The Walt Disney Company just reported its fiscal earnings for the second quarter of 2022.
This legally required earnings call happened in the wake of the state of Florida super-kicking Disney through a glass window Shawn Michaels style.
Simultaneously, venture capitalists and other business experts are telling everyone who will listen that the market will be crazy for a while.
So, fans express continued frustration over the high cost of Disney theme parks.
With so many concerns in place, it’s fair to ask. How should Disney approach the rest of the year?
What about the Money Matters Disney Can Control?
Disney spent the past few days clarifying its intent about money matters.
The company’s Chief Financial Officer bragged about the strength of Disney’s balance sheet. Now, that’s her job and the single most important thing in her life.
So, we’ll forgive her for coming across a bit braggy about how well Disney has persevered during the pandemic.
Still, the one unmistakable truth here is that Disney has just weathered a hundred-years storm. It was legitimately the worst crisis the company had faced since opening in 1923.
The pandemic wrecked Disney’s revenue projections for two years and will have ripple effects for at least another year.
To the company’s credit, it pivoted to a new business model, the one Wall Street preferred.
The early results of this decision have proven quite positive. Disney has turned into a legitimate rival for Netflix, a company with a 10-year head start in streaming.
We’ll discuss in the final section how the parks have suffered a bit from these events. Even so, Disney and its CFO/CEO deserve a lot of credit.
A less financially viable company could have collapsed during the pandemic. I mean, many did.
Somehow, Disney has come out on the other side with the prospect of record revenue for its fiscal 2022.
As a reminder, the pandemic wasn’t over for part of that time. For example, Shanghai Disneyland remains closed as I type this.
Alright, Disney can do even better (!) with its future earnings. This aspect matters the most for a business.
Disney appears well-positioned to excel during the final months of 2022 and well beyond that. It’s a sleeping giant only recently showing signs of stirring.
What about the Money Matters beyond Disney’s Control?
All the positives that I just stated come with a massive caveat, though.
Disney cannot control what happens elsewhere, and that’s a potential problem.
Venture capitalists believe that the economic bubble is finally ready to burst after 13 years of prosperity.
Economic policies put in place by the 44thth POTUS after the events of the market crash of 2008 have proven remarkably effective.
Sadly, international events and the pandemic have created unavoidable issues that have ripple effects around the world.
When the world market punished Russia for its invasion of the Ukraine, one of the most powerful economies in the world cratered overnight.
All the people who did business with Russia are facing the ramifications of that. They thought they had revenue and future contracts that no longer exist.
Disney has indicated that two percent of its revenue came from Russia. That may not sound like a lot, but would you like to give up two percent of your salary?
Now consider that question if you did absolutely nothing wrong but your company screwed up instead. It’s maddening, right?
Meanwhile, supply chain issues have driven all of us crazy. I can’t get a garage door for my new house (I swear this is a thing.)
That’s a trifle compared to the stress many new parents are facing due to baby formula shortages.
The 46thth POTUS just had to invoke the Defense Production Act to address the matter.
At Disney, the aggravations veer wildly between small and large. Restaurants and shops lack the needed items to satisfy customers.
Guests lament that their favorite menu items aren’t available, but there’s nothing Disney can do.
Meanwhile, DIS stock is unlikely to move much until the market settles. That could take a year.
What about the Political Hot Potato?
Part of the reason why the market may not settle is that we’re facing a flashpoint mid-term election.
America utilizes a two-party system, and one party believes that inflation will help it make gains in Congress.
As crazy as this sounds, they’re incentivized to stagnate the economy through November.
So, Disney has found itself in the odd position of playing defense. Some ambitious politicians have taken this opportunity to attack Mickey Mouse.
Florida, a 50-year ally of Disney, just voted to dissolve the Reedy Creek Improvement District. It was both a stunning assault and totally predictable.
Disney has tried to stay out of politics, as CEO Bob Chapek believes that’s the best strategy. He learned the hard way that it’s a functional impossibility.
First, Disney employees took offense at the so-called Don’t Say Gay bill and expressed their displeasure.
When Chapek responded too late in supporting their stance, he angry local politicians, many of whom Disney had financially supported.
For now, Disney has announced it won’t provide political donations to anyone. But it’s also in a challenging position.
Politicians on one side of the aisle will continue to attack Disney because they can score political points by doing so.
Conversely, the other side will ask why Disney isn’t taking a stronger stance about issues everyone knows the company supports.
Disney’s hope for the rest of 2022 is to stay low and ignore criticism as much as possible. How viable is that strategy? Honestly, not very.
You can only turn the other cheek twice before you run out of cheeks.
If politicians keep sucker-punching Disney, its leadership must defend the brand. And that’s gonna be messy.
What about the Angry Fans?
I don’t mean to paint a grim picture here because I’m an optimist by nature. I suspect that most Disney fans are.
Still, the only positive circumstance for Disney right now is its earnings potential. Everything I’m discussing here could get much worse before it gets better.
The thing about the internet is that everyone has hot takes. I once argued that Greg Oden would be a much better basketball player than Kevin Durant, presuming good health.
I’ve taken a beating because he didn’t have good health. People tend to remember only the parts of bad takes that fit their argument at the time.
To wit, Disney cynics swore that Star Wars: Galactic Starcruiser and Disney Genie+ would both fail. The hotel has sold out for months in advance.
The FastPass replacement has performed so well that Disney had to nerf the rules to prevent everyone from buying it.
Seriously, the one question that nobody at Disney thought to ask was, “What if Disney Genie+ proves too popular?” That’s precisely what happened, though.
These successes come at a high cost, though, figuratively and literally. Disney is earning much more money per park guest now.
Unfortunately, many of these customers aren’t happy about it, though. Disney cost less money not that long ago.
Are the prices increasing dramatically? Honestly, no.
I write about this from time to time, and Disney’s usually not that far beyond inflation with its price increases.
Do critics care? Of course not. They know what’s in their wallets, and they want the least expensive Disney trip possible.
How does Disney fix this in 2022? I honestly don’t think it can. The company’s finances required this move, as did pandemic-related inflation.
Disney and its fans have witnessed the cost of business increase. And we’re all grumpy about it.
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Feature Photo: Disney