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Epic Economist, 10/29/23
"Disney Is Seriously Struggling Right
Now As Business Faces Massive Failures"
"Disney is on track to be the first studio to collapse amid unprecedented financial problems, a new report reveals. The mammoth entertainment company just turned 100, and investors are worried it’s starting to show its age. Nearly all segments of the business are underperforming right now, with box-office results going from bad to worse, while its unprofitable streaming platform continues to weigh on balance sheets, and its park division is seeing increasingly fewer customers this year. That’s why the Walt Disney Company is being forced to take some extreme measures to put the brand back on its feet. However, analysts argue that some operational damages are just too profound. They say Disney is falling behind its major competitors, and that bankruptcy is not out of the question.
Third-quarter results showed that the turnaround plan didn’t stop the bleeding – at least, not yet. Over the past three months, Disney’s adjusted earnings declined by 9% year over year, pressured by lower enterprise ad spending and losses in its streaming business. Right now, Disney+ is being called a “money pit” by shareholders. The costs to produce and compete against rivals like Netflix and HBO are extremely high. And even after raising subscription prices, the business doesn’t generate enough revenue to cover production costs, meaning that Disney is currently operating its streaming service at a loss.
The company’s latest report exposes that Disney’s direct-to-consumer segment (which includes Disney+) incurred an operating loss of $512 million. Over the past 12 months, the segment suffered a staggering $1.1 billion loss.
Cooling demand is also impacting Disney’s most successful business. Attendance at Disney parks is falling rapidly. “The parks have become much more expensive with complexities,” stressed Len Testa, who runs the website Touring Plans, which harvested ride data to estimate that attendance is down by 15% this year. “The average guest is spending more, and cutting back the length of stay.”
According to journalist and writer at Medium.com Christopher Cornish, the downfall of Disney’s park business is a sign of a much more serious problem. “We are witnessing what appears to be the collapse of a titan of the entertainment industry into something much less dominant,” Cornish wrote. The second largest segment of the Wall Street Company is studio productions, but both superfans and shareholders are noticing a decline in product quality, as dozens of recent releases registered disappointing box-office results. In fact, Disney is on track to be the first studio to collapse amid box-office bombs.
Big names in Hollywood, including Steven Spielberg, have been raising alarm about the inevitable collapse of the film industry as budgets soar even higher. Dozens of films slated for a 2024 release have already been delayed due to the ongoing actors' and writers' strikes. Variety estimates that the delays on those productions cost Disney studios as much as $2 million a month. As the strikes continue, the entertainment corporation is set to lose even more money.
A recession will further dampen the outlook for 2024, and exacerbate the risks the corporation is facing. There are too many things that need to be fixed, and too little time before something breaks. Unfortunately, this might be the beginning of the end for Disney. The worst is likely ahead, so we should pay very close attention to what happens next."
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