A New Disney is Emerging: Disney's latest first-quarter results highlight a pivotal shift in its business model. Since committing to the streaming model in 2020, Disney has been positioning it as the future of their revenue and profit growth, especially as traditional linear TV succumbs to cord-cutting. This quarter, Disney’s streaming service narrowed its losses dramatically to just $18 million, down from $659 million a year earlier, and is on track to become profitable by the year's end. The service also saw a 13% increase in revenue and added 6 million new subscribers, boosting its base to nearly 120 million.
At the same time, Disney’s linear TV operations (excluding ESPN) recorded an 8% drop in revenue and a 22% fall in operating profits. This shift underscores the company's ongoing transformation and highlights the strategic decisions being made, particularly around ESPN, which is being repositioned to generate more direct revenue streams. With Disney also rebounding from a contentious proxy fight, the pressure is high to effectively leverage one of the world's most valuable intellectual property portfolios. As Disney continues to adapt and evolve, it will be interesting to see how these strategic moves play out in reshaping the entertainment giant.
The Ridesharing Analogy: This week, Uber shared some interesting insights into the current economic landscape. The company reported revenues that exceeded expectations, with both mobility and delivery bookings seeing a 20% increase year-over-year. Uber's CEO highlighted the absence of any significant softening in consumer behavior, whether in purchasing preferences or frequency. Notably, the travel sector remains robust, and despite criticisms over rising costs, food delivery continues to grow. He also pointed to strengthening corporate travel as an indicator that more people are returning to office work.
Uber's performance seems to reflect a broader economic trend: while consumers are becoming somewhat more cautious, they are still willing to invest in experiences and high-quality products that matter to them. Despite a positive earnings report, Uber's stock experienced a downturn, largely due to write-downs of some equity holdings during the quarter. However, with a strong management team at the helm, Uber's story remains compelling and indicative of its resilience in the face of economic challenges.
TikTok vs. US Government: As anticipated, TikTok is actively contesting the U.S. government's efforts to ban the app nationwide. This week, the company launched a legal challenge, accusing the government of infringing on First Amendment rights. TikTok contends that the mandated sale of the app, as stipulated by new legislation, is "simply not possible" on commercial, technical, and legal grounds. Indeed, a sale would be exceptionally challenging, not only due to the app's high market valuation, which limits potential buyers, but also because its Chinese parent company, ByteDance, has stated it would prefer to shut down the app in the U.S. rather than sell it and its proprietary algorithm. Prospective buyers would likely be hesitant to acquire the platform without its core technology.
This situation is unprecedented in its scale of government intervention against a platform so widely used by American citizens and businesses—150 million and 5 million respectively. Observing how the courts handle this case will offer valuable insights into the extent of governmental authority and influence over perceived threats. Should the government prevail, it could set a precedent for increased scrutiny of other businesses under similar circumstances.