Disney Starts Its New Journey
By Vivek Couto
A new dawn. “The pre-eminent global entertainment company,” in chairman & CEO Bob Iger’s words, embarked on a new journey March 20 following the full closing of its US$71 bil. acquisition of 21CF. Bolstered by its acquisition of Fox’s entertainment assets, Disney “is well positioned to lead in an incredibly dynamic and transformative era,” Iger continued.
Now to deliver on that promise. Over the next two quarters, Disney will financially consolidate Fox domestic and international assets to create the world’s biggest entertainment company by revenue. The new Disney is on course to generate US$85-90 bil. across media, theme parks and consumer products in its first full year of consolidation through FYE Sept. 2020.
The company’s core media business across Asia Pacific & Middle East, now under the leadership of chairman Uday Shankar, generated pro forma revenues of ~US$6 bil. in 2018. India contributed 40% to the top-line, with Greater China and Japan together providing another ~35%, according to MPA. Our analysis includes Star India’s large local business as well as theatrical, licensing and branded TV networks across the region from Disney and Fox. We exclude Disney’s consumer products business and theme parks.
An OTT future. In India, Hotstar has also developed a formidable sports and local entertainment-based OTT with an estimated US$300 mil. in run rate revenues. Now Disney will be looking to develop similar local platforms in Southeast Asia and North Asia, anchored to local content, while maintaining Hotstar’s trajectory at home. Disney may also commence roll-out for its upcoming SVOD offering Disney+ in APAC, staring with Australia and Japan.
Details of Disney’s D2C strategy, led by Kevin Mayer alongside international, will become more apparent after an Investor Day on April 11. Consolidating Fox also gives Disney another 30% in US streaming service Hulu, giving Disney majority ownership with a 60% stake.
Meanwhile, pressure on earnings will likely intensify over the next two to three years, challenging Disney’s strong track record of free cash generation. Disney management had flagged up US$2 bil. in cost synergies over two years when first announcing the planned Fox acquisition back in Dec. 2017.
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