Where Disney Makes Money

Key Concepts:

• Experiences Business
• Operating Income
• Direct-to-Consumer (DTC) Business
• Streaming
• Cruise Lines
• Park Expansions

Disney's Core Business: The Experiences Segment

The primary focus of the discussion revolves around Disney's "experiences business," which is identified as the core reason for investing in the company's stock. This segment is described as a "phenomenal business" and is projected to continue its growth trajectory.

• Financial Significance: Approximately two-thirds of Disney's operating income is generated from its experiences business.
• Annual Revenue: This segment brings in $10 billion annually.
• Growth Projections: The experiences business is expected to grow "well into double digits."
• Recent Performance: Operating income for this segment grew by 13% in the most recent quarter.

Growth Drivers for the Experiences Business

Several initiatives are contributing to the expansion and anticipated growth of Disney's experiences segment:

• Cruise Lines: Disney is adding two more cruise lines to its existing fleet.
• Park Expansions: There are ongoing expansions at every single one of Disney's parks globally.

Resilience and Competitive Advantage

The experiences business is highlighted as a significant fallback for Disney, providing stability regardless of performance in other areas like movie theaters, linear TV, or streaming.

• Replication Difficulty: This business model is considered difficult for Disney's media rivals to replicate.
• Strategic Importance: It serves as the "core" of Disney's operations, with other ventures (movies, TV, streaming) considered "pure upside."

Other Business Segments

While the experiences business is the central theme, other aspects of Disney's operations are acknowledged:

• Movie Production: The question of Disney's ability to produce "really good movies" is raised.
• ESPN: The status of ESPN is mentioned.
• Direct-to-Consumer (DTC) / Streaming: The performance and strategy of Disney's DTC and streaming businesses are also part of the broader discussion.

Conclusion

The overarching takeaway is that Disney's experiences business is its most robust and defensible asset, generating substantial operating income and poised for continued growth through strategic investments in cruise lines and park expansions. This segment provides a strong foundation for the company, making it an attractive investment even with uncertainties in its media and entertainment divisions.