Shares of Walt Disney Co. (NYSE: DIS | DIS Price Prediction) have collapsed to a 52-week low. There were two reasons. The first is that the new movie, “Avatar: The Way of Water,” will not become the most successful movie in history as its 2009 predecessor was. Investors found the shortfall in ticket revenue worrisome enough to sell the stock off in another sign of despair about Disney’s future. The second reason for the anxiety is that it has become clear quickly that hero CEO Bob Iger, who helped build Disney into the most successful entertainment company in the world, does not have an ounce of magic that might turn around Disney’s crippled operations.
[in-text-ad]
The new Avatar film was supposed to have domestic ticket sales as high as $179 million, some analysis estimated. Sales weighed in at $134 million. Disney’s most steady earnings engine over the past decades has been studio revenue. This is because of the franchises it bought when it paid tens of billions of dollars for Pixar, Marvel and Star Wars. The success of movies drawn from these franchises may have peaked.
[nativounit]
Disney’s most troubling disaster is its streaming business, which lost $1.5 billion last quarter. The blame for this belongs to Iger, who underpriced Disney+ when it was launched in 2019. Disney’s solution has been to raise monthly subscription prices and even offer an ad-supported service. It remains to be seen if it sells enough advertising to compensate for the lower subscription costs. The sharp increase in the price of the traditional service has been pushed up enough to cause churn. Churn is the enemy of streaming companies. Subscribers cancel, and it is expensive to replace them.
[wallst_email_signup]
Disney has to compete with Netflix, Amazon and a small army of other streaming services. Among these is Apple, which may have the world’s strongest balance sheet of any public corporation. It also has a base of billions of iPhone, iPad and Mac owners to which it can market its streamed content.
[recirclink id=1186952]
Is the drop in Disney stock over? Most likely it is not. Disney’s next quarterly report may be as grim as the last one. And a recession could hit movie ticket sales, streaming income and visits to its massive theme parks.
Disney Falls Apart
© Goofy (CC BY-SA 2.0) by Michael Coghlan
Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
Top Gaining Stocks
Top Losing Stocks