Star Wars Battlefront 2 Helps Boost Disney’s Quarterly Results
Disney released its first quarter results today, showing that the major merchandise side, the Consumer Products & Interactive Media dropped by 2%. With the video game, Star Wars Battlefront 2 making up a shortfall in other areas.
Merchandise sales at the Disney Theme Parks were also up. While the home video market was down due to Cars 3 not being as popular as Finding Dory, from the previous year.
Disney CEO Bob Iger also stated during an investors call that Star Wars was the number one toy franchise over the holiday season.
Here are some of the official details:
Parks and Resorts
Parks and Resorts revenues for the quarter increased 13% to $5.2 billion and segment operating income increased 21% to $1.3 billion. Operating income growth for the quarter was due to increases at our domestic parks and resorts, cruise line and vacation club businesses as well as at Disneyland Paris.
Domestic results benefited from the comparison to the impact of Hurricane Matthew, which occurred in the prior-year quarter. Higher operating income at our domestic parks and resorts was driven by guest spending growth and an increase in attendance, partially offset by higher costs. Guest spending growth was due to higher average ticket prices, food, beverage and merchandise spending and average daily hotel room rates.
The increase in costs was driven by labor and other cost inflation, expenses for new guest offerings and an increase in depreciation associated with new attractions. At our cruise line, growth was primarily due to higher passenger cruise days, which reflected the impact of the Disney Wonder dry-dock in the prior-year quarter. The increase at Disney Vacation Club was driven by sales at Copper Creek Villas & Cabins in the current quarter. Growth at Disneyland Paris reflected higher attendance and increased average ticket prices, both of which benefited from the 25th Anniversary celebration.
Studio Entertainment Studio Entertainment
Studio Entertainment Studio Entertainment revenues for the quarter were relatively flat at $2.5 billion and segment operating income decreased 2% to $829 million as an increase in theatrical distribution results was more than offset by decreases in home entertainment and TV/SVOD distribution results as well as lower income from Consumer Products & Interactive Media segment revenue share.
The increase in theatrical distribution results reflected the success of Star Wars: The Last Jedi and Thor: Ragnarok in the current quarter compared to Rogue One: A Star Wars Story and Doctor Strange in the prior-year quarter. Other significant releases in the current quarter included Coco, while the prior-year quarter included Moana.
The decrease in home entertainment results was driven by lower unit sales reflecting the performance of Cars 3 in the current quarter compared to Finding Dory in the prior-year quarter.
Lower TV/SVOD distribution results were primarily due to a decrease from pay television driven by the domestic availability of two key titles in the prior-year quarter compared to one key title in the current quarter. The prior-year quarter included Captain America: Civil War and Jungle Book, while the current quarter included Guardians of the Galaxy Vol. 2.
Consumer Products & Interactive Media
Consumer Products & Interactive Media revenues for the quarter decreased 2% to $1.5 billion and segment operating income decreased 4% to $617 million. Lower operating income was due to decreases at our merchandise licensing and retail businesses, partially offset by an increase at our games business.
The decrease at merchandise licensing was due to unfavorable timing of minimum guarantee shortfall recognition and lower licensing revenues from merchandise based on Frozen and Finding Nemo/Dory, partially offset by increases from merchandise based on Cars and Star Wars. Star Wars licensing revenue included the recognition of revenue from merchandise based on Star Wars: The Last Jedi that was deferred in the fourth quarter of fiscal 2017.
Minimum guarantee shortfalls are generally recognized at the end of the contract period. For contracts that ended on December 31, minimum guarantee shortfalls were recognized in the prior-year first quarter compared to the second quarter of the current year. Lower results at our retail business were due to an unfavorable foreign currency impact.
The increase at our games business was due to licensing revenue from Star Wars Battlefront II, which was released in the current quarter, whereas there was no comparable release in the prior-year quarter
My Take: Looking at these details, Disney did have a good quarter, with most divisions bringing in more money than they had done in the same quarter in the previous year. Each quarter can be very different, especially when huge franchises like Frozen or Star Wars are involved.
It’s interesting to see Star Wars Battlefront 2 being named as a big help to their numbers, but again, there wasn’t any major new video game out in the quarter the previous year. This year we have more big major titles like Spider-Man and Kingdom Hearts 3 to boost numbers.
If a movie doesn’t do as well at the box office like Cars 3, it will continue to struggle on home video, but obviously major titles like Star Wars: The Last Jedi will help bring up the overall number due to its impact on merchandise and ticket sales.