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Can Walt Disney really hit US$100bn revenue by 2024?


Highlights:

  • Over the past 9 years, Disney saw a 5% CAGR revenue growth
  • Streaming platform Disney+ comprises new growth engine
  • Fast recovery of theme parks could drive revenue rebound


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How Walt Disney actually makes money

Overview of revenue over past 3-years

  • Media and Entrainment remains main revenue contributor
  • Park & Experience segment was heavily impacted by the pandemic

Disney’s revenue continuously increased, but not exploded

  • In the past 9 years, revenue grew at a solid CAGR of 5.3%
  • The company survived the pandemic well thanks to its new streaming platform Disney+
    • Revenue from streaming subscriptions partly offset the severe drop from its Park and Experience segment

But, past growth would not be enough to achieve US$100bn revenue

  • If we were to assume that Disney continues its stable growth rate of 5.3%, then we would end up at US$79 revenue in 2024
    • If we were to assume that Disney continues its stable growth rate of 5.3%, then we would end up at US$79 revenue in 2024

However, analyst consensus expect much higher growth

  • Analysts expects Disney revenue to grow at 14.8% CAGR over the next 3 years
    • This would result in US$102m revenue by 2024

Revenue forecast for Disney

  • Rising costs for affiliate content and advertising should benefit Disney’s top revenue contributor
  • Theater licensing could see a strong rebound as pandemic measures are lifted

Streaming platform Disney+ could be the main growth engine

  • Within 2 years, Disney+ contributed US$12bn in revenue, which is around 40% of Netflix’s revenue
  • As a comparison, Netflix started streaming services in 2007 and needed 10 years to get to US12bn in sales

Business model relies on economies of scale

  • To increase revenue, streaming providers must focus on increasing quantity
    • Given the intense competition, it is difficult to raise prices
  • As of 2021, Netflix has over 200m subscribers compared to Disney + with 118m

Let’s assume Disney can grow to Netflix level in 3 years

  • Disney+ would need to add another 100m subscribers in 3 years
  • If the company can do so, it could generate around US$30bn in annual revenue

How I incorporate the story into my forecast

  • Its streaming platform Disney+ is the main growth driver
  • Reaching 220m subscribers by 2024 does not seem unrealistic

Parks and Experience segment could see a strong rebound

  • In total, the company operates 12 amusement parks under the Disneyland brand
    • Florida, California, Tokyo, Hong Kong, Shanghai, and Paris
  • In 2021, it reopened all locations
    • Only Chinese locations face frequent temporary shutdowns
    • This could delay full recovery

Revenue forecast

  • Within 3 years from now, this segment should have recovered fully from COVID-19 shock

  • The company could indeed reach US$100bn revenue in 2024

Conclusions

  • We imposed two main assumptions
    • Full recovery of amusement parks, hotels, and merchandise revenue by 2024
    • Disney+ reaches more than 200m subscribers  by 2024 which is roughly equivalent to current Netflix subscribers
  • Under these assumptions, the US$100bn mark is possible

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