Surprising Twist: Disney’s Cash Cow Continues to Boom While Guest Satisfaction Hits Rock Bottom – What’s Disney Hiding?

in Disney, Disney Parks

Disney's Mickey Mouse in front of a castle, holding a bag with a dollar sign and a sign reading "be our guest.

Credit: Inside The Magic

Walt Disney World reported its Q2 earnings for 2024, showing a shocking revelation amid guest experience plummeting across its parks in California and Orlando.

Disney CEO Bob Iger posing with Mickey Mouse in front of a sunny, palm-lined Walt Disney Company building.
Image Credit: Inside The Magic

Disney Shows Promising Future Amid Guests Paying More and Having To Deal with Terrible Service

The Walt Disney Company (DIS) reported second-quarter fiscal 2024 adjusted earnings of $1.21 per share, surpassing the Zacks Consensus Estimate by 8.04% and marking a 30.1% increase yearly. Despite a 1.2% year-over-year increase in revenues to $22.08 billion, missing the consensus mark by 0.23%, Disney has experienced a notable surge in its stock, with shares gaining 16.7% year to date, contrary to the broader decline of 2.8% in the Zacks Consumer Discretionary sector. Media and Entertainment Distribution revenues, constituting 44.4% of total revenues, declined by 5% yearly to $9.79 billion.

Linear Networks witnessed a 7.8% decrease in revenues to $2.76 billion, while Direct-to-Consumer revenues increased by 13.2% year over year to $5.64 billion. Conversely, content sales/licensing and other revenues plummeted by 40.3% year over year to $1.38 billion. Parks, Experiences, and Products revenues, accounting for 38% of total revenues, rose by 9.8% year over year to $8.39 billion, with domestic revenues reaching $5.95 billion, up 6.9% year over year, and international revenues surging by 28.5% year over year to $1.52 billion.

Disney+, the company’s streaming platform, boasted 117.6 million paid subscribers as of March 31, 2024, compared with 111.3 million at the end of the previous quarter. Despite this growth, Disney+’s average monthly revenue per paid subscriber for Disney+ domestically decreased slightly from $8.15 to $8. At the same time, internationally, it increased from $5.91 to $6.66, excluding Disney+ Hotstar, which saw a decline from $1.28 to 70 cents. Hulu, another streaming service under Disney, ended the quarter with 50.2 million paid subscribers, up from 49.7 million in the previous quarter.

Bob Iger and Mickey Mouse with bags of cash in front of the Walt Disney Company building.
Credit: Inside The Magic

Higher Prices Mean Better Pay for the House of Mouse

The average monthly revenue per paid subscriber for Hulu SVOD Only decreased from $12.29 to $11.84, while Hulu Live TV + SVOD increased from $93.61 to $95.01. The income for Media and Entertainment Distribution surged 71.6% year over year to $781 million, while Linear Networks witnessed a 21.6% decrease in operating income to $752 million. Direct-to-consumer recorded an operating income of $47 million, contrasting with the year-ago quarter’s loss of $587 million, driven by a rise in subscription revenues.

Parks, Experiences, and Products’ operating income rose by 12.3% year over year to $2.28 billion, with the Domestic segment reporting an operating income of $1.6 billion, up 5.9% year over year, and the International segment reporting an operating income of $292 million, up 87.2% year over year. Consumer Products’ operating profit increased by 7.2% yearly to $387 million. As of March 31, 2024, cash and cash equivalents stood at $6.635 billion, compared with $7.19 billion as of December 31, 2023.

Total borrowings decreased from $47.68 billion to $39.51 billion over the same period. Disney expects robust operating income growth at Experiences for the entire year, with fiscal third-quarter operating income projected to be comparable to the prior year. The company anticipates meeting or exceeding the $7.5 billion annualized savings target by the end of fiscal 2024.

Mickey Mouse in front of the Disneyland Resort castle in California in black and white
Credit: Inside The Magic

What Does This Mean for Disney? For the Dwindling Guest Experience?

Disney expects full-year fiscal 2024 earnings per share (EPS), excluding certain items, to increase by at least 25% from fiscal 2023, with free cash flow generation expected to reach roughly $8 billion. The company forecasts that the combined streaming businesses will achieve profitability in the fourth quarter of fiscal 2024. Disney currently carries a Zacks Rank #3 (Hold). For investors seeking opportunities in the Consumer Discretionary sector, stocks like Roblox (RBLX), SharkNinja, Inc. (SN), and Take-Two Interactive Software (TTWO) hold promise, each carrying a Zacks Rank #2 (Buy) at present.

The financial report suggests a mixed picture for The Walt Disney Company and its theme parks, particularly regarding guest experience. While the company has seen significant growth in its revenues and earnings, the decline in guest experience could pose challenges. The decrease in guest experience may be attributed to various factors such as operational changes, staffing issues, or dissatisfaction with the overall park experience.

For Disney, ensuring a high-quality guest experience is crucial for maintaining customer satisfaction, loyalty, and continued revenue growth. A decline in guest experience could potentially lead to negative consequences for Disney Parks, including reduced visitor numbers, lower guest spending, and damage to the company’s reputation. It may also impact future bookings and deter potential guests from visiting the parks, affecting long-term financial performance.

Walt Disney Company CEO Bob Iger in front of Cinderella Castle
Credit: Inside the Magic

Do Better for the Sake of the Guests!

To address these challenges, Disney may need to improve various aspects of the park experience, such as customer service, cleanliness, ride maintenance, and overall atmosphere. Investing in staff training, infrastructure upgrades, and innovative attractions could help enhance guest satisfaction and mitigate the impact of declining guest experience on the company’s overall performance. The financial report presents several opportunities for Disney World, Disneyland, and The Walt Disney Company to enhance guest experiences and address the challenges highlighted:

Listen to Guest Feedback: Disney should prioritize gathering guest feedback through surveys, online reviews, and direct interactions. Understanding guests’ concerns and preferences can provide valuable insights into areas needing improvement.

Invest in Staff Training: Well-trained and motivated staff are essential for delivering exceptional guest experiences. Disney should invest in comprehensive training programs to ensure that all employees understand and embody the company’s hospitality and customer service excellence values.

Three photos showing crowds at Walt Disney World Resort and other theme parks on bright, sunny summer days.
Credit: Inside The Magic

Focus on Park Maintenance: Regular maintenance and upkeep of attractions, facilities, and infrastructure are crucial for ensuring a positive guest experience. Disney should prioritize maintenance schedules and address any issues promptly to prevent disruptions or dissatisfaction among guests.

Enhance Crowd Management: Managing crowds effectively minimizes wait times, congestion, and overall frustration among guests. Disney should explore innovative solutions such as advanced reservation systems, virtual queuing, and crowd flow optimization to improve the guest experience, especially during peak seasons.

Innovate Attractions and Entertainment: Continuously refreshing and expanding attractions, shows, and entertainment offerings can keep guests engaged and excited about visiting Disney parks. Investing in new technologies, storytelling techniques, and immersive experiences can enhance the guest experience and encourage repeat visits.

A vibrant and colorful illustration of a fantastical castle with towering spires and turrets under a dramatic sunset sky, flanked by whimsical street lamps.
Credit: Disney Parks

Promote Inclusivity and Diversity: Disney should strive to create inclusive and diverse environments that welcome guests from all backgrounds and identities. Incorporating diverse perspectives into park attractions, entertainment, and cultural experiences can make guests feel represented and valued.

Sustain Environmental Initiatives: As part of its commitment to sustainability, Disney should continue implementing environmentally friendly practices and initiatives across its parks and operations. Promoting conservation efforts, reducing waste, and minimizing environmental impact can resonate positively with ecologically conscious guests and contribute to a more sustainable future.

By prioritizing these areas of improvement and actively listening to guest feedback, Disney World, Disneyland, and The Walt Disney Company can elevate the guest experience and maintain their position as premier destinations for entertainment and recreation worldwide.

A joyful child in a yellow dress leaps with excitement against a magical backdrop of Cinderella Castle at Disney World and a sky filled with sunshine and floating bubbles.
Credit: Disney Parks Blog

Brighter Days Are Ahead for Disney

As Disney continues to succeed, it gains more resources, expertise, and capabilities to invest in enhancing the guest experience across its parks and properties. With increased financial strength, Disney can allocate more outstanding funds towards innovations, expansions, and improvements that directly benefit guests. This could involve the development of new attractions, the refurbishment of existing ones, the introduction of cutting-edge technologies, and the enhancement of overall park infrastructure.

Furthermore, Disney’s success allows it to invest in sustainable practices, environmental initiatives, and community engagement efforts that benefit guests and the broader society. By prioritizing sustainability, conservation, and social responsibility, Disney demonstrates its commitment to positively impacting the environment and the communities it serves, thereby enriching the guest experience and fostering goodwill among visitors. Collaborations with renowned chefs, acclaimed artists, and popular franchises can enrich guests’ culinary, artistic, and entertainment options, enhancing their overall experience.

Additionally, as Disney’s influence and reach expand, it can forge strategic partnerships with leading companies, brands, and organizations to offer guests an even more comprehensive array of experiences and amenities. Ultimately, as Disney’s success grows, so does its ability to innovate, inspire, and delight guests worldwide. By continually raising the bar for excellence in entertainment, hospitality, and immersive storytelling, Disney ensures that each visit to its parks and properties is a memorable and magical experience for guests of all ages.

in Disney, Disney Parks

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