5 Growth Signals To Look For During Disney's Earnings Conference Call

| About: The Walt (DIS)

The Walt Disney Company (NYSE:DIS) will report its earnings for Q1 FY2013 on February 5, 2013. As an investor, you should listen to Disney's conference call and look for the news regarding ESPN, the implementation of the My Magic+ Magic Band system at Walt Disney Word, revenue due to reduced Cap-Ex spending, Disney UTV, and the Infinity Game as five signals for growth. Disney has already reached all-time highs in the value of its stock, nevertheless Disney is poised to grow.

1. ESPN Becoming The Place To See Post-Season College Football

ESPN is a significant portion of Disney's business. ESPN will become the place to see post-season college football. ESPN recently purchased all the rights to show post-season bowl games through the selection of a national champion, which includes showing the Orange Bowl, the Fiesta Bowl, the Sugar Bowl, the Rose Bowl and the BCS Championship game.

ESPN previously owned the rights through a subsidiary, ESPN Regional Television, to 7/35 bowl games: the BBVA Compass Bowl, Beef `O' Brady's Bowl, Bell Helicopters Bowl, MAACO Bowl Las Vegas, Gildan New Mexico Bowl, Meineke Car Care Bowl of Texas and Sheraton Hawai'i Bowl.

ESPN reported that it had telecast the 2011 and 2012 BCS Championship bowl games, which generated the two largest audiences for any program in cable history. ESPN is in a multi-year contract to show the BCS Championship game and aired the 2013 game. ESPN later reported this game as drawing the second largest audience in cable history.

Disney will likely comment on this acquisition as well as its success regarding this year's telecast of post-season college football bowl games. You should look for these comments for ESPN has taken a considerable position, a position likely to pay off well.

ESPN previously cornered Major League Baseball, which will likewise raise its profile. In baseball, ESPN may become the "only game in town." At the same time, Disney is a media company, and you should look for ad revenue and the impact that this acquisition and the most recent telecasts had on ESPN ad revenue.

The author believes that this investment in post-season college football, effectively cornering the market, will generate profit and higher ad rates over time for ESPN and thus Disney. Disney should give a glimpse into this likelihood during its earnings release, as a growth signal.

2. My Magic + MagicBand System

Disney recently introduced its MyMagic+ which includes both a wristband system as well as advance planning and mobile updates for your visit to the Walt Disney World resort. Disney stated :

A major component of MyMagic+ is the new My Disney Experience website and mobile app, which gives guests planning their trip the latest information on all Walt Disney World Resort has to offer. They can book dining and other experiences and reserve times for their favorite attractions, shows and more through an enhanced FastPass system, FastPass+. Once they arrive, they can use their smart phones to spontaneously change their plans in the moment, exploring our parks at their own pace and getting the most out of their visit.

Linking the entire MyMagic+ experience together is an innovative piece of technology we developed called the MagicBand. Worn on the wrist, it will serve as a guest's room key, theme park ticket, access to FastPass+ selections, PhotoPass card and optional payment account all rolled into one. We've began testing certain aspects of MyMagic+ in Florida last month and the early reactions we've gotten have been fantastic.

MyMagic+ is a system that will allow visitors to better utilize the Walt Disney World Resort and their time there. Disney examined a problem, the amount of time visitors had to wait, and developed a system to help its visitors. Disney will likely roll out this system to other of its resorts as well. You should look to Disney's earnings conference call about this MyMagic+ and the associated wristband and its impact on attendance and sales.

The author believes that MyMagic+ wristband is innovative and clever, and is likely to enhance sales, as shown by increased attendance and/or spending per visitor at the Walt Disney World Resort. Not to be missed too, Disney may have a wealth of data mining opportunities from this system, having what appears to be a "Mouse GPS" on its park visitors.

3. Decreased Cap-Ex should result in Increased Revenue

Disney stated in its August 2012, Q3 FY2012, earnings call that Cap-Ex would be decreased, specifically the following:

In fact with these significant investments behind us, this will be the peak year for our capital expenditures in our domestic parks and resorts business. Going forward we expect each one of these projects to deliver strong returns on invested capital that will exceed our hurdle rate and drive improvement in our overall returns.

Disney confirmed that view, and the effect it may have on revenue in its Q4 FY 2012 earnings call through Robert A. Iger, Chairman, CEO and President:

[W]e're not going to give you specific guidance for the year. But since you asked us to characterize or categorize the year, I'd say that we are entering a phase of transitioning out of an investment mode and transitioning into a more compelling growth mode. But it is a -- again, it is a transition year in that regard because of some of the things that Jay talked about. And that's also reflected in the rampdown of capital spending.

Disney has decreased its capital spending, and is planning on enjoying the benefit of such capital spending - increased revenue. You should look for exactly that, increased revenue, as a growth signal. Disney has touted such an increase in the last two earning periods and the author believes it should start being seen in this earnings conference call.

4. Disney UTV

Robert Iger, Chairman, CEO and President stated as follows:

We also completed our strategic acquisition of UTV, making Disney India's leading -- making Disney India's leading film studio and TV producer, as well as one of the country's leading broadcasters, reaching more than 100 million viewers every week.

Disney went further just recently. Through a subsidiary, Disney is reported as entering into a joint venture with TV18 Group in India through TV 18 Group's Indiacast and Disney's UTV UGBL.

The joint venture will distribute 35 channels. Apart from TV 18, Viacom 18, A+E Networks, and Eenadu channels, DisneyUTV will also move its domestic distribution activities for entire bouquet of 9 channels to the new entity.

Like the Netflix content distribution deal, Disney is expanding its distribution channels for its content. With the acquisition of UTV, Disney became a major film and TV producer in India.

UTV is the leading TV producer in India with distribution in 20 countries in seven languages and across 27 channels. Its six owned channels have emerged as the fastest growing cable and satellite network in India. In three years UTV has also become a leading broadcast network in the country. After the transaction, Disney will be one of the leading broadcasters reaching more than 100 million viewers weekly in households across India.

As Disney described it:

Increasing our brand presence and reach in key international markets is a cornerstone of our growth strategy. This acquisition expands our footprint significantly and allows us to more effectively build, monetize and brand multi-platform franchises, and deliver a rich library of content to the world's second largest population.

By the way, if you were wondering whether Disney appeals to Indians, please see this article wherein Disney is reported as bringing Disney-themed houses to Mumbai, India, through none other than Disney UTV and Sunteck Realty, Ltd.

Disney may very well mention these developments in its earnings call. Disney is poised to profit from its presence in India in film, TV, and mobile games (Indiagames). Disney should profit from this increase in brand recognition as well as further distribution of both its content as well as UTV's content. As such, you should look to Disney UTV and reference to it as a signal for Disney's growth.

5. Infinity Game - Monetizing Imagination

Disney announced that it will launch its Infinity Game in June 2013, with an expected retail price of $74.99. With the Infinity Game, Disney will sell physical characters that can be placed onto a base and then played with using a virtual playset. Kids always combine characters, having a horse run as fast as a race car or a mermaid swim through the stars. Disney stated as follows:

Disney Infinity combines prominent Disney and Pixar characters and scenarios in a way that mimics how kids play in real life,' said John Blackburn, vice president and general manager, Avalanche Software. With our platform's unique gameplay mechanics and innovative approach to user generated content within the 'Toy Box' mode, Disney Infinity will spark imaginations and provide endless hours of fun and creativity.

Disney is attempting to harness the imagination, limitless possibility, and harmony of a child at play with its Infinity Game.

Mattel (NASDAQ:MAT) just recently reported:

Sales in the so-called "Other Girls Brands" division--which includes Monster High and Disney Princesses--were up 55% in the fourth quarter.

With the Infinity Game, Disney will again sell both characters and playsets albeit virtual playsets through the sale of an actual, physical character and Infinity base.

Recently, Disney introduced toys at the Consumer Electronics Show, which interact with tablets and smartphones, showing a Disney character playing an instrument, for example. Disney will be bridging play in the virtual world by unlocking it with a physical object, a character. The Infinity Game will sell software, i.e. virtual playsets, through and/or in addition to the sale of physical characters. Disney is likewise selling power discs, which interact with the character, granting it powers and/or other features in the virtual play.

Disney is monetizing imagination. With the new toys and the Infinity game, Disney is presenting prototypes upon which to build, joining value and worth of real world items to their virtual counterparts. The author believes that Disney is just beginning with this concept - the sale of physical objects to unlock virtual adventure. The author further believes that this concept will become ubiquitous for Disney. Disney is a pioneer as shown by its new toys and Infinity Game.

Stated simply, Disney is selling keys to its Magic Kingdom, and who doesn't want to buy a magical key?

Disclosure: I am long DIS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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