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Disney Q1 2019 Earnings

Earlier today Disney released their Q1 2019 numbers. Disney’s fiscal year begins at the end of September, so their Q1 2019 numbers are actually for the 2018 holiday season. I will just make this quick, no detailed charts etc since Hasbro is due to release their numbers this Friday and I will go more in depth here. Star Wars was brought up in the Disney earnings report and please click through for the details. And yes, it’s always the darkest just before dawn.

Rey in The Last Jedi

Rey’s tears have not run dry yet

So, without much further ado let’s jump right to Disney’s comments about Star Wars:

Lower income from licensing activities was driven by a decrease in revenue from products based on Star Wars and Cars and higher third-party royalty expense, partially offset by an increase from minimum guarantee shortfall recognition, higher revenues from products based on Spider-Man and an increase in licensee settlements.

So in the last three months of 2018 (remember that Disney’s 2018 fiscal year ended on September 30th 2018!) Star Wars revenue declined some more. Spider-Man had a massively successful Playstation game in 2018 which made Disney very happy, it seems.

Disney’s elaborated on Star Wars a bit in their earnings call:

Lower operating income for merchandise licensing primarily reflects strong sales of “Star Wars” and “Cars” merchandise in the first quarter last year. The theatrical success of “Star Wars: The Last Jedi” in Q1 last year was a key driver to licensing results. So, the absence of a comparable franchise title in Q1 this year created a meaningful headwind to our licensing results. These results were partially offset by higher minimum guarantee revenue due to the adoption of the new revenue recognition standards.

Well, my comment to that is that Star Wars merchandise sales for The Last Jedi were weaker than a year before already. But it’s obvious that merchandise sales for the 2018 holiday season, without any new Star Wars movie, would always be worse than in the previous holiday season.

Hasbro will release their numbers on Friday but Disney’s earnings already anticipate what Hasbro will most likely tell us: partner brands revenue will be down, Marvel and Beyblade will have shown growth, but Star Wars sales will be down, by a lot. With no Force Friday and no movie in December to push sales and Solo already a distant memory very weak Star Wars toy sales are guaranteed.

I suppose Bob Iger’s decision to give Mary Poppins the December slot instead of Solo hurt not only Disney, but also Hasbro quite a lot. In my opinion Solo would have fared better at the box office in December, the toyline would have not collapsed around the holiday season and overall both Disney and Hasbro would have made more money. Especially given the fact that Mary Poppins is a flop at the box office.

On a related note, Bob Iger briefly touched upon video games, this is what he had to say about games:

We’ve had good relationships with some of those we’re licensing to, notably EA and the relationship on the “Star Wars” properties. We’re going to continue to stay on that side of the business and put our capital elsewhere.

So despite EA being one of the most hated game publishers in existence and the lootbox controversy surrounding Battlefront II resulting in disappointing sales, it appears Disney will stick with them, the license will only expire in 2023 anyway, so maybe there’s not much choice here. Iger said that Disney will not self-publish Star Wars games, since Disney is not very good at it.

Anyway, that’s all for today! Expect more on Friday! The numbers will not be pretty, but 2019 can and hopefully will bring the turnaround again, with Episode IX in December and maybe a toyline for the Mandalorian, at least a few figures from the show for TVC and Black Series, things can only get better again.

Sources:
Disney’s Q1 earnings
Earnings Call transcript

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