How Disney Makes Money: Media Networks and Studio Entertainment

The Walt Disney Co. (DIS) is a diversified global entertainment company that operates theme parks, resorts, a cruise line, broadcast TV networks, and related products. The company also produces live entertainment events, and produces and streams a broad array of film and TV entertainment content through its new digital-content streaming services.

Disney faces an unusually large number of competitors including: ViacomCBS Inc. (VIAC), Comcast Corp. (CMCSA), Sony Corp. (SNE), AT&T Inc. (T), Netflix Inc. (NFLX), Apple Inc. (AAPL), and Amazon.com Inc. (AMZN); and smaller niche rivals including theme park and resort companies Six Flags Entertainment Corp. (SIX), SeaWorld Entertainment Inc. (SEAS), and Hilton Worldwide Holdings Inc. (HLT).

Key Takeaways

Disney is a diversified global entertainment company that operates theme parks, resorts, broadcast networks and streams TV shows and movies.
Disney’s Media Networks currently generates the most revenue and profits as its Parks, Experiences and Products business has been hit hard by COVID-19
Most of Disney’s theme parks and resorts were closed during its fiscal third quarter but some have since re-opened.
Paid subscribers of Disney+ have risen to 57.5 million since the streaming service was first launched in November 2019.

Disney’s Financials

The COVID-19 pandemic has had a major impact on Disney’s financial recent financial results. The company posted a net loss of $4.5 billion in Q3 of its 2020 fiscal year (FY), the three-month period that ended June 27, 2020. It was a significant change from the $2.0 billion in net income reported in the same quarter a year ago. Revenue for the quarter fell 41.9% to $11.8 billion.

Disney said that the adverse impact of the pandemic during its third quarter was mostly felt in its Parks, Experiences and Products segment. Most of the company’s theme parks and resorts were closed for the entire quarter while cruise ship sailings and guided tours were suspended. Disney’s merchandise licensing business and advertising sales were also negatively impacted, and the company has had to delay, shorten, or cancel theatrical releases and stage play performances.

Disney’s Business Segments

Disney operates through four primary business segments: Media Networks; Parks, Experiences and Products; Studio Entertainment; and Direct-to-Consumer & International. The company breaks out revenue and operating income for each segment. The pie charts above do not include segments with operating losses, such as Disney’s Parks, Experiences and Products and Direct-to-Consumer & International businesses.

Media Networks

Disney’s Media Networks segment operates a long list of properties, including: cable networks such as Disney, ESPN, Freeform, FX, and National Geographic; ABC broadcast television network and eight domestic television stations; production and distribution; and National Geographic magazines. The segment’s revenue comes from affiliate fees, advertising, as well as licensing fees and other revenue. The Media Networks segment posted revenue of $6.6 billion in Q3 FY 2020, down 2.2% compared to the same three-month period a year ago. Operating income rose 47.6% to $3.2 billion. The segment accounts for about 50% of total revenue and 83% of total operating income.

Parks, Experiences and Products

Disney’s Parks, Experiences and Products segment is comprised of theme parks and resorts in Florida, California, Hawaii, and Paris, as well as ownership interests in resorts in Hong Kong and Shanghai. It also includes a cruise line and vacation club. Revenue comes mainly from selling theme park admissions, food, beverages, and resort and vacation stays. The Parks, Experiences and Products segment reported revenue of $983 million, or 7% of total revenue, in Q3 FY 2020. Revenue plunged 85.0% compared to the year-ago quarter. The segment posted an operating loss of $2.0 billion, a significant change from the $1.7 billion of operating income reported in the same quarter a year ago.

Studio Entertainment

Disney’s Studio Entertainment segment is engaged in motion picture production and distribution through the Walt Disney Pictures, Twentieth Century Fox, Marvel, Lucasfilm, Pixar, and other companies. The segment also produces and distributes live entertainment and music, among other activities. Revenue comes from licensing motion pictures to theaters; sale of motion pictures in DVD, Blu-ray, and other formats; and licensing fees, stage play ticket sales, and post-production services. Studio Entertainment posted revenue of $1.7 billion in Q3 FY 2020, down 54.7% compared to the year-ago quarter. Operating income fell 15.7% to $668 million. The segment accounts for about 13% of Disney’s total revenue and about 17% of its total operating income.

Direct-to-Consumer & International

Disney’s Direct-to-Consumer & International segment includes branded international TV networks and channels such as Disney, ESPN, Fox, National Geographic, and Star; its new direct-to-consumer streaming service, named Disney+, and also ESPN+, Hotstar, and Hulu. The segment’s revenue includes advertising, affiliate fees, and subscription fees. Revenue for the segment was $4.0 billion in Q3 FY 2020, comprising about 30% of total the total. Revenue grew 2.4% compared to the same three-month period a year ago. The segment posted an operating loss of $706 million, $144 million bigger than the operating loss reported in the year-ago quarter.

A note to readers that the segment revenue and operating-income figures in the breakdowns above and in the pie charts do include inter-segment transactions.

Disney’s Recent Developments

Disney indicated in its press release for its Q3 FY 2020 results that Disney+ has reached 57.5 million paid subscribers as of June 27, 2020. The direct-to-consumer online streaming service was first launched in November 2019. Disney also said that some of its theme parks and resorts that were closed during the quarter have re-opened.

How Disney Reports Diversity & Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Disney and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Disney releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.

Below is a table of potential diversity measurements. It shows whether Disney discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Disney breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.