Disney Q4 Home Entertainment Revenue Declined Due to Fewer Releases, Lower Unit Prices

Disney’s sales/licensing of movies and TV shows across multiple channels, including packaged media, decreased 15% to $1.7 billion in the fourth quarter (ended Oct. 1), from $2 billion in the previous-year period. The segment’s operating loss increased $113 million to a loss of $178 million, from a loss of $65 million in the prior year loss.

The decrease in operating results was due to lower TV/SVOD and home entertainment distribution results, partially offset by higher theatrical distribution results and an increase at its stage play business, as stage play productions were generally shut down in the prior-year quarter due to COVID-19.

The decrease in TV/SVOD distribution results was due to lower sales volumes of film and episodic content in the current quarter and current quarter impairments of episodic content produced for third-party networks. Lower sales volumes included the impact of the shift from licensing content to third parties to distributing it on DTC services.

The decrease in home entertainment results was due to lower unit sales and a decrease in average net effective pricing of catalog and new-release titles. The decrease in unit sales of new-release titles was due to fewer titles available for release in the quarter. The increase in theatrical distribution results reflected the box office performance of Thor: Love and Thunder in the current quarter, compared with titles released in the prior-year quarter, which included Black Widow, Free Guy, Shang-Chi and the Legend of the Ten Rings and Jungle Cruise.

The home entertainment division’s top-selling packaged-media release in 2022 remains the animated musical Encanto.

Disney Content Sales/Licensing Posts Q3 Loss, Despite 26% Revenue Gain

The Walt Disney Co. on Aug. 10 said revenue in its “content sales/licensing and other” business segment increased 26% in the third quarter (ended July 2) to $2.1 billion from $1.66 billion in the previous-year period. The segment, which includes home entertainment, saw operating income of $132 million in the previous-year period reverse to a loss of $27 million this year.

The decrease in operating results was due to an unfavorable foreign exchange impact and lower TV/SVOD and home entertainment distribution results. These decreases were partially offset by an increase in Disney’s stage play business, as productions were generally shut down in the prior-year quarter due to COVID-19, and higher theatrical distribution results.
The decrease in TV/SVOD distribution results was due to a decrease in sales of theatrical film content primarily due to a shift from licensing content to third parties to distribution on Disney’s direct-to-consumer services.

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The decrease in home entertainment results was due to lower unit sales of catalog titles. The increase in theatrical distribution results was due to the strong performance of Doctor Strange in the Multiverse of Madness in the current quarter compared with Cruella in the prior-year quarter. Current quarter releases also included Pixar Animation’s Lightyear and The Bob’s Burgers Movie.

Disney’s top-selling packaged-media release through July 2 was the animated Encanto. Disney’s top box office release with more than $1 billion in ticket sales, Doctor Strange in the Multiverse, was released into packaged-media retail channels on July 26. Marvel Studios’ Thor: Love and Thunder has topped $704 million at the global box office to become the highest-grossing Thor movie.

That said, Disney CFO Christine McCarthy said the home entertainment/licensing segment would see an additional revenue decline of $100 million in the current fourth quarter as the company transitions content licensing away from third-party licensees to the Disney+ and Hulu streaming platforms.

Disney Q2 Home Entertainment Revenue Slips Due to Lower Catalog Sales

The Walt Disney Company May 11 said “content sales/licensing and other” revenue, which includes packaged media and transactional VOD, declined 3% to $1.9 billion, compared with $1.84 billion in revenue in the prior-year period. Segment operating income plummeted almost 95% to $16 million, from $312 million a year ago. The decrease in operating income was due
to lower TV/SVOD distribution results and, to a lesser extent, a decrease at home entertainment due to lower sales of catalog titles in the current quarter.

In the prior-year period, top-selling Disney titles included Mulan and Soul, while animated musical Encanto and residual revenue from Shang-Chi and the Legend of the Ten Rings were the top-selling packaged-media titles in Q2.

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The decrease in TV/SVOD distribution results was due to a decrease in sales of episodic television content driven by higher sales of “Modern Family” and “How I Met Your Mother” in the prior-year quarter.

Speaking on the May 11 fiscal call, CFO Christine McCarthy said the decline in home entertainment revenue included management’s “strategic decision” to re-direct Disney titles to direct-to-consumer streaming channels, rather than legacy retail channels.

“As a reminder, these results are deliberately aligned with our decision to utilize our content on our own direct-to-consumer services,” McCarthy said.