Studios — the next phase of movies was announced side-by-side with original content to stream from Disney+. The two segments will look to bounce viewers from one to the other in a symbiotic, cross-platform universe. Whether it is in the cinema or in your living room, Disney will bring you its universe.
Of course, creating a streaming service is hard — and not just because of rivals in the form of media giants such as Netflix, Amazon (NASDAQ: AMZN), Time Warner’s (NYSE: TWX) HBO, and Comcast (NASDAQ: CMCSA) subsidiary, NBC Peacock.
Disney+ is not expected to make a profit until 2024, and by this time the company expects to have 90 million subscribers, generating $630 million in monthly revenue or $2 billion quarterly. In that time, Disney plans to spend $2 billion on original content creation. In the grand scheme of things, this will amount to less than 20% of its 2019 cinema haul.
In conclusion, Disney’s success on the big screen may well hold the key to the company’s future success on the small screen. That would make Disney’s movie business very important indeed.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.