Disney Counting On International Growth

| About: The Walt (DIS)

According to a PwC report on global entertainment, the consumer demand for entertainment and media (E&M) services is projected to grow 5.6% annually over the next five years, to $2.2 trillion by 2017. Digital entertainment will be among the fastest growing media with growth rates of 11.9%. By region, there are eight markets of China, Brazil, India, Russia, Middle East and North Africa, Mexico, Indonesia, and Argentina that are projected to see the most growth, with their share rising from 12% in 2008 to 22% of the global E&M market by 2017. Entertainment services powerhouse, Disney, is gearing up to cater to these growing markets.

Disney's Financials

Walt Disney's (NYSE: DIS) fourth quarter revenues grew 7% over the year to $11.57 billion, ahead of the Street's target of $11.45 billion. EPS for the quarter grew 13% to $0.77, marginally ahead of the market's projections of $0.76. By segment, Disney's media networks revenues grew 1% to $4.95 billion and revenues from parks and resorts increased 8% to $3.72 billion. Studio entertainment revenues increased 7% over the year to $1.51 billion. Consumer product revenues saw the biggest growth at 14% to $1 billion. Interactive business accounted for $396 million in revenues for the quarter.

Disney ended the year with revenues growing 7% to $45.04 billion and EPS growing 8% to $3.38.

Disney's International Growth

Disney continued their international expansion through the year. They are currently building a theme park in Shanghai, China, which is expected to be completed by 2015. Disney has seen strong growth in international operations. The Tokyo Disney Resort and Hong Kong Disneyland both had record attendance during the year. Disney also announced plans to open their first Marvel-themed amusement part attraction at the Hong Kong theme part. The Iron Man feature is expected to be open to the public by 2016.

They are also investing heavily in the growing entertainment market in India. They have recently acquired 50% stake in India's leading entertainment company, UTV by investing an estimated $500 million. The move will help Disney market their assets better on India's platform and will also open up the Indian film industry for them as UTV is one of the most successful movie studios in the country.

Disney Expands Content

Disney continued to grow their content offering and recently announced their tie up with Netflix (NASDAQ:NFLX) for 2015. As part of the deal, Disney's Marvel TV in association with ABC Television Studios will develop four serialized programs for Netflix. These programs will feature Marvel's characters including Daredevil, Jessica Johns, Iron Fist, and Luke Cage. Their Star Wars franchise is also going strong and they have set the release date for Star Wars Episode VII as December 18, 2015. This is expected to be one of the "most important movies" slated from their studios.

Earlier this month, Disney announced their agreement with Paramount Pictures that lets them gain marketing and distribution rights to future films in the Indiana Jones adventure franchise. Terms of the deal are not known, but it will allow Disney to make future Indiana Jones movies on its own terms.

They are also growing the content available to viewers on mobile devices. They have apps like Watch ABC, that lets paying cable subscribers watch TV anytime, anywhere. They released a full version of MMO-for-kids Club Penguin on the mobile. Unlike other games that earn revenues through a downloadable app or in-app purchases, Club Penguin operates on a subscription fee based model, charging $7.95 per month. It is one of the first games to be allowed to operate on a subscription model by Apple (NASDAQ:AAPL). Disney claims that the Club Penguin app is not a game, but more of a social network for kids aged 8-12 years. This is a big launch for Disney as Club Penguin has traditionally been a Flash based service and was yet to be made available on the iOS. The service has seen strong growth and already has more than 220 million registered players.

The market is impressed with Disney's moves. Its stock is trading at year high levels of $73.85 with a market capitalization of $129.8 billion.

Disclosure: No positions

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